Policies Towards Foreign Direct Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are no specific legal, practical or market access restrictions on foreign investment.  American investors have not complained of discriminatory laws against foreign investors.  However, in October 2019 a new digital services tax was signed into law, effective on January 1, 2020.  This 5% tax on advertising revenues targets companies with global revenues exceeding €750 million ($848 million) provided at least €25 million ($28 million) of that sum comes from Austria, with a carve-out for Austria’s national broadcaster (ORF) which would otherwise be taxed.  Government officials claim the tax is intended to level the playing field.

The corporate tax rate, a 25 percent flat tax, is above the EU average, and the government has indicated plans to reduce this rate to 21 percent within the current parliamentary term which runs through 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) bilateral agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should be aware of Austria’s lengthy environmental impact assessments in their investment decision-making.  The mining and transportation sectors are also more heavily regulated than in other economies.  The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector.  Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops.

Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria.  It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company.  ABA provides these services free of charge.

The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors.  Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

In principle there is generally no limitation on establishing and owning a business in Austria. However, a local managing director must be appointed to any newly established enterprise.  For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business.  Many Austrian trades are regulated, and the right to run a business in regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.

The requirement that over 50 percent of energy providers must be publicly owned limits foreign investments in the energy sector.  Strict liability and co-existence regulations regarding crop contamination in the agriculture sector virtually outlaw the cultivation, marketing, or distribution of genetically-modified crops.

Austria maintains a national security investment screening process to review potential foreign acquisitions of 25 percent or more of a company deemed essential to national security or which is involved in the provision of public services such as energy, water, telecommunications, and educational services.  The government plans to reduce the threshold for review to ten percent and expand covered sectors through adoption of a new investment-screening law in 2020. The current screening process has seldom been used since its introduction in 2012. The EU Regulation establishing a framework for the coordination of members’ national security screening of foreign direct investments into the Union entered into force in April 2019.  It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the national security of EU countries.

Non-EU/EEA citizens need authorization from administrative authorities of the respective Austrian province to acquire land.  Provincial regulations vary, but in general there must be a public (economic, social, cultural) interest for the acquisition to be authorized.  Often, the applicant must guarantee that he does not want to build a vacation home on the land in order to receive the required authorization.

Other Investment Policy Reviews

Not applicable.

Business Facilitation

While the World Bank Doing Business Index ranked Austria as the 27^th  in 2020  (www.doingbusiness.org), starting a business takes time and requires many procedural steps (Austria ranks 127 in this category ).  The average time to set up a company in Austria is 21 days, compared to just 9.2 days in other  high income countries.  In order to register a new company or open a subsidiary in Austria, a company must first be listed on the Austrian Companies Register at a local court.  The next step is to seek confirmation of registration from the Austrian Economic Chamber (WKO) establishing that the company is really a new business.  The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located.  Membership in the WKO is mandatory for all businesses in Austria.

For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites (in German language only) to either found or register a company:

https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html:  or www.gisa.gv.at/online-gewerbeanmeldung. It is advisable to seek information from ABA or the WKO before applying to register a firm.

Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria.  It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company.  ABA provides these services free of charge.  The website of the ABA contains further details and contact information and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/. 

Outward Investment

With more than 50 percent of its GDP derived from exports, the Austrian government encourages outward investment.  Advantage Austria, the “Austrian Foreign Trade Service” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates six offices in the United States (Washington, DC, New York, Chicago, Atlanta, Los Angeles, and San Francisco.)  It also has trade offices in 26 European, 19 Asian, 7 other North- and South American, 6 African countries, and Australia.

https://www.wko.at/service/aussenwirtschaft/aussenwirtschaftscenter.html#heading_aussenwirtschaftscenter  The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support.

Investment Incentives

Financial incentives and business subsidies provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants.  Most incentives are targeted to investments that meet specified criteria, including job-creation, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, revitalization of a community, and promoting startups.  Tax allowances for advanced employee training and R&D expenditures are also available, as are financing options for start-ups and cash grants.  The Austrian Labor Market Service (AMS) offers grants for job creation and personnel development training.

Austria offers financial and tax incentives within EU regional co-funding schemes to firms undertaking projects in economically underdeveloped and rural areas. In the 2014-2020 funding period, roughly EUR 536 million (USD 638 million) from the European Regional Development Fund (ERDF) is available to Austria for strengthening investments in growth and jobs.

Austria’s Wirtschaftsservice (AWS) is the governmental institution that provides financial incentives for businesses.  In April 2020, the government established a EUR 100 million (USD 112 million) COVID-19 assistance package for startups, where it matches one-to-one private (also foreign) investments in Austrian startups, and a EUR 50 million  (USD 56 million) venture capital fund (also open for foreign investors), where it guarantees 50% of the fund’s investment.

Additional information on targeted investment incentives is available at https://www.aws.at/en/ . More detailed information on investment incentives in English language is available on the ABA website (see chapter 2) at http://investinaustria.at/en/ 

Various government agencies in Austria offer incentives for research and development (R&D) activities (up to 50 percent of the investment amount).  The incentives are also available for foreign-owned enterprises.  The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en ); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/  ); and AWS (above). The latter also provides guarantees of up to €25 million over 5 to 10 years for investments in Austria, with a focus on small and medium-sized companies.

