Slovakia
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Slovakia is one of the most open economies in the EU. The government’s overall attitude toward foreign direct investment (FDI) is positive, and the government does not limit or discriminate against foreign investors. FDI plays an important role in the country’s economy, with major foreign investments in manufacturing and industry, banking, information and communication technologies (ICT), and Business Service Centers, where U.S. companies have a significant presence.
Slovakia’s assets, including skilled labor, EU and Eurozone membership, and location at the crossroads of Europe, have attracted a significant U.S. commercial and industrial presence, including Accenture, Adient, Amazon, Amphenol, AT&T, Cisco, Dell, Garrett, GlobalLogic, Hewlett-Packard, IBM, Lear, Oracle, U.S. Steel, Whirlpool, and many others.
The Ministry of Economy coordinates efforts to improve the business environment, innovation, and support for least-developed regions. Within the Ministry of Economy, the Slovak Investment and Trade Development Agency (SARIO) is responsible for identifying and
advising potential investors. The government supports foreign investors and offers investment incentives based on specific criteria, usually delivered in the form of tax allowances, or grants to support employment, regional development, and training. The Regional Investment Aid Act (57/2018) specifies eligibility criteria. Section four covers investment incentives in detail.
According to the National Bank of Slovakia, in 2018, inward FDI flows to Slovakia reached
€1 billion, and inward FDI stock was €51 billion. EU Member States are the largest foreign investors in Slovakia, including the Netherlands, Austria, the Czech Republic, Luxembourg, and Germany. South Korea remains an important investor among non-EU countries, given its importance in global automotive supply chains.
The Act on Special Levy on Regulated Sectors (235/2012 Coll., and later amendments) imposes a special tax on regulated industries, including the energy and network industries, insurance companies, electronic communications companies, healthcare, air transport, and others. The levy applies to profits generated from regulated activities above €3 million. The Act on Special Levy on Selected Financial Institutions (384/2011 Coll., and later amendments) imposed a special 0.2 percent levy on banks, most of which are foreign-owned. In November 2019, ahead of February 2020 elections, and despite public declarations that the levy would cease to exist in 2020, the government increased the levy to 0.4 percent (valid as of January 2020).
Per amendment to the Act on Income Tax (344/2017 Coll.) valid as of January 2019, sharing economy platforms in the area of transport or housing are obliged to register a permanent platform in Slovakia. Income is taxed in accordance with the valid income tax rules of 21 percent for corporate income tax in Slovakia. If the service provider does not register a platform, the firm will be obligated to pay either a 19 or 35 percent withholding tax on the fees it pays to a foreign entity, based on the residence of the recipient of such fee, and based on whether bilateral taxation treaties exist.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity in Slovakia. Businesses can contract directly with foreign entities. Private enterprises are free to establish, acquire, and dispose of business interests, but must pay all Slovak obligations of liquidated companies before transferring any remaining funds out of Slovakia.
Slovakia has no formal performance requirements for establishing, maintaining, or expanding foreign investments. Large-scale privatizations are possible via direct sale or public auction. There are no formal requirements to approve FDI, though the Government ultimately approves investment incentives. If investment incentives apply, the Economy Ministry manages the associated legislative process. The Act on Regional Investment Aid (57/2018) specifies eligibility requirements.
The Slovak government treats foreign entities established in Slovakia in the same manner as domestic entities, and foreign entities face no impediments in participating in R&D programs financed and/or subsidized by the Slovak government. Since January 2020, up to 200 percent of R&D spending is tax deductible.
The Slovak government holds stakes in a number of energy companies. It has historically been less open to private investment in energy assets that it considers to be in the national security interest. There are no domestic ownership requirements for telecommunications and broadcast licenses. The Act on Civil Air Transport (143/1998 Coll.) sets out rules for foreign operators seeking to operate in Slovakia.
Please consult the following websites for more information:
- R&D Tax-Deductible: https://superodpocet.sk/
Other Investment Policy Reviews
- The OECD Economic Survey of Slovakia
- The European Commission’s Country Report Slovakia 2020
- The World Trade Organization’s data on Slovakia
Business Facilitation
According to the World Bank’s Doing Business 2020 report , Slovakia ranks 118th out of 190 countries surveyed on the ease of starting a business (up from 127th in the 2019 edition). It takes around 21.5 days to start a business in Slovakia (versus 26.5 days in 2019), and involves seven procedures.
The Central Government Portal “slovensko.sk” provides useful information on e-Government services in the area of starting and running a business, citizenship, justice, registering vehicles, social security, etc. Checklists of procedures necessary for registrations, applications for permits, etc., are currently available on websites of individual institutions, and the Economy Ministry is working on streamlining the information into one common platform.
Please consult the following websites for more information:
- Central Government Portal: https://www.slovensko.sk/en/title/
- Commercial Register: http://www.orsr.sk/Default.asp?lan=en
- Slovak Business Agency: http://www.sbagency.sk/en/national-business-center#.WrzvnNtMS9I
- Slovak Investment and Trade Development Agency: https://www.sario.sk/en
- World Bank Doing Business 2020:
- https://www.doingbusiness.org/content/dam/doingBusiness/country/s/slovakia/SVK.pdf
Outward Investment
The majority of Slovak exports go to fellow EU countries. Due to their limited size, Slovak companies have not made significant outward foreign direct investments.
Several state agencies share responsibilities for supporting investment (inward and outward) and trade. SARIO is officially responsible for export facilitation and attracting investment. The Slovak Export-Import Bank (EXIM BANK) supports exports and outward investments with financial instruments to reduce risks related to insurance, credit, guarantee, and financial activities; it assists both large companies and small and medium sized enterprises (SMEs),
and is the only institution in Slovakia authorized to provide export and outward investment-related government assistance. The Ministry for Foreign and European Affairs runs a Business Center that provides services in the area of export and investment opportunities. Slovakia’s
diplomatic missions, the Ministry of Finance’s Slovak Guarantee and Development Bank, and the Deputy Prime Minister’s Office for Investments and Regional Development also play a role in facilitating external economic relations.
2. Bilateral Investment Agreements and Taxation Treaties
Slovakia has signed several bilateral investment treaties in accordance with the European Outline Convention on Trans-frontier Cooperation between Territorial Communities or Authorities. Some of these are legacies of the former Czechoslovakia, while others have come into force following independence in 1993. The 1992 U.S.-Slovakia Bilateral Investment Treaty specifies the basic framework for investment protection and dispute resolution. Slovakia signed a Bilateral Taxation Treaty with the United States in 1993. The amended bilateral investment treaty with the United States entered into force on May 14, 2004, after Slovakia joined the EU.
The United States and Slovakia agreed to the Foreign Account Tax Compliance Act (FATCA) in July 2015, and Slovakia subsequently approved the Act on Automatic Exchange of Information on Financial Accounts (359/2015) in order to fully comply with FATCA. Slovak financial institutions are now required to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS).
