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Executive Summary

Portugal’s economy is fully integrated into the European Union (EU). Fellow EU member states remain Portugal’s biggest trading partners and its largest investors. Portugal complies with EU law for equal treatment of foreign and domestic investors. Beyond Europe, Portugal maintains significant links with former colonies including Brazil, Angola, and Mozambique.

Portugal is one of 19 Eurozone members; the European Central Bank (ECB) acts as central bank for the euro (EUR) and determines monetary policy. Portugal’s banking sector has faced a number of challenges in recent years, including the costly central bank-led resolution of Banco Espirito Santo (succeeded by Novo Banco) in 2014 and Banif in 2015. Nonetheless, the sector’s future seems brighter as the biggest private banks are undergoing restructuring and recapitalizations.

In 2017, the economy continued on the upward trajectory begun in 2014 with completion of a EUR 78 billon European Union-IMF bailout program. Unemployment dropped to 8 percent, and GDP growth was 2.7 percent of GDP, the highest this century. Strong exports, driven by a record-breaking tourism boom, and investment buoyed this growth. In 2017 alone, tourist visits grew nine percent to over 20 million visitors, an all-time high that has not only improved the external account balance, but also enabled the state to reap substantial tax revenues. Foreign investor acquisitions of Portuguese property drove up housing prices 12.8 percent in 2017, with international investors constituting 20 percent of buyers.

Portugal made the most of a benign economic environment to reduce its public debt, slashing it to 125.7 percent of GDP in 2017, as compared to 129.9 percent the year before. Even so, the country’s high debt to GDP ratio remains a weak point, leaving the country exposed to the negative effects of an eventual economic downturn.

The country successfully exited the EU’s excessive deficit procedure in mid-2017, affording the government greater budget flexibility. Although a capital injection to state-owned Caixa Geral de Depositos bumped the deficit back up to 3 percent of GDP at the end of the year, without this one-off expense, the deficit would have been just 0.92 percent, the lowest since Portugal’s return to democracy in 1974.

All of these positive factors led to sovereign debt rating upgrades by two of the three major international ratings agencies, which has in turn enabled access to a larger pool of international investment options and better financing conditions.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 29 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2018 29 of 190
Global Innovation Index 2017 31 of 127
U.S. FDI in partner country (M USD, stock positions) 2016 USD 2,273
World Bank GNI per capita 2016 USD 19,880

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Government of Portugal recognizes the value of foreign investment and sees such investment as an important engine of economic growth. Portuguese law is based on a principle of non-discrimination. Both foreign and domestic investors are subject to the same rules. Foreign investment is generally not subject to any special registration or notification to any authority, with exceptions for a few limited, specific activities.

The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead agency for promotion of trade and investment. AICEP is responsible for the attraction of foreign direct investment (FDI), promotion of global Portuguese trademarks, and export of goods and services. It is the primary point of contact for investors with projects over EUR 25 million or companies with a consolidated turnover of more than EUR 75 million. For foreign investments not meeting these thresholds, AICEP will make a preliminary analysis and direct the investor to assistance agencies such as the Institute of Support to Small- and Medium- Sized Enterprises and Innovation (IAPMEI), a public agency within the Ministry of Economy that provides technical support, or to AICEP Capital Global, which offers technology transfer, incubator programs and venture capital support. AICEP does not favor specific sectors for investment promotion. It does, however, provide a “Prominent Clusters” guide on its website where it advocates investment in Portuguese companies by sector: .

The Portuguese government maintains regular contact with investors through the Confederation of Portuguese Business (CIP), the Portuguese Chamber of Commerce and Industry and AICEP. More information can be found at these websites:

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no legal restrictions in Portugal as to foreign investment. To establish a new business foreign investor must follow the same rules as domestic investors, including mandatory registration and compliance with regulatory obligations for specific activities. There are no nationality requirements and no limitations on the repatriation of profits or dividends.

Shareholders that are not resident in Portugal must obtain a Portuguese taxpayer number for tax purposes. EU residents may obtain this number directly with the tax administration (in person or by means of an appointed proxy); non-EU residents must appoint a Portuguese resident representative to handle matters with tax authorities.

There are limitations on both foreign and domestic investments with regard to certain economic activities. Portuguese government approval is required in the following strategic sectors: defense, water management, public telecommunications, railway, maritime transportation and air transport. Any economic activity that involves the exercise of public authority also requires government approval; private sector companies can operate in these areas only through a concession contract. Recent examples of state-owned enterprise sales include the sales of flagship airline TAP to the Atlantic Gateway Consortium and the sale of Novo Banco to U.S. private equity fund Lone Star.

