Attitude toward Foreign Direct Investment
While generally welcoming greenfield investments, Slovenia presents a number of informal barriers that challenge foreign investors. According to a survey conducted by SPIRIT, which is Slovenia’s government agency dedicated to the promotion of entrepreneurship, the most significant barriers adversely affecting FDI in Slovenia are high taxes, high labor costs, high taxes on profit, lack of payment discipline, an inefficient judicial system, difficulties in firing employees, and bureaucracy.
Foreign companies doing business in Slovenia and the local American Chamber of Commerce have also cited additional factors that affect the local investment climate, including the lack of a high-level FDI promotion strategy, a sizable judicial backlog, difficulties in obtaining building permits, labor market rigidity, and disproportionately high social contributions and personal income taxes coupled with excessive administrative tax burdens. Business have also reported a lack of transparency in public procurement, unnecessarily complex and time-consuming bureaucracy, frequent changes in regulation, relatively high prices of real estate, and confusion over lead responsibility or jurisdiction regarding foreign investment among government agencies.
Other Investment Policy Reviews
Slovenia underwent an OECD Investment Policy Review in 2002 and a WTO Trade Policy review in 2002. The Economist Intelligence Unit and World Bank's "Doing Business 2016" provide current economic profiles of Slovenia.
Laws/Regulations on Foreign Direct Investment
Foreign companies conducting business in Slovenia have the same rights, obligations, and responsibilities as domestic companies. The principles of commercial enterprise, which include free operation and national treatment, apply to the operations of foreign companies as well. The Law on Commercial Companies and the Law on Foreign Transactions guarantee their basic rights.
Slovenia's Promotion of Foreign Direct Investment and Internationalization of Enterprises Act covers the main goals and measures for promotion of FDI. The Slovenian Public Agency for the Promotion of Entrepreneurship, Innovation, Development, Investment and Tourism (SPIRIT) promotes FDI and advocates for foreign investors in Slovenia. Its mission is to enhance Slovenia’s economic competitiveness through technical and financial assistance to entrepreneurs, businesses, and investors.
An individual or business in a variety of different legal and organizational forms may perform economic activities. Individuals most often operate as sole traders; however, legal entities may establish different forms of businesses: the most common are the limited liability company (LLC or d.o.o.) and public limited company (PLC or d.d.).
Non-residents of the Republic of Slovenia have to obtain a Slovenian tax number before starting the process of establishing a business. Slovenia’s Companies Act, which is fully harmonized with EU legislation, regulates the establishment, management, and organization of companies.
Companies act: http://www.mgrt.gov.si/fileadmin/mgrt.gov.si/pageuploads/zakonodaja/ZGD-1_PREVOD__13-12-12.pdf
More information on how to invest and register business in Slovenia is available at - http://www.spiritslovenia.si/ and http://www.eugo.gov.si/en/starting/business-registration/
Companies in Slovenia fall under four separate classification benchmarks, including micro, small, medium-sized, and large, in accordance with the following criteria:
i. average number employees in the financial year;
ii. net proceeds from sales; and
iii. value of assets.
i. A company that satisfies any two of the following criteria shall be deemed a micro company:
a. it has less than an average of 10 employees in a financial year;
b. it has an annual turnover of less than EUR 2,000,000 (USD 2.3 million); and
c. the value of its assets is less than EUR 2,000,000 (USD 2.3 million).
ii. A small company shall be a company other than a micro company, and shall meet any two of the following criteria:
a. it has less than an average of 50 employees in a financial year;
b. it has an annual turnover of less than EUR 8,800,000 (USD 10 million); and
c. the value of its assets is less than EUR 4,400,000 (USD 5 million).
iii. A medium-sized company shall be a company other than a micro company, or a small company, and shall meet two of the following criteria:
a. it has less than an average of 250 employees in a financial year;
b. it has an annual turnover of less than EUR 35,000,000 (USD 39.9 million); and
c. the value of its assets is less than EUR 17,500,000 (USD 19.9 million).
iv. A large company shall be a company which is neither a micro company, nor a small company, nor a medium-sized company
Slovenia particularly welcomes high-tech sector investments that create jobs and are linked to research and development (R&D) activities. The government supports such activities with special tax incentives. In some economically depressed and underdeveloped regions (such as the Prekmurje region near the Hungarian border), Slovenia offers special facilities, services, and financial incentives to foreign investors. In 2011, when the share of FDI as a percentage of GDP amounted to 30.6 percent, the Government of Slovenia set a goal to increase the share to 37 percent by 2014. In the period from 2010 to 2012, Slovenia spent EUR 36.2 million (USD 41.2 million) to promote FDI and to increase integration into global value chains, mainly through financial incentives for investors.