Please consult the following websites for more information:
- S.- Slovakia Bilateral Investment Treaty: http://2001-2009.state.gov/documents/organization/43587.pdf
- S.- Slovakia Bilateral Taxation Treaty: https://www.irs.gov/businesses/international-businesses/slovak-republic-tax-treaty-documents
- UNCTAD: https://investmentpolicy.unctad.org/country-navigator/197/slovakia
3. Legal Regime
Transparency of the Regulatory System
The business community continues to voice concerns regarding the transparency of Slovakia’s regulatory environment. A frequently changing and complex legislative environment is often cited as a business obstacle for both local and global companies, and the long-term predictability of regulations affecting the business and legal environment is weak. Businesses note that most of the changes affecting the regulatory environment lack estimated costs and impacts for businesses.
The Legislative and Information Portal of the Ministry of Justice, Slov-Lex, is a publicly accessible centralized online portal for laws and regulations, including actual draft texts, information about inter-agency and public review processes. Draft bills, including investment laws proposed by ministries through a standard legislative procedure are available for public comment through the portal; however, the public is often granted little time to comment on draft legislature, and there is no obligation for a government reaction to comments prior to final submission to the cabinet.
While the process of adopting new laws and regulations follows clearly defined rules, MPs or parliamentary groups have been using an extraordinary option of proposing draft bills outside the standard participatory legislative procedure. This process has no rules guaranteeing opportunities for public comment, thus rendering the legislative process less predictable and less transparent. In 2019, 11 laws were passed without due stakeholder discussion, including an increase of the bank levy paid to state coffers from 0.2 to 0.4 percent of the value of bank liabilities reported in balances and limiting the financing of political parties by external sponsors.
A law on recreational vouchers, which increases the administrative and economic burden of employers by obligating companies with more than 49 employees to pay up to €275 per year for domestic vacations has been fully implemented. The proposed special levy on retail stores (2.5 percent of net turnover) mentioned in the 2019 ICS was not implemented following opposition from the European Commission.
In 2019, the Slovak government partially decreased the administrative burden of businesses by improving interagency sharing of legal and official documents. Starting January 1, 2020, the corporate income tax and the income tax of the self-employed with revenues up to €100,000 decreased from 21 percent to 15 percent; the minimum monthly wage in Slovakia rose from €520 to €580; and all cash registers must be connected to the e-cash registry online system of the Financial Administration.
Regulations are not reviewed on the basis of scientific data assessments. At their discretion, analytical institutes at some ministries (mostly under the value-for-money umbrella) produce data-driven assessments of state policies or big investment projects. However, projects for assessment are selected by the institutes or by the ministries and they are not publicly available for comment. Assessments are often published once completed.
The Commercial Code (98/1991 Coll.) and the Act on Protection of Economic Competition (136/2001 Coll.) govern competition policy in Slovakia. As an EU Member State, Slovakia has transposed numerous pieces of relevant EU legislation. The Anti-Monopoly Office, a part of the EU’s European Competition Network (ECN), is an independent state administrative body responsible for ensuring competition, including in state aid.
The Office for Public Procurement supervises and administers public procurement. Public procurement legislation is frequently amended, and challenges remain to ensure fair competition and eradication of corruption. Changes to the legislation, which entered into force January 2019 significantly affected access to public tenders, especially for SMEs. Ceilings for low-value tenders have increased by approximately 250%, giving more space to municipalities to directly select suppliers.
Since the new leadership was put in place in 2017, the Public Procurement Office has made efforts to improve transparency and communication with stakeholders, as well as to strengthen supervisory activities. The Public Procurement Office introduced further reforms to make procurement process more efficient in July 2019, but Parliament did not approve the changes in November 2019. As of April 1, 2019, the Public Procurement Office operates an optional platform in the official Bulletin of Public Procurement for low-value purchases. All procurers (ministries/municipalities/etc.) are now able to publish online calls for bids for low-value purchases, increasing transparency and increasing possibilities for businesses to participate in public tenders.
Slovakia’s fiscal transparency is generally good. Budget proposals, enacted budgets, and closing statements are substantially complete and publicly available. Departures from budget goals are common. Despite having a goal of reaching a balanced budget in 2019, Eurostat data from April 2020 reported a deficit of 1.3% of GDP, which is the worst deviation from budget goals since 2010. The Ministry of Finance publishes monthly reviews of budget execution, which provide an overview of public revenues and expenditures broken down by source and type. Public debt management information is an integral part of the Public Administration budget, including volume, total cost, debt service, structure, financing, forecast, risk assessments, etc. Annex 6 of the Public Administration budget describes the Debt Management Strategy. As an EU Member State, Slovakia follows International Financial Reporting Standards (IFRS-EU).
Please consult the following websites for more information:
- Legislative and Information Portal Slov-Lex: https://www.slov-lex.sk/domov (Note: all legal acts and regulations mentioned throughout this report can be found on this portal.)
- World Bank:http://rulemaking.worldbank.org/en/data/explorecountries/slovak-republic
- Anti-Monopoly Office of the Slovak Republic: http://www.antimon.gov.sk/antimonopoly-office-slovak-republic/
- Office for Public Procurement: https://www.uvo.gov.sk/
- Public Administration Budget, Ministry of Finance:https://www.finance.gov.sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/
- The European Commission Country Report – Slovakia 2020: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020SC0524&from=EN
International Regulatory Considerations
Slovakia is an EU Member State and EU legislation and standards fully apply in Slovakia. The national regulatory system is enforced in areas not governed by EU regulatory mechanisms. Slovakia is a WTO member, and the government notifies the WTO Committee on Technical Barriers to Trade of technical regulations. The Trade Facilitation Agreement (TFA) is an EU competence; the EU approved in 2015 a Protocol of Amendment to insert the WTO TFA into Annex 1A of the WTO Agreement.
Please consult the following websites for more information:
WTO: https://www.wto.org/english/thewto_e/countries_e/slovak_republic_e.htm
Legal System and Judicial Independence
Slovakia is a civil law country. The Slovak judicial system is comprised of the Constitutional Court and general courts, including the Specialized Criminal Court and the Supreme Court. General courts decide civil, commercial, and criminal matters, and review the legality of decisions by administrative bodies. The Specialized Criminal Court focuses on cases involving corruption, organized crime, serious crimes like premeditated murder, crimes committed by senior public officials, and crimes related to extremism, such as hate crimes. Enforcement actions are appealable and are adjudicated in the national court system. The right to appeal against regulations is limited to some state institutions and selected public officials.
The Slovak Constitution and the European Convention of Human Rights guarantee property rights. Slovakia has a written Commercial Code including contract law in the civil and commercial sectors. The basic framework for investment protection and dispute resolution between Slovakia and the U.S. is outlined in the 1992 U.S.-Slovakia Bilateral Investment Treaty.
Court judgments by EU Member States are recognized and enforced in compliance with existing EU Regulations. Third country judgments are governed by bilateral treaties or by the Act on International Private Law. Contracts are enforced through litigation or arbitration – a largely applied form of alternative dispute resolution.