Portugal additionally limits foreign investment with respect to the production, transmission, and distribution of electricity, the manufacturing of gas, the pipeline transportation of fuels, wholesale services of electricity, retailing services of electricity and non-bottled gas, and services incidental to electricity and natural gas distribution. Any concessions for electricity and gas sectors are assigned only to limited companies with their headquarters and effective management in Portugal.

Portugal limits foreign investment in the provision of executive search services, placement services of office support personnel, and publicly-funded social services.

Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non- EU firms). In both cases, the authorities carefully consider the proposed transaction, but in the case of non-EU firms, the Ministry of Finance especially considers the impact on the efficiency of the financial system and the internationalization of the economy. Non- EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.

Other Investment Policy Reviews

Portugal has not undergone an OECD, WTO or UNCTAD Investment Policy Review in recent years.

Business Facilitation

Over the last decade, but especially since the start of the economic crisis in 2010, the Portuguese Government has prioritized policies to increase the country’s appeal as a destination for foreign investment. In 2007, the Government established AICEP – a promotion agency for investment and foreign trade that also, through its subsidiary AICEP Global Parques, manages industrial plants and provides business location solutions for investors.

Taxation procedures have gone the same way. Effective warehouse and transport logistics have been developed, especially at the Sines Port terminal southwest of Lisbon, and telecommunications infrastructure has been improved. In March 2018, Portugal started construction of an 80-kilometer railway line between Evora and Elvas, which will improve commercial transportation between the Portuguese ports of Sines and Lisbon ports, and the Southwestern European Logistics Platform (PLSWE) in Badajoz, Spain, reducing freight transportation times to the rest of Europe.

The “Golden Visa” program that gives fast-track residence permits to foreign investors complying with specific pre-established conditions was established in 2012. To date, 3,588 out of 5,553 total residency permits have been issued to Chinese nationals.

Other measures implemented to help attract foreign investment include the easing of some labor regulations to increase workplace flexibility and the creation of a special EU-funded program, Portugal 2020, for large projects above EUR 25 million. Finally, to combat the perception of a cumbersome regulatory climate, the Government has created a “Cutting Red Tape” website detailing measures taken since 2005 to reduce bureaucracy, and the Empresa na Hora (“Business in an Hour”) program that facilitates company incorporation in less than 60 minutes.

Both Portuguese citizens and non-citizens can register a business in person at any of the government’s 214 “Empresa na Hora” registration locations.

Portuguese citizens can alternately register online through the “Citizen’s Portal” available at: . Companies must also register with the Directorate General for Economic Activity (DGAE), the Tax Authority (AT), and with the Social Security administration. The online registration process can take as little as one to two days.

In line with the EU, Portugal defines an enterprise as micro-, small-, and medium-sized based on its headcount, annual turnover, or the size of its balance sheet. To qualify as a micro-enterprise, a company must have less than 10 employees and no more than EUR 2 million in revenues or EUR 2 million in assets. Small enterprises must have less than 50 employees and no more than EUR 10 million in revenues or EUR 10 million in assets. Medium-sized enterprises must have less than 250 employees and no more than EUR 50 million in revenues or EUR 43 million in assets. The Small- and Medium-Sized Enterprise (SME) Support Institute (IAPMEI) offers financing, training, and other services for SMEs based in Portugal: .

More information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available here, at AICEP’s website: .

Outward Investment

Portuguese government does not restrict domestic investors from investing abroad. To the contrary, it promotes and incentivizes outward investment through AICEP, whose main tasks are to promote the internationalization of Portuguese companies, support their export activity, and attract investment, with the larger goal of creating value for the country. Through its Customer Managers, Export Stores and its External Commercial Network – which, in cooperation with the diplomatic and consular network, is present in about 80 markets – AICEP provides support and advisory services on the best way of approaching foreign markets, identifying international business opportunities of Portuguese companies, particularly SMEs.

See more at: .

2. Bilateral Investment Agreements and Taxation Treaties

Portugal shares no investment agreement with the United States.