Foreign investors in Austria can also benefit from government support measures designed for companies affected by COVID-19, including:  a hardship fund for sole proprietorships; a COVID-19 assistance fund which provides EUR 15 billion (USD$16.8 billion) in loan guarantees; banking measures to increase liquidity; and a short-time work (kurzarbeit) program which allows staff working hours to be reduced by up to 90%, with the government paying up to 90% of the salary cost. More information can be found here: https://investinaustria.at/en/blog/2020/03/covid-19-support-measures-companies.php#vier 

Foreign Trade Zones/Free Ports/Trade Facilitation

Not applicable.

Performance and Data Localization Requirements

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the Austrian Labor Service (AMS).  The AMS only grants that permission if there is no comparable person in the pool of registered unemployed persons in Austria.  This does not apply to senior management positions, researchers, highly qualified personnel, and a limited set of other categories.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty.  Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills).  This Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations.  It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (such as qualified labor and registered nurses), and key personnel/professionals.  Applicants must have an offer of employment to apply for the RWR.  Highly qualified individuals holding U.S. citizenship may apply locally in Austria or opt to find a potential employer from abroad and have the company apply in Austria on their behalf.

Austrian immigration law requires those applying for residency permits in some categories to take German language courses and exams.   There is a specific visa category under the RWR model for founders of start-up enterprises to support Austria’s push to expand its innovation economy.

A less bureaucratic alternative is the EU Blue Card, which entitles applicants to a fixed-term stay of 24 months and employment is tied to a specific employer. However, there is a threshold of a gross annual income of at least one and a half times the average gross annual income for full-time employees (in 2020: at least EUR 63,672 (USD 71,313); annual salary plus special payments).

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply.  The EU General Data Protection Regulation (GDPR) as adopted by Austria in 2018, places restrictions on companies’ ability to store and use customer data.  It also requires specific user consent, in order for companies to send out promotional materials (previously, implied consent was sufficient). Transmission of customer or business-related data is therefore subject to EU GDPR regulations.  Austria’s Data Protection Authority is in charge of enforcing all GDPR-related matters, which include GDPR rules on data storage. In October 2019, the DPA imposed a fine of EUR 18 million (USD 20.2 million) on Austria’s postal service for illegal use of customer data, which included collecting and selling data on party affiliations.  The postal service was ordered to delete the data concerned.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives.  There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

* Source for Host Country Data:
*Statistics Austria (GDP) https://www.statistik.at/web_de/statistiken/wirtschaft/volkswirtschaftliche_gesamtrechnungen/index.html 
*Austrian National Bank (Investments) https://www.oenb.at/en/Statistics/Standardized-Tables/external-sector/foreign-direct-investment.html 

Austria’s inward investment figures show significant lower numbers for the Netherlands and Luxembourg. Special Purpose Entities (SPEs) may be used to avoid corporate taxes.

Alexander Schratt
Economic Specialist
U.S. Embassy Vienna, Vienna 1090, Boltzmanngasse 16
+43 1 31339-2206
schrattax@state.gov

Policies Towards Foreign Direct Investment

Croatia is generally open to foreign investment and the Croatian government continues to make efforts, through financial incentives, to attract foreign investors.  All investors, both foreign and domestic, are guaranteed equal treatment by law, with a handful of exceptions described below.  However, bureaucratic and political barriers remain.  Investors agree that an unpredictable regulatory framework, lack of transparency, judicial inefficiencies, lengthy administrative procedures, lack of structural reforms, and unresolved property ownership issues weigh heavily upon the investment climate.

Croatia is partnered with the World Bank on the “Croatia Business Environment Reform” project which intends to help Croatia implement various business reforms. The Ministry of Economy, Entrepreneurship and Crafts Directorate for Investment, Industry and Innovation assists investors.  For more information, see: http://investcroatia.gov.hr/ .  The Strategic Investment Act fast-tracks and streamlines bureaucratic processes for large projects valued at USD 10.7 million or more on the investor’s behalf.  Various business groups, including the American Chamber of Commerce, Foreign Investors’ Council, and the Croatian Employers’ Association, are in dialogue with the government about ways to make doing business easier and to keep investment retention as a priority.

Limits on Foreign Control and Right to Private Ownership and Establishment

Croatian law allows for all entities, both foreign and domestic, to establish and own businesses and to engage in all forms of remunerative activities.  Article 49 of the Constitution states all entrepreneurs have equal legal status.  However, the Croatian government restricts foreign ownership or control of services for a handful of national security-sensitive sectors:  inland waterways transport, maritime transport, rail transport, air to ground handling, freight-forwarding, publishing, education, and ski instruction.  Apart from these, the only blocks to market access involve professional licensing requirements (architect, auditor, engineer, lawyer, and veterinarian, etc), about which detailed information can be found at http://psc.hr/en/sectoral-requirements/ .  Over 90 percent of the banking sector is foreign-owned.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) published an investment climate review for Croatia in June 2019:

https://www.oecd.org/publications/oecd-investment-policy-reviews-croatia-2019-2bf079ba-en.htm 

The World Bank Group published a “Doing Business” Economic Profile of Croatia in 2019: https://www.doingbusiness.org/content/dam/doingBusiness/country/c/croatia/HRV.pdf 

Business Facilitation

The Croatian government offers two e-government options for on-line business registration, www.hitro.hr  and start.gov.hr , both of which provide 24-hour access.  Start.gov.hr provides complete business registration for a limited liability company (d.o.o.), simple limited company (j.d.o.o.) or company, without any need to physically enter a public administration office.  The procedure guarantees a short turnaround on requests and provides deadlines by which the company can expect to be registered.  The Start.gov.hr procedure eliminates fees for public notaries, proxies, seals and stamps, and reduces court registration fees by 50 percent.  Hitro.hr also provides on-line services but maintains offices in 60 Croatian cities and towns for those who want to register their business in person.