Laws guarantee judicial independence, however, in practice, public perception of judicial independence is among the lowest in the EU. A Focus Agency public survey from August 2019 commissioned by the Supreme Court Office showed 64 percent of Slovaks lack full trust in Slovak courts. Accountability mechanisms ensuring judicial impartiality and independence are strong, but not fully utilized. According to judicial watchdog NGOs, some judicial nominations and personnel selections appear to be strongly influenced by political considerations. In 2019 and 2020 numerous investigations into judicial corruption were opened. Businesses and NGOs report the justice system remains relatively slow and inefficient and suggest verdicts lack predictability and are often poorly justified. Judges remain divided on the need for reform. Several judges have been arrested by police for suspicion of corruption and obstruction of justice in March 2020. . As a result, investors generally prefer international arbitration to resolution in the national court system.
Laws and Regulations on Foreign Direct Investment
Slovakia is a politically and economically safe destination for foreign investment. Investment incentives are available to motivate investors to place their new projects in regions with higher unemployment and to attract projects with higher added value.
The Slovak Investment and Trade Development Agency (SARIO) is a specialized government agency in charge of attracting foreign investments to Slovakia and serves as a one-stop shop for foreign investors. The Slovak Business Agency (SBA) runs a National Business Center (NBC) in Bratislava and several other cities; it provides a one-stop shop with information and services for starting and establishing businesses. Startups can use a simplified procedure to register their company in order to facilitate entry of potential investors. The Interior Ministry operates Client Centers around the country where many formal procedures can be done under one roof.
Slovakia ranked 45th out of 190 countries in the World Bank’s Doing Business 2020 ranking, and 42nd out of 141 in the 2019 World Economic Forum’s Global Competitiveness Index.
Please consult the following websites for more information:
- Ministry of Economy: https://www.mhsr.sk/podnikatelske-prostredie
- Slovak Business Agency: http://www.sbagency.sk/en/national-business-center#.WrzvnNtMS9I
- Slovak Investment and Trade Development Agency: http://www.sario.sk
- Central Public Administration Portal: https://www.slovensko.sk/en/title/
- Interior Ministry:https://www.minv.sk/?klientske-centrum-bratislava
- World Bank Ease of Doing Business Ranking: https://www.doingbusiness.org/en/rankings
Competition and Anti-Trust Laws
The Anti-Monopoly Office of the Slovak Republic is an independent body charged with the protection of economic competition. The Office intervenes in cases of cartels, abuse of a dominant position, vertical agreements, and controls compliance of mergers with antitrust law. The key antitrust legislation regarding fair competition is the Competition Law (136/2001 Coll.) Slovakia complies with EU competition policy.
Please consult the following website for more information:
- The Anti-Monopoly Office: http://www.antimon.gov.sk/2066-en/cases-in-slovak/
Expropriation and Compensation
The Slovak Constitution guarantees the right to property. There is an array of legal acts stipulating property rights. The right to the Act on Expropriation of Land and Buildings (282/2015 Coll.) mandates that expropriation must only occur to the extent necessary, be in the public interest, provide appropriate compensation, and shall only occur when the goal of expropriation cannot be achieved through agreement or other means.
The most recent case of expropriation is from 2016, when Slovak government started expropriating land needed for the construction of a car making factory and accompanying road infrastructure. The state proceeded with expropriation only after it failed to directly purchase the land from the owners.
Dispute Settlement
ICSID Convention and New York Convention
Slovakia is a contracting state to the International Centre for Settling International Disputes (ICSID) and the World Bank’s Commercial Arbitration Tribunal (established under the 1966 Washington Convention). Slovakia is a member of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, which obligates Slovakia to accept binding international arbitration. The Finance Ministry leads on bilateral investment treaty matters and manages and represents Slovakia in international arbitration. Investment contracts with foreign investors in Slovakia are covered by respective ministries depending on the sector, in most cases by the Ministry of Economy.
Investor-State Dispute Settlement
The basic framework for investment protection and dispute resolution between Slovakia and the United States is governed by the 1992 U.S.-Slovakia Bilateral Investment Treaty with an additional Protocol signed in 2003.
To date, eleven known cases of international arbitration have concluded, none of which Slovakia lost. In one of the international arbitrations, a U.S. investor was making claims under the U.S. – Slovakia Bilateral Investment Treaty but respected the decision of the International Centre For Settlement of Investment Disputes, which ruled in Slovakia’s favor.
The legal system generally enforces property and contractual rights, but decisions may take years, thus limiting the courts’ relevance in dispute resolution. According to the World Bank Doing Business 2020 report, Slovakia ranked 46th out of 190 countries in the “enforcing contracts” indicator, with a 775-day average for enforcing contracts. The report notes that Slovakia made enforcing contracts easier by implementing electronic processing services. Slovak courts recognize and enforce foreign judgments, subject to the same delays. Although the commercial code generally appears to be applied consistently, the business community continues to cite a lack of legislation protecting creditor rights, corruption, political influence, lengthy procedures, and weak enforcement of court rulings as persisting problems. U.S. and other investors privately described instances of multi-million dollar losses that were settled out of court because of doubts about the court system’s ability to offer a credible legal remedy.
International Commercial Arbitration and Foreign Courts
The alternative dispute resolution mechanisms in Slovakia are relatively fast compared to the court system. The list of permanent arbitration courts authorized by the Slovak Ministry of Justice is published on the Ministry’s website. Decisions should be reached within 90 days of the date when the lawsuit was filed. It is possible to lodge an appeal to a civil court against an arbitrary decision within three months of the date of its issuance or lodge a complaint about an arbitrary decision to the chairman of the permanent arbitration court or to the Ministry of Justice.
Alternative dispute resolution proceedings can be also initiated by filing a motion with one of the alternative dispute resolution entities included in the list published by the Ministry of the Economy on its website. The settlement of a dispute takes place through written communication and is to be settled within 90 days of the delivery of a complete motion. Unless the parties reach an agreement, the alternative dispute resolution entity will prepare a justified opinion. If any attempt to settle the dispute by mutual agreement fails, there is no appeal against the result of such proceedings.
The other option for extrajudicial dispute settlement is mediation. Mediation can be used even after a court proceeding has started. The agreement resulting from mediation is legally enforceable only if it has the form of a notarial record or court settlement. The list of mediators is published on the website of the Association of Mediators. In the case of an unsuccessful mediation, parties can still take the case to arbitration or to court.
There are two acts applicable to alternative dispute resolution in Slovakia – the Act on Mediation (420/2004 Coll.) and the Act on Arbitration (244/2002 Coll.). The Slovak Act on Arbitration is largely modeled after UNCITRAL model law. Local courts in Slovakia recognize and enforce foreign arbitral awards.