Portugal has investment agreements with over 100 economies, including: Albania, Algeria, Angola, Argentina, Bosnia and Herzegovina, Brazil, Bulgaria, Cape Verde, Chile, China, Democratic Republic of Congo, Congo, Croatia, Cuba, Czech Republic, Egypt, Equatorial Guinea, Gabon, Germany, Guinea-Bissau, Hungary, India, Jordan, Republic of Korea, Kuwait, Latvia, Libya, Lithuania, Macao, Mauritius, Mexico, Morocco, Mozambique, Pakistan, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russian Federation, Sao Tome and Principe, Senegal, Serbia, Slovakia, Slovenia, Timor-Leste, Tunisia, Turkey, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Bolivarian Republic of Venezuela and Zimbabwe. For a complete list of investment agreements currently in force, please see the UNCTAD Navigator: 

Portugal signed an Income Tax Treaty with the United States in 1994 to prevent double taxation and tax evasion. In 2015, Portugal signed an agreement with the United States to improve international tax compliance and implement the U.S. Foreign Account Tax Compliance Act (FATCA). See more at:  and at: 

3. Legal Regime

Transparency of the Regulatory System

The Government of Portugal employs transparent policies and effective laws to foster competition and establish clear rules. The legal system is quite welcoming with respect to FDI. Regulations are drafted by ministries or other regulatory agencies. Drafts must be approved by Parliament, and, in some cases, by European authorities. All proposed regulations are subject to a public consultation period during which the proposed measure is published on the relevant ministry or regulator’s website.

Typically, the consultation period is 30 days (or 20 days in urgent cases). Only after ministries or regulatory agencies have conducted an impact assessment of the proposed (not yet adopted) regulation, the text can be enacted and published at: .

Ministries or regulatory agencies report on the results of the consultations on proposed regulations through a consolidated response published on the website of the relevant ministry or regulator.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations; all procedures are managed by government entities.

Rule-making and regulatory authorities exist within several sectors including the Energy, Telecommunications, Securities Markets, Financial and Health sectors. Regulations are enforced on the local level through District Courts, on the national level through the Court of Auditors and at the supra-national level through European Union mechanisms including the European Court of Justice, the European Commission, and the European Central Bank.

The legal, regulatory, and accounting systems are transparent and consistent with international norms. Since 2005, all listed companies have been required to comply with International Financial Reporting Standards as adopted by the European Union (“IFRS”). The IFRS closely parallels the U.S. GAAP (Generally Accepted Accounting Principles). See more at: .

Parliament publishes draft bills on its website, http:/  and at , allowing for public review of proposals before they are voted on and become law. UTAO, the Parliamentary Technical Budget Support Unit, is a nonpartisan body composed of economic and legal experts that supports parliamentary budget deliberations by providing the Budget Committee with quality analytical reports on the executive’s budget proposal(s). More information on UTAO can be found here:
. In addition, the Portuguese Public Finance Council conducts an independent assessment of the consistency, compliance with stated objectives, and sustainability of public finances, while promoting fiscal transparency, and publishes all of its assessments online at: .

The government regularly publishes key regulatory actions here: . The OECD, EC and IMF also publish key regulatory actions and/or summaries thereof at:  and .

Portugal’s Competition Authority enforces adherence to domestic competition and public procurement rules. The European Commission further ensures adhesion to EU administrative processes among its member states.

The Portuguese Public Finances Council conducts regular, independent assessments of the consistency, compliance with the stated objectives and the sustainability of public finances, while promoting fiscal transparency. All assessments are published online at: .

International Regulatory Considerations

Portugal has been a member of the EU since 1986, a member of the Schengen area since 1995, and joined the Eurozone in 1999. Portugal complies with EU directives regarding equal treatment of foreign and domestic investors. Portugal has been a member of the World Trade Organization (WTO) since 1995. With the Treaty of Lisbon’s entry into force in 2009, trade policy and rules on foreign direct investment became exclusive EU competencies, as part of the block’s common commercial policy.

The European Central Bank (ECB) is the central bank for the euro (EUR) and determines monetary policy for the 19 Eurozone member states, including Portugal. Portugal has incorporated U.S. FACTA regulations, into its banking system.

Legal System and Judicial Independence

The Portuguese legal system is a civil law system, based on Roman law. The hierarchy among various sources of law is as follows: (i) Constitutional laws and amendments; (ii) the rules and principles of general or common international law and international agreements; (iii) ordinary laws enacted by Parliament; (iv) instruments having an effect equivalent to that of laws, including approved international conventions or decisions of the Constitutional Court; (v) regulations used to supplement and implement laws.