In 2019, the Global Enterprise Registration website (www.GER.co ) rated Croatia’s business registration process 4 out of 10, while the 2020 World Bank Ease of Doing Business report ranks Croatia as 114 out of 190 countries in this category.  The government pledged to improve conditions for business registration.  In 2019, the government adopted legislation relieving the service sector of various fees, licensing requirements, and prohibitions for companies in legal services, energy certification, architecture, accounting, tourism, pharmaceutics, and physical therapy.  Croatia’s business facilitation mechanism provides for equitable treatment to all interested in registering a business, regardless of gender or ethnicity.

The United Nations Conference on Trade and Development (UNCTAD)  provides an outline of investment facilitation proposals at https://investmentpolicy.unctad.org/country-navigator/53/croatia .

Outward Investment

Croatian foreign direct investment totals approximately USD 23.1 million in the United States, according to Croatian National Bank figures.  The government does not promote or incentivize outward investment.  Croatia has no restrictions on domestic investors who wish to invest abroad.

Investment Incentives

The Investment Promotion Act (IPA), amended in 2020, offers incentives to investment projects in manufacturing and processing activities, development and innovation activities, business support activities and high added value services.  The incentives are either tax refunds or cash grants.  After they are approved for implementation, they are not distributed immediately.  Those who receive cash grants are required to provide documentation proving they have fulfilled the criteria per which the request was granted for every year they have received approval for the incentive.  Tax refunds are provided to companies on an annual basis, based on information provided in tax returns.  Incentive measures can be combined or used individually.

The IPA provides the following incentive measures: tax refunds for microenterprises; tax advantages for small, medium and large enterprises; cash grants for eligible costs of new jobs linked to the investment project; cash grants for eligible training costs linked to the investment project; additional aid for development and innovation activities, business support and high value-added services; cash grants for capital costs of investment projects; cash grants for labor intensive investment projects; incentives for investments which utilize inactive government-owned property; and incentives to modernize business processes through automation and digitalization of production and manufacturing processes.

All incentive measures can be used by entrepreneurs.  Entrepreneurs are defined as individuals subject to Croatian income tax or companies registered in Croatia investing the minimum amount of USD 54,000 in fixed assets, and creating at least three new jobs for microenterprises or 10 new jobs for companies investing in information computer technology (ICT) systems and software development centers, or USD 162,000 in fixed assets and creating at least five new jobs for small or medium enterprises, and large companies, and USD 540,000 in fixed assets for modernizing and increasing business process productivity.

Substantial tax cuts on profits are available depending on the size of the investment and the number of new jobs created.  A 50 percent reduction applies for up to ten years for companies that invest up to USD 1.1 million and create at least five new jobs (three jobs for microenterprises or 10 jobs for companies investing in ICT system and software development centers).  This reduction increases to 75 percent for companies investing USD 1.1-USD 3.2 million and creating at least 10 new jobs, and up to 100 percent for companies that invest over USD 3.2 million and create at least 15 new jobs.

Profit tax reductions are also available for investments modernizing the manufacturing industry.  These projects must include a minimum fixed asset investment of USD 560,000, all employees must be retained for the project duration, and the per-employee productivity after three3 years must increase at least 10 percent compared to the one-year period prior to the project.  A 50 percent profit tax rate reduction applies for companies that invest up to USD 1.1 million,75 percent for companies investing USD 1.1 to -USD 3.2 million, and up to 100 percent for companies that invest over USD 3.2 million.

Cash grants for new jobs created can be up to USD 10,100 per new position, depending on the location of the investment and category of the person employed.  Financial support of 10 percent of expenses, which is not subject to reimbursement, or up to USD 3,250 per new position can be used to create jobs in counties with unemployment levels up to 10 percent.  This support increases to 20 percent or up to USD 6,500 per position in counties with unemployment levels from 10 to 20 percent, and up to 30 percent or USD 10,000 per new position in counties with unemployment levels above 30 percent.

There are also programs to reimburse costs for employee education and training connected to an investment project which can cover up to 50 percent of the of education and training costs for large companies, up to 60 percent for medium sized companies or if training is given to workers with disabilities, or up to 70 percent for small businesses and microenterprises. Incentives for education cannot exceed 70 percent of eligible costs of education and training.

Additional incentives for job creation are available for development and innovation activities that affect the development of new products or significantly improve existing products, production series, manufacturing processes, and/or production technologies; for business support activities such as customer support, outsourced business activities centers, or logistics and distribution centers, as well as ICT systems and software development centers; for activities such as hospitality and tourism accommodation facilities categorized  as at least four stars; support services for the above-listed types of accommodations with high value added in a range of categories; nautical tourism projects; and amusement and theme park projects; as well as for creative services, and industrial engineering services.