Please consult the following websites for more information:
- List of alternative dispute resolution entities: https://www.mhsr.sk/obchod/ochrana-spotrebitela/alternativne-riesenie-spotrebitelskych-sporov-1/zoznam-subjektov-alternativneho-riesenia-spotrebitelskych-sporov-1
- List of permanent arbitration courts: https://obcan.justice.sk/infosud-registre/-/isu-registre/zoznam/srSud
- List of Mediators: http://www.komoramediatorov.sk/zoznam.html
- S.- Slovakia Bilateral Investment Treaty: http://2001-2009.state.gov/documents/organization/43587.pdf
- Finance Ministry – International Arbitrations: https://www.finance.gov.sk/sk/financie/statne-vykaznictvo/medzinarodna-ochrana-investicii/arbitrazne-spory/
- Slovak Chamber of Commerce: http://web.sopk.sk/view.php?cisloclanku=900001
- World Bank Ease of Doing Business Ranking: https://www.doingbusiness.org/en/rankings
Bankruptcy Regulations
The Law on Bankruptcy and Restructuring (377/2016 Coll.) governs bankruptcy issues. The law allows companies to undergo court-protected restructuring and both individuals and companies to discharge their debts through bankruptcy. The International Monetary Fund credited the Act for speeding up processing, strengthening creditor rights, reducing discretion by bankruptcy judges, and randomizing the allocation of cases to judges to reduce potential corruption. The Act contains provisions to prevent preferential treatment for creditors over company shareholders, measures limiting space for arbitrariness in bankruptcy administrators’ conduct, and stricter liability rules for those responsible for initiating bankruptcy proceedings, as well as new provisions on related parties valid as of January 2019. The Commercial Code also contains provisions on bankruptcy and restructuring and provisions to prevent speculative mergers, including in cases of ongoing bankruptcy.
Slovakia ranked 46th out of 190 in the World Bank’s Doing Business 2020 ranking of the ease of resolving insolvency (42nd in 2019), with an average of four years for resolving insolvency.
Please consult the following websites for more information:
- Slovak Banking Credit Bureau: http://www.sbcb.sk/
- Non-Banking Credit Bureau: http://www.nbcb.sk/
- Justice Ministry: https://www.justice.gov.sk/Stranky/Sudy/Zoznam-dlznikov.aspx?OrgZlozka=MSSR_AN4100
- Insolvency Register: https://ru.justice.sk/ru-verejnost-web/pages/home.xhtml
- sk: https://dlznik.zoznam.sk/
- Central Register of Debtors: https://www.registerdlznikov.sk/
4. Industrial Policies
Investment Incentives
The Economy Ministry manages and coordinates investment aid with other relevant agencies.
Eligibility for investment incentives is defined in the Act on Regional Investment Aid (57/2018 Coll.). Investors are encouraged to implement projects in less-developed regions, and to invest in high value-added activities.
Investment incentives are available to foreign and domestic investors for projects in sectors including industrial production, technology centers, and shared service centers. The incentives are provided as tax relief, cash grants (which can be viewed as joint financing of FDI projects), contributions for newly created jobs, and transfer of state/municipal property at a discounted price. Eligible costs include acquisition of land, acquisition and construction of buildings, acquisition of technology equipment and machinery, as well as intangible assets (i.e. licenses, patents, etc.), and wages of new employees for a period of two years.
Apart from investment aid, the Economy Ministry offers innovation vouchers and special loans through its Investment Fund. Individual ministries run EU-supported projects in their respective areas of expertise (i.e. agriculture, environment, infrastructure, R&D and innovations, etc.).
State aid granted by the Slovak government must comply with valid EU regulations. The Anti-Monopoly Office of the Slovak Republic is the coordinating body for state aid granted by individual ministries, as per the Act on State Aid (358/2015 Coll.), and there is a dedicated state aid web portal (link below).
Please consult the following websites for more information:
- Investment Aid: https://www.sario.sk/en/invest/investment-incentives
- State Aid: http://www.statnapomoc.sk/
- Deputy Prime Minister for Investment and Informatization: https://www.vicepremier.gov.sk/en/index.html
Foreign Trade Zones/Free Ports/Trade Facilitation
Slovakia eliminated all foreign trade zones and free ports in 2006.
Performance and Data Localization Requirements
There are no special requirements for foreign IT providers to turn over their source code or to provide access to encrypted documents. However, according to the Act on Electronic Communications (351/2011 Coll.), entities providing public networks or public services that use coding, compression, encryption, or other form of concealing signal transfer must, at their own expense, provide information obtained through wire-tapping and network traffic recording or monitoring to relevant authorities. Slovakia follows the EU General Data Protection Regulation (GDPR) regulating data protection and privacy. Certain public systems are located in the “government cloud”. There are no automated or systemic mechanisms in place enforcing rules on local data storage. Slovakia follows the EU regulation on the free flow of non-personal data 2017/0228 (COD) that sets out the principle that non-personal data is allowed to be located and
processed anywhere in the EU without unjustified restrictions, with some exceptions on the grounds of public security. The relevant authority for data localization is the Deputy Prime Minister’s Office for Investments and Digitalization and the Office for Personal Data Protection.
Slovakia does not mandate local employment, follow “forced localization,” or impose conditions on permissions to invest. Conditions for employing foreigners from non-EU countries were somewhat eased in 2018 (more details in Chapter 11 on Labor Policies).
Foreign entities have equal access to investment incentives on a case-by-case basis, as per the Act on Regional Investment Aid (57/2018 Coll.). For more details on eligible projects, please see the section on Investment Incentives. Along with investment incentives, other tools to support investment, including EU structural funds or other schemes, are motivational tools and every investor can freely decide whether to apply for them or not; as such, any procedures linked to these tools should not be perceived as investment performance requirements per se.
The Alien Police Department issues temporary and long-term residence permits. The legislative framework on residence and adjacent permits is specified in the Act on Residency of Foreign Nationals (404/2011 Coll.; 108/2018 Coll.). Although foreign nationals have criticized the process of obtaining residency permits as difficult and time-consuming, Slovak authorities have made some concessions to ameliorate this process for American citizens. These have included accepting FBI background checks that are up to 90 days expired, and accepting applications at the Slovak Embassy in Washington, D.C. prior to departure for Slovakia. The U.S. Embassy’s Consular Section has reported a drop in the number of Americans looking for help with this issue since the implementation of these changes. However, even with these changes, authorities are still inconsistent in their recommendations or enforcement of regulations. The regulations themselves, however, do not differ significantly from those of other EU countries. Some Americans have also reported low level bribery solicitations at the registration center.
Please consult the following websites for more information:
- Alien Police Department at Interior Ministry: https://www.minv.sk/?residence-of-an-foreigner
- Migration Information Center: https://www.mic.iom.sk/en/doing-business/general-information.html
- Foreign Affairs Ministry: https://www.mzv.sk/web/en/consular_info/residence_of_foreigners_in_territory_of_slovakia .