Although Slovenia has some of the highest taxes in Europe, the government has implemented tax cuts targeted at reducing the cost of doing business. For example, in 2009, the government eliminated the payroll tax, and in January 2013, it lowered the corporate tax rate to 17 percent. In July 2013, facing pressure on its budget because of the ongoing impact of the global recession, the government increased the VAT rate from 20 percent to 22 percent, (and the “reduced rate” from 8.5 percent to 9.5 percent).
Limits on Foreign Control and Right to Private Ownership and Establishment
Both foreign and domestic private entities have the right to establish and own business enterprises and engage in different forms of remunerative activity.
Slovenia has relatively few limits on foreign ownership or control.
Professional services: There are limits on banking and investment services, private pensions, insurance services, asset management services, and settlement, clearing, custodial, and depository services provided in Slovenia but headquartered in non-EU countries.
Gaming: This is a 20 percent cap on foreign ownership.
Air transport: Registration of an aircraft is only possible for aircraft owned by Slovenian or EU nationals or companies controlled by them. Companies controlled by Slovenian nationals or carriers complying with EU regulations on ownership and control are the only entities eligible for Air Operator’s Certificates (AOC) for performing airline services.
Maritime transport: The law forbids majority ownership by non-EU residents of a Slovenian flag maritime vessel unless the operator is a Slovenian or other EU national.
Unlike other countries in Central and Eastern Europe, Slovenia never undertook a comprehensive privatization process, thus it still has a relatively high percentage of enterprises either owned or controlled, directly or indirectly, by the state. State control is evident in several key sectors including energy, transport, public utilities, banking, telecommunication, and insurance. State participation in these sectors of the economy is among the highest in Europe. The state either owns or indirectly controls large portions of the manufacturing, construction, retail, and tourism sectors.
In 2013 the Parliament approved a list of 15 state owned companies which it plans to sell. To date the state has sold seven of these companies, and three are in the final phase of privatization. Foreign investors can participate in the public-bidding processes on an equal basis. However, interested parties often describe the bidding process as opaque, with unclear or unenforced deadlines.
In 2015, the government prepared an asset management strategy that classifies state-owned assets into strategic, important, and portfolio assets. In companies classified as strategic, the State will maintain or obtain at least a 50% share + 1 share. In companies classified as important, the State will maintain a controlling share (25% equity stake + 1 share). In companies classified as portfolio, it is not mandatory for the State to keep the controlling share.
Screening of FDI
Slovenia has an open economy and no screening or review process is necessary for the FDI Competition Law.
Slovenia’s Competition Protection Agency (CPA) supervises the application of the Restriction of Competition Act and monitors and analyzes market dynamics, assessing alleged restrictive agreements and abuses of a dominant or monopoly position.
In Slovenia, highly concentrated market structures are not illegal; however, the abuse of market power is forbidden. The Law on the Protection of Competition prohibits acts that restrict competition in the market, conflict with good business practices relating to market access, or involve prohibited speculation. The law is applicable to corporate bodies and natural persons engaged in economic activities regardless of their legal form, organization, or ownership. The law also applies to the actions of public companies. The law complies with EU legislation.
The law prohibits restriction of competition through cartel agreements, unfair competition (i.e., false advertising, promises/gifts in exchange for business, trade secrets, etc.), illicit speculation during times of irregular market situations, and dumping and subsidized imports. However, the government may prescribe market restrictions in the following instances: in cases of natural disasters, epidemics, or in a state of emergency; in cases of appreciable market disturbances due to the shortage of goods; or when necessary to satisfy product requirements, raw materials, and semi-finished goods of special or strategic importance to the defense of the nation.
The CPA is responsible for ensuring fair competition in the marketplace. The CPA can initiate or conduct investigations at the request of private companies. The CPA can also issue a decree against any company found to be violating the Law on the Protection of Competition, although the power to levy fines rests solely in the hands of the courts. Any party trading in goods or services in the marketplace may initiate legal proceedings in cases of unfair competition. Injured parties are entitled to compensation and cessation of non-competitive activities.
The designated court may issue a penalty of EUR 125,000 (USD 142,493) to EUR 1,000,000 (USD 1,113,950) against companies found to have engaged in cartel agreements, abused a dominant market position, committed an act of unfair competition, or engaged in illicit speculation. The managers and directors of the sanctioned company may be liable for a minimum fine of EUR 4,000 (USD 4,600). Self-employed persons found to have committed any legally prohibited actions are liable to pay a fine of no less than EUR 40,000 (USD 45,600). There are also fines for noncompliance with the CPA in the range of EUR 2,000 to EUR 4,000 (USD 2,280 to USD 4,600) for every week that requested documentation is not submitted. The same range of fines also applies in the event the sanctioned entity does not comply.