Additional incentives for job creation are offered for labor-intensive investment projects within the first three years of the project start date.  Cash grants for job creation are increased by 25 percent for projects creating 100 or more positions, by 50 percent for projects creating 300 or more jobs, and by up to 100 percent or the total cost (or up to the maximum allowed limit) for creating 500 or more jobs.

Cash grants for the capital costs of investment projects are approved for investments over USD 5.4 million which generate 50 new positions within 3 years of the start of the investment. They cover 10 percent of the cost of new factory construction, production facility construction, or the purchase of new equipment (up to USD 540,000) in counties where the unemployment rate is from 10-20 percent.  This incentive increases to 20 percent of the investment cost (up to USD 1.1 million) in counties where the unemployment rate is above 20 percent, with the condition that at least 40 percent of the investment is in machines or equipment and that at least 50 percent of those machines or equipment are of high-value technology.  There are also grants for buying equipment or machinery for research and development activities up to 20 percent of the cost of the equipment, or up to USD 540,000.

There are incentives for investment projects which revitalize inactive state-owned property and provide free land leases for investors investing USD 3.2 million and creating at least 15 new jobs. Additional information regarding the types of incentives offered by the Ministry of Economy, Entrepreneurship and Crafts can be found at investcroatia.gov.hr.

The Act on Strategic Investment Projects went into effect in November 2013 and was amended in 2018. This Act facilitates and accelerates administrative procedures for projects deemed to be of strategic interest for Croatia based on a number of conditions listed in the Act.  Strategic projects can include private, public-private, or public investments in economy, mining, energy, tourism, transport, infrastructure, electronic communication, postal services, environmental protection, public utilities, agriculture, forestry, water management, fishery, health care, culture, audio-visual activities, science, defense, judiciary, technology, construction, and education.

The minimum amount for an investment to be considered strategic is approximately USD 10.6 million, which is significantly less than the previous minimum of USD 21.2 million.  All investments over this amount may be considered strategic, and will be entitled to accelerated permitting and registration procedures.  Investments may also be treated as strategic if they are valued at USD 1.4 million or more, and are implemented in assisted areas, or if they are implemented on the islands or are in the agriculture, fisheries, and forestry sector.  A guide and application materials for private investors interested in applying for status under the Act on Strategic Investment Projects can be found at:  www.investcroatia.gov.hr.

The Construction Act allows investors to secure permits through an e-licensing system. The investor may obtain a license valid for three years, which allows for a three percent change in the dimensions of the project from start to finish. The e-licensing system can be accessed at https://dozvola.mgipu.hr/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

There are 10 duty free zones (called “free zones” in the EU) operating in Croatia and one that is designated, but not operational.  Contact information for each of the zones can be found at https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/customs/procedural_aspects/imports/free_zones/list_freezones.pdf . Both domestic and foreign investors are afforded equal treatment in the zones.  After Croatia entered the European Union in 2013, many of the zones that operated throughout Croatia were slowly transitioned to industrial/business zones. Investment incentives are available in these zones.  For more information regarding these zones go to http://investcroatia.gov.hr/lokacije-za-investiranje/ ..

Performance and Data Localization Requirements

Croatian law does not impose performance requirements on or mandate employment requirements for foreign or domestic investors, nor are senior management or board of directors positions mandated in private companies.  In regard to U.S. investors, Article VII of the U.S.-Croatia BIT prohibits mandating or enforcing specified performance requirements as a condition for a covered investment.

Although procedures for obtaining business visas are generally clear, they can be cumbersome and time-consuming.  Foreign investors should familiarize themselves with the provisions of the Act on Foreigners.  Questions relating to visas and work permits should be directed to the Croatian Embassy or a Croatian Consulate in the United States.  The U.S. Embassy in Zagreb maintains a website with information on this subject at https://hr.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/entry-residence-requirements/.

There are no government imposed conditions for investment, nor are there “forced localization” policies for investors in terms of goods and technology.  There are no performance requirements, or associated enforcement procedures.  Foreign IT providers are not required to turn over source code or give access to surveillance.  There are no measures that prevent companies from freely transmitting customer or other business related data outside the country’s territory.  There are no requirements for investors to maintain or store data within the territory of Croatia.

*GDP at www.dzs.hr  for 2019, FDI at www.hnb.hr   for Q1-Q3 2019 Note:  U.S. Bureau of Economic Analysis do not have GDP or FDI data available for 2019 at time of publishing.

*FDI at www.hnb.hr   for Q1-Q3 2019

Table 4: Sources of Portfolio Investment
Data not available.

For more information on the investment climate in Croatia, you may contact:

Economic Section
U.S. Embassy Zagreb
Ulica Thomasa Jeffersona 2, 10010 Zagreb
Tel (+385 1) 661-2200
E-mail: InvestmentClimateCroatia@state.gov

Policies Towards Foreign Direct Investment

Hungary maintains an open economy and its high-quality infrastructure and central location are features that make it an attractive destination for investment.  Attracting FDI is an important priority for the GOH, especially in manufacturing and export-oriented sectors. According to some reports, in other sectors, including banking and energy, however, government policies have resulted in some foreign investors selling their stakes to the government or state-owned enterprises.  In 2018, net annual FDI amounted to USD 5.9 billion while total gross FDI amounted to USD 92 billion.