- Central Office of Labor, Social Affairs and Family: http://www.upsvar.sk/sluzby-zamestnanosti/zamestnavanie-cudzincov.html?page_id=272197
5. Protection of Property Rights
Real Property
The mortgage market in Slovakia is growing rapidly, and a reliable system of record keeping exists. From January 1, 2020 the National Bank of Slovakia further tightened the rules on providing mortgages to cool down the property market. Secured interests in property and contractual rights are recognized and enforced.
Even though the Cadastral Office records that less than 10 percent of the land in Slovakia lacks a clear title, there are instances when the property owner is unknown. In such cases, real estate titles can take significant amounts of time to determine. Legal decisions may take years, thus limiting the utility of the court system for dispute resolution.
Parcels commonly have a very high number of co-owners. There are currently 8.4 million parcels, 4.4 million recorded owners of land, and 100 million co-owning relations. On average, one parcel has 11.93 co-owners, and one owner has an average of 22.74 parcels. To address this issue, the Agriculture Ministry started a robust land ownership reform in 2019 to consolidate parcels and simplify ownership records in the cadaster database. A dedicated web portal allows verification of information about land and property ownership.
Foreigners can acquire real property without restrictions. In February 2019, the Slovak Constitutional Court ruled against a Law on Agricultural Land Ownership (140/2014 Coll.), which indirectly limited the sale of land to foreigners by requiring at least three years of previous agricultural business activity and having at least 10 years of residency in Slovakia.
Squatting is illegal in Slovakia and ownership of unoccupied property will not revert to squatters or other parties unless they are entitled to own the land.
Slovakia was 8th out of 190 countries in the World Bank’s 2020 Doing Business “registering property” indicator, averaging 16.5 days to register a property compared to average of OECD high income countries of 23.6 days.
Please consult the following websites for more information:
- Cadastral portal on land and property ownership: http://www.katasterportal.sk/kapor/
- World Bank Doing Business 2020: https://www.doingbusiness.org/en/rankings
Intellectual Property Rights
The Slovak legal system provides strong protection for intellectual property rights (IPR). The country transposes and follows robust EU regulations and adheres to major international IPR treaties, including the Berne Convention, the Paris Convention, and numerous others on design classification, registration of goods, appellations of origin, patents, etc. The protection of IPR falls under the jurisdiction of two agencies. The Industrial Property Office of the Slovak Republic is the central government body overseeing industrial property protection, including patents, and the Culture Ministry is responsible for copyrights, including software. The Financial Administration, which is part of the Finance Ministry, plays an important role in enforcing IPR and deals with customs, which plays a major part in the fight against counterfeit goods. In case of IPR infringement, rights holders can bring a civil lawsuit in the district courts in Bratislava, Banska Bystrica, and Kosice and, if applicable, have the right to claim lost profits. The courts can issue injunctions to prevent further infringement of IPR. In certain cases, violation of IPR can be considered a criminal offense.
No major IPR-related laws were passed in 2019. The EU Directives on copyright (2019/790 and 2019/789) are required to be transposed by June 2021. Slovakia is not included in USTR’s Special 301 Report or the Notorious Markets List.
There were 1,901 suspected breaches of IPR in 2018 for goods imported from third countries (up from 1363 cases in 2017, especially in the form of textiles and shoes), but the value of seized counterfeit goods declined 53 percent from 2017 to €735,845. The number of domestic IPR infringement cases grew from 918 in 2017 to 996 in 2018 with an increase in value in 2018 by 51 percent to €2.7 million.
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
Please consult the following websites for more information:
- Ministry of Culture, Copyright Act: https://www.slov-lex.sk/pravne-predpisy/SK/ZZ/1953/115/19640401.html
- Intellectual Property: https://www.dusevnevlastnictvo.gov.sk/web/guest
- Industrial Property Office: http://www.upv.sk/?introduction
- Financial Administration: https://www.financnasprava.sk/en/homepage
- Financial Administration Annual Report for 2018 (latest): https://www.financnasprava.sk/_img/pfsedit/Dokumenty_PFS/Financna_sprava/Vyrocne_spravy/2019.04.17_VS_2018.pdf
- American Chamber of Commerce in the Slovak Republic:
http://www.amcham.sk/home
6. Financial Sector
Capital Markets and Portfolio Investment
The Bratislava Stock Exchange (BSSE) is a member of the Federation of European Securities Exchanges (FESE). The stock market in Slovakia is among the smallest in Europe, and largely dominated by bonds that represent 95 percent of all volume. In 2019, the total volume of transactions at the BSSE was slightly below $265 million (a 53 percent decline compared to 2018). Market capitalization of shares was roughly $3 billion and market capitalization of bonds $51 billion.
The European Single Market and existing European policies facilitate the free flow of financial resources. Slovakia respects International Monetary Fund (IMF) Article VIII by refraining from restricting payments and transfers for current international transactions. Credit is allocated on market terms in Slovakia and is available to foreign investors on the local market.
Please consult the following websites for more information:
- Bratislava Stock Exchange: http://www.bsse.sk/bcpben/MainPage/tabid/104/language/en-US/Default.aspx
- Central Depository of Securities: https://www.cdcp.sk/en/
- Central Bank of Slovakia: https://www.nbs.sk/en/about-the-bank
- Central Register of Regulated Information: https://ceri.nbs.sk/
Money and Banking System
Slovakia became part of the Euro system, which forms the central banking system of the euro area within the European System of Central Banks, upon its integration into the Eurozone on January 1, 2009. The Central Bank of Slovakia (NBS) is the independent central bank of the Slovak Republic.
Most banks operating in Slovakia are subsidiaries of foreign-owned institutions. Slovak branches operate conservatively and showed strong resilience during the 2009 financial crisis and subsequent EU-wide stress tests. The combined total assets of the financial institutions active in the Slovak market were over €85 billion at the end of 2019.
According to the 2019 Financial Stability Report issued by NBS, profitability of the Slovak banking sector (ROE of 8 percent as of September 2019) remains above-average in the EU’s banking union, but the gap is narrowing. Corporate credit has gradually decreased amid economic slowdown. Non-performing loans reported by domestic banks were approximately 3.4 percent of total loans in September 2019. The banking sector’s aggregate total capital ratio was 18.4 percent in the first half of 2019.
Foreign nationals can open bank accounts by presenting their passport and/or residence permit, depending on the bank.
Please consult the following websites for more information:
- Central Bank of Slovakia: https://www.nbs.sk/en/financial-market-supervision-practical-info/publications-data
Foreign Exchange and Remittances
Foreign Exchange
Slovakia joined the Eurozone on January 1, 2009. The exchange rate is free floating.
The Foreign Exchange Act (312/2004) governs foreign exchange operations and allows for easy conversion or transfer of funds associated with an investment. The Act liberalized operations with financial derivatives and abolished the limit on the export and import of banknotes and coins (domestic and foreign currency). It also authorizes Slovak residents to open accounts abroad and eliminates the obligation to transfer financial assets acquired abroad to Slovakia. Slovakia meets all international standards for conversion and transfer policy. Non-residents may hold foreign exchange accounts. No permission is needed to issue foreign securities in Slovakia, and Slovak citizens are free to trade, buy, and sell foreign securities.
Remittance Policies
There are very few controls on capital transactions, except for rules governing commercial banking and credit institutions, which must abide by existing banking and anti-money laundering laws. The basic framework for investment transfers between Slovakia and the United States is set within the 1992 U.S. – Slovakia Bilateral Investment Treaty.
Following Slovakia’s approval of the Foreign Account Tax Compliance Act (FATCA) in July 2015, and per the Act on Automatic Exchange of Information on Financial Accounts (359/2015), Slovak financial institutions are obligated to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS).
Slovakia is not a Financial Action Task Force (FATF) member; but receives FATF recommendations, and is a member of MONEYVAL, which is an FATF associate member.
Slovakia does not impose any limitations on remittances. Dividends are taxed at a 7 percent rate. Transfer pricing for controlled transactions must be based on market prices. An obligation to pay a 21 percent tax applies to companies that are moving their assets or activities abroad.
Please consult the following websites for more information:
- S.-Slovakia Bilateral Investment Treaty: http://2001-2009.state.gov/documents/organization/43587.pdf
- S.- Slovakia Bilateral Taxation Treaty: https://www.irs.gov/businesses/international-businesses/slovak-republic-tax-treaty-documents
- MONEYVAL: https://www.coe.int/en/web/moneyval/jurisdictions/slovak_republic
Sovereign Wealth Funds
Slovakia does not maintain a Sovereign Wealth Fund (SWF). Slovak Investment Holding (SIH) is a fund of funds fully owned by the Slovak Guarantee and Development Bank. Resources are allocated as revolving financial instruments, through financial intermediaries or directly to final beneficiaries, and focus on strategic investment priorities in the following sectors: transport infrastructure, energy efficiency, waste management, SMEs, and social economy.
Please consult the following websites for more information:
- Slovak Investment Holding: https://www.sih.sk/en/
7. State-Owned Enterprises
There are roughly 100 SOEs in Slovakia that employ approximately 86,000 employees. SOEs are mostly active in strategic sectors, including health and social insurance, aerospace, ground transportation, and energy industries. Gas industry SOEs are the most profitable with SPP Infrastructure (gas infrastructure) at the top of the list with a profit of €607 million in 2019. Slovak Rails, a rail infrastructure company with a net loss of €2 million in 2019 and assets worth €3.7 billion, and Slovak Post with a net income of €1.4 million in 2019 and assets worth €500 million, are the two biggest employers in Slovakia, each with almost 14,000 employees. Narodna Dialnicna Spolocnost (National Highway Company) has the most assets, worth €10 billion. The second biggest SOE in terms of assets is SPP Infrastructure with €6 billion. The 30 biggest fully state-owned enterprises have assets of roughly €25 billion. The 2019 Slovak budget received roughly €430 million in revenues from SOEs. Slovenske Elektrarne, a major utility company with 34 percent state ownership has assets worth €10.5 billion. According to the government’s Value for Money unit, 37 percent of SOEs have a good financial health and the same percentage have serious financial problems.
In 2019, Transparency International Slovakia (TIS) published a ranking of 100 Slovak SOEs (including state, municipally and regionally owned companies), assessing how open these companies are when it comes to publishing economic results and access to information. Transparency International has deemed the SOEs to be generally non-transparent. The 100 ranked SOEs have a combined budget of more than €10 billion, which represents two thirds of state budget expenses. Wider concerns over transparency of public tenders persist, including those involving the SOEs.
Most SOEs are structured as joint-stock companies governed by boards that include government representatives and government appointees and the government plays a key role in SOEs’ decision making. Significant SOEs are required to publish their audited financial statements in accordance with the Accounting Act. They submit their audited financial statements to the Finance Ministry’s dedicated portal.
Most ministries publish a list of companies they own on their web portals. The list includes SOE equities and profits broken down by enterprise and is publicly available.
Slovak SOE ownership is exercised in accordance with the Act on State-Owned Enterprises (111/1990) and is consistent with the OECD Guidelines on Corporate Governance for SOEs.
Please consult the following website for more information:
- Register of Financial Statements: http://www.registeruz.sk/cruz-public/home
- 2019 Ranking of SOEs’ openness by Transparency International Slovakia: http://firmy.transparency.sk/rankings/companies/2019
- Equity of key Slovak SOEs: https://www.nrsr.sk/web/Dynamic/DocumentPreview.aspx?DocID=472879
- Economic data about Slovak companies including SOEs: https://www.finstat.sk/
Privatization Program
Foreign investors are free to participate in privatization programs for SOEs however, no privatization efforts are currently under way. Privatization programs were usually executed through direct sale, although Slovakia has a track record of doing major privatization projects through public tenders, especially in the energy sector.
According to Act on Transfer of State Assets to Other Entities (92/1991 Coll.), the appropriate ministry plays a central role in the SOE privatization process. Previous privatization programs commonly resulted in foreign investors bidding and winning the tenders.
8. Responsible Business Conduct
No concise or standardized definition of Responsible Business Conduct (RBC) has been introduced in Slovakia so far. The Slovak government has not prepared any comprehensive national action plan towards RBC, but Slovakia adheres to EU directives on social responsibility and OECD guidelines for Multinational Enterprises. The Slovak Ministry of Labor, Social Affairs and Family references the World Business Council for Sustainable Development in its definition of CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at-large.” The ministry refers to Howard R. Bowen’s 1953 text on Social Responsibilities of the Businessman for its definition of social responsibility. While the ministry has a generic webpage on social responsibility, it is not regularly updated nor has the Ministry been actively promoting or assessing RBC in recent years.
The Acts on Environmental Impact Assessment (24/2006), Air (137/2010), and Waste (313/2016) govern the environmental protections affecting businesses. The mandatory Environmental Impact Assessment (EIA) process applies to a number of industries, including mining, energy, steel, chemical, pharmaceutical, wood, food, and agriculture, as well as infrastructure projects. The Act on Air defines legal obligations for businesses causing emissions, including emissions limits, monitoring, and reporting in line with valid national and EU legislation. The Act on Waste establishes the obligations for companies producing packaging, as well as rules on waste recycling and recovery, and other waste management issues.
Ministry of the Environment uses environmental criteria in its own purchases of paper, information technology and vehicles with a view to future mandatory use of green criteria by other public bodies. The government has approved a new environmental strategy 2030 aiming to better protect national parks, reduce coal-produced energy and invest in green public procurement which is expected to increase to 70 percent by 2030. Slovakia has a voluntary target of having at least 50 percent of public procurements include a “green” component by 2020. The current share of green procurements is around 3 percent of the total public procurement value.