As a bloc, the EU accounts for approximately 89 percent of all FDI in Hungary in terms of direct investors and 62 percent in terms of ultimate controlling parent investor.  Germany is the largest investor, followed by the United States, Austria, France, the United Kingdom, Italy, Japan, the Netherlands, and China. The majority of U.S. investment falls within the automotive, software development, and life sciences sectors.  Approximately 450 U.S. companies maintain a presence in Hungary.

The GOH actively seeks foreign investment and has implemented a number of tax changes to increase Hungary’s regional competitiveness and attract investment, including a reduction of the personal income tax rate to 15 percent in 2016, reducing the business income tax rate to 9 percent in 2017, and the gradual reduction of the employer-paid welfare contribution from 27 percent in 2016 to 15.5 percent in 2020.  As of 2016, the GOH streamlined the National Tax and Customs authority (NAV) procedure to offer fast-track VAT refund to customers categorized as “low risk” based on their internal controls and previous tax record.

Many foreign companies have expressed displeasure with the unpredictability of Hungary’s tax regime, its retroactive nature, slow response times, and the volume of legal and tax changes.  According to the European Commission (EC), a series of progressively-tiered taxes implemented in 2014 disproportionately penalized foreign businesses in the telecommunications, tobacco, retail, media, and advertisement industries, while simultaneously favoring Hungarian companies.  Following EC infringement procedures, the GOH phased out most discriminative tax rates by 2015 and replaced them with flat taxes.

In 2017, the GOH passed a regulation that gives the government preemptive rights to purchase real estate in World Heritage areas.  The rule has been used to block the purchase of real estate by foreign investors in the most desirable areas of Budapest.

A 2014 law required retail companies with over USD 53 million in annual sales to close if they report two consecutive years of losses.  Retail businesses claimed the GOH specifically set the threshold to target large foreign retail chains.  The EC determined that the law was discriminatory and launched an infringement procedure in 2016, which resulted in the GOH repealing the controversial legislation in November 2018.  In April 2020, during the COVID-19 pandemic, the GOH issued a decree that levied sector-specific taxes on the banking and retail sectors to help finance a crisis response fund.  The progressive tax on retail grocery outlets was structured in a manner that only foreign retail firms were large enough to qualify for the tax.

The GOH publicly declared that reducing foreign bank market share in the Hungarian financial sector is a priority.  Accordingly, GOH initiatives over the past several years have targeted the banking sector and reduced foreign participation from about 70 percent before the financial crisis in 2008 to just over 50 percent by the end of 2018.  In addition to the 2010 bank tax and the 2012 financial transaction tax levied on all cash withdrawals, regulations between 2012-2015 obligated banks to retroactively compensate borrowers for interest rate increases on foreign currency denominated mortgage loans, even though these increases were spelled out in the original contract with the customer, and were permitted by Hungarian law.

While the pharmaceutical industry is competitive and profitable in Hungary, multinational companies complain of numerous financial and procedural obstacles, including high taxes on pharmaceutical products and operations, prescription directives that limit a doctor’s choice of drugs, and obscure tender procedures that negatively affect the competitiveness of certain drugs.  Pharmaceutical firms have also taken issue with GOH moves to weigh the cost of pharmaceutical procurement as more important than efficacy when issuing tenders for public procurement.

The Hungarian Investment Promotion Agency (HIPA), under the authority of the Ministry of Foreign Affairs and Trade, encourages and supports inbound FDI.  HIPA offers company and sector-specific consultancy, recommends locations for investment, acts as a mediator between large international companies and Hungarian firms to facilitate supplier relationships, organizes supplier training, and maintains active contact with trade associations.  Its services are available to all investors. For more information, see: https://hipa.hu/main .

Foreign investors generally report a productive dialogue with the government, both individually and through business organizations.  The American Chamber of Commerce enjoys an ongoing high-level dialogue with the GOH and the government has adopted many AmCham policy recommendations in recent years.  In 2017, the government established a Competitiveness Council, chaired by the Minister of Economy, which includes representatives from multinationals, chambers of commerce, and other stakeholders, to increase Hungary’s competitiveness.  Many U.S. and foreign investors have signed MOUs with the GOH to facilitate one-on-one discussions and resolutions to any pending issues. For more information, see: http://www.kormany.hu/en/ministry-for-national-economy  and https://www.amcham.hu/ .

The US-Hungary Business Council (USHBC) – a private, non-profit organization established in 2016 – aims to facilitate and maintain dialogue between American corporate executives and the top government leaders on the U.S.-Hungary commercial relationship.  The majority of significant U.S. investors in Hungary have joined USHBC, which hosts roundtables, policy conferences, briefings, and other major events featuring senior U.S. and Hungarian officials, academics, and business leaders. For more information, see: http://ushungarybc.org/ .

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is permitted with the exception of some “strategic” sectors including defense-related industries, which require special government permit, and farmland.  There are no general limits on foreign ownership or control.