Slovak National Center for Human Rights (NCHR) is a national agency tasked with human rights protection. In September 2018, the National Contact Point for Business and Human rights (NCPBH) has been established within the NCHR. NCPBH initiated the implementation of basic international business and human rights regulations in Slovakia, in particular the implementation of the UN Guiding Principles on Business and Human Rights. At the same time, NCPBH aims to prevent and mitigate negative impact of business activities in Slovakia.
Several NGOs have a track record in building awareness of Corporate Social Responsibility (CSR). Pontis Foundation – an NGO promoting corporate philanthropy, transparency, and ethics – has an almost 20-year tradition of recognizing the country’s best CSR programs with its prestigious Via Bona Awards. The Pontis Foundation also hosts an informal Business Leaders Forum, which brings together companies adhering to the principles of CSR. The American Chamber of Commerce in Slovakia, which houses some of the biggest private employers in Slovakia, plays an important and active role in promoting and advocating for CSR. Many businesses and multinational companies promote CSR and the Slovak Chamber of Commerce and Industry advocates for ethical business.
A National Contact Point was established to promote these guidelines among wider public (business community, government, trade unions, etc.) and help finding solution in specific cases related to the implementation of directives.
Please see below NCP’s information:
Ministry of Economy of the Slovak Republic
The Strategy Unit
Department of Bilateral Trade Cooperation
Mierova 19
827 15 Bratislava 212
Slovak Republic
Tel.: +421 2 4854 2309
E-mail: nkm@mhsr.sk
Slovakia is a party to the Aarhus Protocol. Consumer protection is guaranteed and enforced through the Civil Rights Act, Consumer Protection Act, and the Act on E-Commerce. Slovakia has ratified the Extractive Industry Transparency Initiative (EITI). As an EU Member State, Slovakia adheres to the 2017/821 regulation, which is based on the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
9. Corruption
Slovakia is a party to international treaties on corruption. Among them are the OECD Convention on Combating Bribery of Foreign Public Officials, the UN Anti-Organized Crime Convention, the UN Anti-Corruption Convention, and the Criminal Law Convention on Corruption and Civil Law Convention on Corruption. Slovakia is a member of the Group of States against Corruption (GRECO).
The giving or accepting of a bribe constitutes a criminal act according to Slovak law. Slovak criminal law incorporates criminal liability for legal persons, including corporations. Nevertheless, corruption continues to be among the most serious issues for the business community. According to the Special Eurobarometer survey of October 2017, 81 percent of respondents believed that corruption is part of Slovakia’s business culture. In 2019 Transparency International’s global corruption perception ranking showed that Slovakia dropped from 57th place in 2018 to 59th place. There is no data available on whether U.S. firms identify corruption as an obstacle to foreign direct investment. In a March 2018 survey by five foreign chambers of commerce (Slovak-German Chamber of Commerce, Slovak-Austrian Chamber of Commerce, Dutch Chamber of Commerce, Swedish Chamber of Commerce, and Advantage Austria), respondents highlighted the fight against criminality and corruption as the worst among evaluated investment criteria. The investors further noted that concerns about corruption and rule of law could potentially damage the image of Slovakia and raise questions about future stability.
NGO analysts and GRECO point out that conflicts of interest and asset declaration regulations lack the necessary level of detail to be implemented and enforced in practice. There is a high threshold for reporting gifts accepted by judges and prosecutors. Government authorities do not require private companies to establish internal codes of conduct that would prohibit bribery of public officials, although some companies have adopted such measures voluntarily. While law enforcement has effectively investigated some cases of petty bribes and mid-level corruption, anti-corruption non-governmental organizations assess that high-level corruption is rarely investigated or prosecuted effectively; only two ministerial-level officials have been convicted of corruption-related crimes since Slovak independence in 1993. According to survey published by the Transparency International Slovakia between October 2016 and 2019 only 10 percent of corruption cases decided by the Specialized Criminal Court exceeded the amount of EUR 5,000.
Following the murder of investigative journalist Jan Kuciak and his fiancée Martina Kusnirova in February 2018 and the resulting changes in the government and police leadership, one individual involved in high-level tax fraud was convicted and a number of judges were charged with corruption, interference in the independence of courts and obstruction of justice. In March 2020 Pavol Rusko, a former director of TV Markiza, and Marian Kočner, accused of plotting the murder of Jan Kuciak and his fiancé, and were sentenced to 19 years in jail for obstruction of justice and promissory notes fraud. Based on the promissory notes, Kočner claimed €69 million from TV Markiza. The appeal proceedings are pending. TV Markiza is part of NASDAQ-traded Central European Media Enterprise (CME), and was majority owned by AT&T. CME was sold to Czech firm PPF in 2019, pending approval from relevant EU and national regulatory authorities.
The previous government in power from 2016-2020 approved a National Anti-corruption Plan in September 2019. NGOs investigating corruption do not enjoy any special protection. In 2019 the Parliament adopted the law on whistleblower protection including a new office assigned to enhance whistleblower protection. The Head of the Office has not yet been selected. In June 2019 Parliament streamlined application of the anti-shell company law that provides for increased transparency in governmental contracting by requiring private companies reveal their ownership structure before entering into business contracts with state entities.
Some members of civil society and many politicians claim political influence over the police and prosecution services have impeded corruption investigations, allowing individuals with strong political connections to avoid prosecution for corrupt practices. Several police investigators have publicly claimed, and other investigators told journalists in private, that the police corps’ politically nominated leadership discouraged investigation of politically sensitive cases, manipulated police statistics on criminality, and forced honest police officers to leave the force. Following February 2020 parliamentary elections, a new government took over with a political program heavily focused on strengthening anti-corruption measures.
In January 2020, a conflict of interest in civil service regulation was launched by Cabinet decree, introducing a Code of Conduct for Civil Servants (400/2019 Coll.).
Disclosure of contracts in the Central Registry of Contracts by public administrators and state-owned enterprises is compulsory. However, there continues to be frequent media reports alleging corruption in public tenders and EU subsidy programs.
Private businesses, especially those with foreign ownership, often have internal codes of ethics, in many cases also extending to contractors.