Foreign law firms and auditing companies must sign a cooperation agreement with a Hungarian company to provide services on Hungarian legal or auditing issues.  According to the Land Law, only private Hungarian citizens or EU citizens resident in Hungary with a minimum of three years of experience working in agriculture or holding a degree in an agricultural discipline can purchase farmland.  Eligible individuals are limited to purchasing 300 hectares (741 acres). All others may only lease farmland. Non-EU citizens and legal entities are not allowed to purchase agricultural land. All farmland purchases must be approved by a local land committee and Hungarian authorities, and local farmers and young farmers must be offered a chance to purchase the land first before a new non-local farmer is allowed to purchase the land.  For those who do not fulfill the above requirements or for legal entities, the law allows the lease of farmland up to 1200 hectares for a maximum of 20 years. The GOH has invalidated any pre-existing leasing contract provisions that guaranteed the lessee the first option to purchase, provoking criticism from Austria and Austrian farmers. Austria has reported the change to the European Commission, which initiated an infringement procedure against Hungary in October 2014.  In March 2018, the European Court of Justice ruled that the termination of land use contracts violated EU rules, opening the way for EU citizens who lost their land use rights to sue the GOH for damages. In March 2015, the EC launched another – still ongoing – infringement procedure against Hungary concerning its restrictions on acquisitions of farmland.

The GOH passed a law on investment screening in 2018 that requires foreign investors seeking to acquire more than a 25 percent stake in a Hungarian company in certain “sensitive sectors” (defense, intelligence services, certain financial services, electric energy, gas, water utility, and electronic information systems for governments) to seek approval from the Interior Ministry.  The Ministry has up to 90 days to issue an opinion and can only deny the investment if it determines that the investment is designed to conceal an activity other than normal economic activity. As of publication, we are not aware of any instances in which the Ministry has reviewed an investment.

Other Investment Policy Reviews

Hungary has not had any third-party investment policy reviews in the last three years.

Business Facilitation

Hungary maintains an open economy and its high-quality infrastructure and central location make it an attractive destination for investment.  Attracting FDI is an important priority for the GOH, especially in manufacturing and export-oriented sectors.  In 2006, Hungary joined the EU initiative to create a European network of “point of single contact” where existing businesses and potential investors can access all information on the business and legal environment, as well as connect to Hungary’s investment promotion agency.  In recent years, , the government has strengthened investor relations and, in addition to signing strategic agreements with key investors, established a National Competitiveness Council to discuss competitiveness challenges, formulate pro-competitiveness measures, and build constructive stakeholder relationships.

The registration of business associations is compulsory in Hungary.  Firms must contract an attorney and register online with the Court of Registration.  Registry courts must process applications to register limited liability and joint-enterprise companies within 15 workdays, but the process usually does not take more than three workdays.  If the Court fails to act within the given timeframe, the new company is automatically registered. If the company chooses to use a template corporate charter, registration can be completed in a one-day fast track procedure.  Registry courts provide company information to the Tax Office (NAV) eliminating the need for separate registration. The Court maintains a computerized registry and electronic filing system and provides public access to company information.  The minimum capital requirement for a limited-liability company is HUF 3,000,000 (USD 10,800); for private limited companies HUF 5,000,000 (USD 17,900), and for public limited companies HUF 20,000,000 (USD 71,400). Foreign individuals or companies can establish businesses in Hungary without restrictions.

Further information on business registration and the business registry can be obtained at the GOH’s information website for businesses: http://eugo.gov.hu/starting-business-hungary  or at the Ministry of Justice’s Company Information Service: http://ceginformaciosszolgalat.kormany.hu/index .

Hungarian business facilitation mechanisms provide equitable treatment for women, but offer no special preference or assistance for them in establishing a company.

Outward Investment

The stock of total Hungarian investment abroad amounted to USD 29.7 billion in 2018.  Outward investment is mainly in manufacturing, pharmaceuticals, services, finance and insurance, and science and technology.  There is no restriction in place for domestic investors to invest abroad. The GOH announced in early 2019 that it would like to increase Hungarian investment abroad and it is considering incentives to promote Hungarian investment.

Investment Incentives

Hungary has a well-developed incentive system for investors, the cornerstone of which is a special incentive package for investments over a certain value (typically over 10 million Euro, or USD 11 million).  The incentives are designed to benefit investors who establish manufacturing facilities, logistics facilities, regional service centers, R&D facilities, bioenergy facilities, or those who make tourism industry investments.  Incentive packages may consist of cash subsidies, development tax allowances, training subsidies, and job creation subsidies. The incentive system is compliant with EU regulations on competition and state aid and is administered by the Hungarian Investment Promotion Agency (HIPA) and managed by the Ministry of National Development (MND).  The government provides non-refundable subsidies to foreign investments in less developed areas and certain sectors including research and development, innovation, and high-tech manufacturing, based on case-by-case government decisions.   For more information please see: https://hipa.hu/tovabbi-kedvezo-modositasok-a-vissza-nem-teritendo-tamogatasi-rendszerben .

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign trade zones were eliminated as a result of EU accession.

Performance and Data Localization Requirements

Hungary does not mandate local employment.  The number of work permits issued for third-country nationals is limited by law, but in recent years, this limit was well above the actual number of registered third-country employees.  Residency and work permits are issued by the Immigration Office and the local labor offices.

As of 2019, for investments in certain strategic sectors including the military, intelligence, public utilities, financial services and electronic information systems, the Ministry of Interior issues investments permits.  There are no laws in place requiring the fulfilment of special labor force related conditions to get investment permits. However, in certain cases, the GOH has established retention of workforce as a condition to award state grants to investors.

Hungary has no forced data localization policy.  Foreign IT providers do not need to turn over source code or provide access to encryption.  Hungary follows EU rules as regards transfer of personal data outside the economy. Storage of personal data is regulated by a data protection law and it is under the authority of a Data Protection Ombudsman.

There are no general performance requirements for investors in Hungary.  However, investors may receive government subsidies in the event they meet certain performance criteria, such as job creation or investment minimums, which are available to all enterprises registered in Hungary and are applied on a systematic basis.  To comply with EU rules, the GOH no longer grants tax holidays based on investment volume. There is no requirement that investors must purchase from local sources, but the EU Rule of Origin applies. Investors are not required to disclose proprietary information to the GOH as part of the regulatory process.

Hungary, as an EU Member State, follows the General Data Protection Regulation (GDPR) rules on transmitting data outside of the EU and local data storage requirements.  The National Authority for Data Protection and Freedom of Information is responsible for enforcing GDPR rules.

* Source for Host Country Data: Hungarian Central Bank www.mnb.hu 

U.S. Embassy Political and Economic Section
Szabadsag Ter 12
1054 Budapest, Hungary
BUDEcon@State.gov
+36 1 475 4400

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 118^th out of 190 countries surveyed on the ease of starting a business (up from 127^th 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.

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 

* Source for Host Country Data:
– Central Bank of Slovakia:  https://www.nbs.sk/sk/statisticke-udaje/statistika-platobnej-bilancie/priame-zahranicne-investicie 
https://www.nbs.sk/sk/menova-politika/makroekonomicka-databaza 
(Note: Values from host country sources are converted from their original euro denomination with the conversion rate valid at the end of the respective year.  Data on FDI is inconsistent since much of U.S. FDI is channeled through subsidiaries located inside the EU.)

Source:
– IMF: http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1482186404325 
Data is fully consistent with host country data provided by the Central Bank of Slovakia (http://www.nbs.sk/sk/statisticke-udaje/statistika-platobnej-bilancie/priame-zahranicne-investicie ).

Source:
– IMF:  http://data.imf.org/regular.aspx?key=60587804  (Note: Data is from June 2019)

Bradley Gardner
Economic Officer
U.S. Embassy Bratislava
Hviezdoslavovo námestie
+421 (2) 5443 3338
Gardnerbm@state.gov

Policies Towards Foreign Direct Investment

Although Slovenia has no formal business roundtable or foreign investment ombudsman, 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.

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.

According to SPIRIT’s annual survey on foreign investors’ perceptions of Slovenia’s business environment, investors cite the high quality of Slovenia’s labor force as the deciding factor in choosing the country as an investment destination, followed by widespread knowledge of foreign languages, employees’ technical expertise, innovation potential, and strategic geographic position offering easy access to EU and Balkan markets.

While generally welcoming greenfield investments, Slovenia presents a number of informal barriers that may prove challenging to foreign investors. According to SPIRIT’s survey, the most significant disincentives to FDI are high taxes, high labor costs, lack of payment discipline, an inefficient judicial system, difficulties in firing employees, and excessive bureaucracy. There are no formal limits on foreign investors’ ability to establish an investment or operate in the market.

Foreign companies doing business in Slovenia and the local American Chamber of Commerce have also cited additional factors that adversely 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. Businesses have also reported a lack of transparency in public procurement, unnecessarily complex and time-consuming bureaucracy, frequent changes in regulation, relatively high real estate prices in some parts of the country, and confusion over lead responsibility or jurisdiction regarding foreign investment among government agencies.

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 formal limits on foreign ownership or control.

Sector-specific restrictions:

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 by companies headquartered in non-EU countries. Companies from non-EU countries can operate freely only through an affiliate with a license granted by an appropriate Slovenian or EU institution.

Gaming: There is a 20 percent cap on private ownership of individual companies.

Air transport: Aircraft registration is only possible for aircraft owned by Slovenian or EU nationals or companies controlled by such entities. 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-flagged maritime vessel unless the operator is a Slovenian or other EU national.

Slovenia has an open economy, and no screening or review process is currently necessary for FDI.

Other Investment Policy Reviews

Slovenia underwent an OECD Investment Policy Review  and a WTO Trade Policy Review  in 2002. The Economist Intelligence Unit and World Bank’s “Doing Business 2020” provide current economic profiles of Slovenia.

Business Facilitation

Individuals or businesses may adopt a variety of different legal and organizational forms to conduct economic activities. Businesses most commonly incorporate legally as limited liability companies (LLC or d.o.o.) and public limited companies (PLC or d.d.).

Non-residents of the Republic of Slovenia must obtain a Slovenian tax number  before beginning 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.

Generally, bureaucratic procedures and practices for foreign investors wishing to start a business in Slovenia are sufficiently streamlined and transparent. Start-up costs for businesses are among the lowest in the EU. In order to establish a business in Slovenia, a foreign investor must produce capital of at least EUR 7,500 (USD 8,141) for a limited liability company and EUR 25,000 (USD 27,136) for a stock company. The investor must also establish a business address and file appropriate documentation with the courts. The entire process usually takes three weeks to one month, but may take longer in Ljubljana due to court backlogs.

Individuals or legal entities may establish businesses through a notary, one of several VEM (Vse na Enem Mestu or “all in one place”) point offices designated by the Slovenian government, or online. A list of VEM points is available at http://www.podjetniski-portal.si/ustanavljam-podjetje/vem-tocke/seznam-vstopnih-tock-vem .