Resources to Report Corruption
Contact details of government agencies responsible for combating corruption:
Dusan Kovacik
Head of the Special Prosecutor’s Office
Office of the Special Prosecution under the General Prosecutor’s Office
Sturova 2
812 85 Bratislava
Telephone: +421 33 690 3171
Dusan.Kovacik@genpro.gov.sk
Branislav Zurian
Director of the National Criminal Agency
Ministry of Interior, National Police Headquarters
Račianska 45
812 72 Bratislava
Telephone: +421 964052102
Branislav.Zurian@minv.sk
Contact details of “watchdog” organizations:
Gabriel Sipos
Executive Director
Transparency International Slovakia
Bajkalska 25
82718 Bratislava
Telephone: +421 2 5341 7207
sipos@transparency.sk
Zuzana Petkova
Executive Director
Stop Corruption Foundation
Stare Grunty 18
841 04 Bratislava
petkova@zastavmekorupciu.sk
Peter Kunder
Executive Director
Fair Play Alliance
Smrecianska 21
811 05 Bratislava
Telephone: +421 2 207 39 919
kunder@fair-play.sk
10. Political and Security Environment
Politically motivated violence and civil disturbance are rare in Slovakia. There have been no recent reports of politically motivated damage to property, projects, and installations or violence directed toward foreign-owned companies. In May 2018, a foreign-born IBM employee was murdered in an apparent hate crime, but overall criminal violence remains rare. Slovak citizens have responded well to stringent government measures introduced during March and April to contain the spread of the COVID-19 pandemic, with polls showing that nine out of ten Slovaks considered them appropriate. There were no reported cases of mass civil disobedience, looting or clashes with law enforcement, despite the temporary introduction of far-reaching restrictions on movement and the sale of goods and services, as well as a mandatory two-week quarantine in state-operated facilities applied to all individuals returning to Slovakia from abroad. Mass quarantine regimes implemented in a number of marginalized Romani settlements, effectively isolating them from the surrounding world, also progressed with limited civil disturbance or violence. In February 2020, Slovakia elected a new four-party government coalition, which ran on a campaign of anti-corruption, good governance, and accountability. The transfer of power from the previous government was smooth and effective.
11. Labor Policies and Practices
Slovakia is one of the most industrialized economies in the EU with almost 32 percent of the workforce employed in industry, 65 percent in services (including construction), and the rest in agriculture. The unemployment rate dropped to 6 percent by the end of 2019. The government continued implementing a program meant to help the long-term unemployed find jobs. Long-term unemployment remains prevalent in poorer regions, especially in the marginalized Romani communities.
Foreign companies frequently praise workers’ motivation and productivity, and especially commend younger workers for their proficiency with foreign languages. However, businesses complain about the growing gap between their labor market needs and popular areas of study, with shortages in technical education at both the high school and higher education levels, and a lack of support for critical thinking and managerial skills. Slovak PISA scores are persistently below average with skill shortages particularly prevalent in knowledge and technology-intensive sectors.
The minimum wage law indexes the minimum wage to overall wage growth in the economy. The minimum wage in 2019 was €520 per month; it increased to €580 in 2020, which corresponds to €3.33 per hour. Nominal wages grew by 7.8 percent in 2019. The average nominal wage in 2019 was €1,090 per month. The average hourly labor cost was €12.5, significantly lower than the EU average of €27.7. According to Eurostat, the gender pay gap stood at 19.4 percent and the gender employment gap at 13 percent in 2018. A lack of childcare facilities for children below three years of age combined with the three year paid maternity leave discourages mothers from returning to work and aggravates the gender pay gap. According to the European Commission Country Report on Slovakia, formal childcare of children under 3 years remains among the lowest in the EU. The proportion of women working part-time remains below 10%.
The Slovak Labor Code (311/2001 Coll. and later amendments) governs the labor market, including for foreigners and is applied in the whole territory of Slovakia. Businesses cite labor regulations and frequent changes to the Labor Code, non-systematic measures, and lack of stakeholder discussion as some of the obstacles to doing business in Slovakia. A number of labor related measures were enacted January 1, 2020 including: an extra week of annual leave to employees under 33 years that have children (5 weeks total); a tax benefit for employers who provide accommodation to their employees and to the receiving employee; an employer’s voluntary contribution to sport activities of employee’s children; and the increase of minimal wage.
The number of foreign nationals from non-EU countries on the Slovak labor market continues to be low but rose significantly in the past year from just over 17,000 in December 2018 to 28,500 in December 2019. According to Slovak Labor Office statistics, nationals of Ukraine and Serbia account for 80 percent of the total number. The total number of foreign workers, including EU nationals and those non-EU nationals who do not require work permits, was roughly 78,000. From January 1, 2019, the list of positions that are difficult to fill, for which the administrative process of employing third country nationals is simplified, is updated quarterly and the obligation for foreigners to prove the highest achieved education has been cancelled. On January 1, 2020, the Amendment to the Act on Employment Services (5/2004 Coll.) further simplified hiring of non-EU nationals especially by decreasing waiting times for temporary residence from 90 to 30 days and limiting the waiting time for obtaining a work permit to 20 days.
The Labor Code contains provisions against discrimination in the workplace (also stipulated in the Anti-discrimination Act, 365/2004 Coll.) based on gender, race, nationality, sexual orientation, health impairment, age, language, religion, political affiliation, and other forms of discrimination. Slovakia has a standard workweek of 40 hours and the law mandates a maximum workweek of 48 hours, including overtime, except for employees in the health-care sector, whose maximum work week is 56 hours. The Labor Code caps overtime at 400 hours annually and sets minimum remuneration for overtime and work during public holidays or on weekends. There are no serious concerns regarding compliance with international labor standards. The Labor Code differentiates between layoffs and firing. The cost to lay-off employees stipulated by the Labor Code is generally less expensive than in Western Europe and depends mostly on the employee’s time in service.
Social insurance contributions are compulsory and include healthcare, unemployment, and pension insurance. Both employers and employees must pay social contributions – employers’ combined social and health contributions amount to 35 percent of wages. The relatively heavy reliance on social insurance increases the cost of labor, especially for low-skilled, low-wage workers. According to the OECD, the average worker in Slovakia faces a tax wedge (the difference between salary and total cost of employment) of roughly 42 percent, compared to the OECD average of 36 percent.
Collective bargaining is voluntary and takes place without interference from the state. No national-level collective bargaining exists in Slovakia. Provisions agreed in multiemployer as well as single-employer collective agreements are legally binding for the contracting parties. In 2017 and 2018, 14 new multiemployer agreements were registered. EU Agency Eurofound reports up to 35 percent of employees in the national economy are covered by a collective agreement. At the sectoral or regional level, the coverage is about 10 percent. No official national data exist on collective bargaining coverage. The standard mechanism for dealing with collective labor disputes is conciliation, which is used in vast majority of cases, and arbitration.
Union membership has declined in recent years. A “tripartite arrangement” is used as a discussion platform including state representatives, labor unions, and the employers’ associations. Slovakia is a member of the International Labor Organization and has ratified all eight core conventions. Strikes are infrequent in Slovakia. In January 2020, truck drivers organized a series of strikes, which affected production at two car making factories. The Finance Minister and the drivers’ representatives met to discuss their demands for discounts on road taxes, which were approved in early March by an outgoing government at the cost of €30 million but never approved by the outgoing parliament. In early May 2020, the new government started preparing discounts on road taxes to mitigate negative impacts of COVID-19, pending approval from parliament.
Please consult the following websites for more information:
- The European Commission Country Report – Slovakia 2020: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020SC0524&from=EN
- OECD Economic Survey – Slovak Republic 2019: http://www.oecd.org/economy/surveys/Slovak-Republic-2019-OECD-economic-survey-overview.pdf
- Central Office of Labor, Social Affairs and Family: https://www.upsvr.gov.sk/sluzby-zamestnanosti/zamestnavanie-cudzincov.html?page_id=272197