More information on how to invest and register a business in Slovenia is available at http://www.investslovenia.org/business-environment/establishing-a-company/  and http://www.eugo.gov.si/en/starting/business-registration/ .

Outward Investment

Slovenia does not restrict domestic investors from investing abroad, nor are there any incentives for outward investments. The majority of Slovenia’s outward investments are in the Western Balkans. Croatia is the most popular destination for Slovenian outward investment, constituting 32.2 percent of Slovenia’s investments abroad, followed by Serbia (15.9 percent), Bosnia and Herzegovina (8.7 percent), and North Macedonia (6.3 percent).

Investment Incentives

Slovenia offers special tax incentives for high-tech sector investments that create jobs and are linked to research and development activities. 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.

As defined in Slovenia’s Investment Promotion Act, the government offers the following investment incentives: subsidies, loans, guarantees, subsidized interest rates and purchase of land owned by municipalities at below-market prices.

All companies registered in Slovenia can participate in government-financed or subsidized research and development programs, regardless of the origin of capital.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Port of Koper is Slovenia’s only free trade zone (FTZ). Under Slovenia’s Customs Act, subjects operating in FTZs are not liable for payment of customs duties, nor are they subject to other trade policy measures until goods are released into free circulation.

Duties and rights of users include the following:

1. Separate books must be kept for activities undertaken in FTZs;
2. Users may undertake business activities in a FTZ on the basis of contracts with the founders of FTZs;
3. Users are free to import goods (customs goods, domestic goods for export) into FTZs;
4. Goods imported into FTZs may remain for an indefinite period, except agricultural produce, for which the government sets a time limit;
5. Entry to and exit from FTZs is to be controlled;
6. Founders and users must allow customs or other responsible authorities, to execute customs or other supervision; and
7. For the purposes of customs control, users must keep records of all goods imported into, exported from, consumed, or altered in FTZs.

The Customs Act also allows the establishment of open FTZs to allow for more flexible organization and supervision of customs authorities.

In such FTZs, users may undertake the following activities:

1. Production and service activities, including handicrafts, defined in the founding act or contract, and banking and other financial business transactions, property and personal insurance and reinsurance connected with the activities undertaken;
2. Wholesale transactions;
3. Retail sales, but only for other users of the zone or for use within the FTZ.

Slovenia has set aside land for greenfield investments. Most of the newly-developed industrial zones have direct access to well-developed infrastructure, including highways and rail service. Land prices vary greatly. For example, in the eastern Slovenia community of Lendava, one square meter of land costs roughly five euros (USD 5.43), while prices in the vicinity of Ljubljana can run to 50 euros (USD 54.27) or more. Municipalities and the state often subsidize infrastructure and land costs as incentives to increase employment opportunities, reducing prices for fully-equipped land in industrial zones.

Potential investors may access a full range of free services and concessions provided by local development agencies for start-ups. Such assistance may also include assistance in completing all necessary paperwork, securing permits, and in some cases organizing and financing construction in line with investor requirements. Interested investors may contact the U.S. Embassy in Ljubljana for further information.

Performance and Data Localization Requirements

Rigid procedures necessary to acquire work permits can be an impediment for foreign investors. It may take as long as two to three months to obtain a single work and residence permit, which is required for local employment. Applicants must submit their single permit application at an administrative unit or at the diplomatic or consular office in their home country.  The Ministry of Labor has established a fast-track procedure for foreigners registered as authorized persons or representatives of companies, managers of branch offices, and foreigners who are temporarily sent to work in organizational units for foreign legal persons (corporate entities) registered in Slovenia. More information on single work and residence permits and employment services is available here .

The government does not oblige foreign investors to use domestic content in goods and technology, or to use local data storage.

*Statistical Office of the Republic of Slovenia; published in November 2019
N.B.: The Bank of Slovenia (BoS), in its official data, lists U.S. FDI at approximately EUR 72 million in 2018, or 0.5 percent of total inward FDI. However, this amount does not reflect significant investments by U.S. firms not listed as U.S. in origin by the BoS, as U.S. funds are often routed through third-country subsidiaries. In 2017, the BoS began reporting FDI according to the ultimate investing country or originating country of capital. It estimated that USD 1.75 billion (EUR 1.48 billion euros) or 9.8 percent of Slovenia’s total FDI originated in the United States in 2018, putting the United States behind only Austria and Germany as a source of foreign investment in Slovenia.

Source: IMF’s Coordinated Direct Investment Survey (2018) http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1482331048410 
Comment: IMF data are consistent with Bank of Slovenia data.
Note: The Bank of Slovenia has made an additional breakdown of inward FDI according to the ultimate source of capital. It shows that Germany, the United States, Japan, the Russian Federation, and Mexico are all much more important investor countries in Slovenia than is suggested by the breakdown by the immediate partner country. The U.S. ranks third with 1.48 billion euros (USD 1.68 billion) in 2018.

Source: IMF’s Coordinated Direct Investment Survey http://data.imf.org/regular.aspx?key=60587804 
http://data.imf.org/regular.aspx?key=60587804 

William D. Baker
Economic & Commercial Officer
31 Presernova Street, Ljubljana, Slovenia
+386 1 200 5668
Email: DoingBusinessinSlovenia@state.gov