The country’s Commercial Company Law and Civil Code define Portugal’s legal treatment of corporations and contracts. Portugal has specialized family courts, labor courts, commercial courts, maritime courts, intellectual property courts, and competition courts.

The judicial system is independent of the executive branch. Indeed, adverse Constitutional Court rulings during the country’s bailout period served as a check on the government’s ability to implement many austerity measures, including pension cuts and tax increases.

Regulations or enforcement actions are appealable, and are adjudicated in national Appellate Courts, with the possibility to appeal to the European Court of Justice.

Laws and Regulations on Foreign Direct Investment

The Bank of Portugal (Portugal’s central bank) defines FDI as “an act or contract that obtains or increases enduring economic links with an existing Portuguese institution or one to be formed.” A non-resident who invests in at least 10 percent of a resident company’s equity and participates in the company’s decision-making is considered a foreign direct investor.

The Portuguese legal system is based on non-discrimination with regard to the national origin of investment, and foreigners are permitted to invest in all economic sectors open to private enterprise. However, there are limitations on both foreign and domestic investments with regard to certain economic activities. Portuguese government approval is required in the following sectors: defense, water management, public telecommunications operators, railway, maritime transportation and air transport. Any economic activity that involves the exercise of public authority also requires government approval. Private sector companies can operate in these areas only through a concession contract.

Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non- EU firms). In both cases, the authorities carefully consider the proposed transaction, but in the case of non-EU firms, the Ministry of Finance especially considers the impact on the efficiency of the financial system and the internationalization of the economy. Non- EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.

The Embassy is not aware of any new laws over the last 12 months that regulate FDI, or significant decisions that have changed how foreign investors or their investments are treated. Current information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available here, at AICEP’s website: .

Competition and Anti-Trust Laws

The domestic agency which reviews transactions for competition-related concerns is the Portuguese Competition Authority (Autoridade de Concorrencia) and the international agency is the European Commission’s Directorate General for Competition (DG Comp).

Portugal’s competition authority is investigating the takeover of leading media group Media Capital by Altice, a Netherlands multinational led by billionaire Patrick Drahi. In February, the competition authority said it launched a deep investigation because there are strong indications that it could result in “significant obstacles to competition in various markets.”

Those markets included television content production, advertising and telecommunications. Altice owns Portugal’s largest telecom operator and agreed to buy Media Capital in July 2017 from Spain’s Prisa in a EUR 440 million deal.

The Competition Authority’s mandate derives from Law No. 19/2012 (dated May 8, 2012) which superseded Law No. 18/2003. It specifically prohibits collusion between companies to fix prices, limit supplies, share markets or sources of supply, discriminate in transactions, or force unrelated obligations on other parties. Similar prohibitions apply to any company or group with a dominant market position. The law also requires prior government notification of mergers or acquisitions that would give a company more than 30 percent market share in a sector, or mergers or acquisitions among entities that had total sales in excess of EUR 150 million in the preceding financial year. The Competition Authority has 60 days to determine if the merger or acquisition can proceed. The European Commission may claim authority on cross-border competition issues or those involving entities large enough to have a significant EU market share.

Expropriation and Compensation

Under Portugal’s Expropriation Code, the government may expropriate property and its associated rights if it is deemed to support the public interest, and upon payment of prompt, adequate, and effective compensation. The code outlines criteria for calculating fair compensation based on market values. The decision to expropriate as well as the fairness of compensation can be challenged in national courts.

In 2005, the Portuguese Parliament passed a Water Resources Law that required owners of properties bordering coasts, rivers, and reservoirs to present evidence of private ownership dating to at least 1864 by a deadline of January 2014, or otherwise face government seizure of the land. The law elicited public protests from property owners, including many British expatriates, which in turn pressed Parliament in May 2014 to establish broad exemptions and eliminate the deadline for presentation of evidence of ownership. To date, there have been no public cases of expropriation of such properties.

There have been no other cases of expropriation of foreign assets or companies in Portugal in recent history.

Dispute Settlement

ICSID Convention and New York Convention

Portugal has been a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention – also known as the Washington Convention) since 1965. Portugal has been a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since January 1995. Portugal’s national arbitration law No. 63-2011, of December 14, 2011 enforces awards under the 1958 New York Convention and the ICSID Convention.

Investor-State Dispute Settlement

Portugal ratified the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, and in 2002 ratified the 1975 Inter-American Convention on International Commercial Arbitration.

Portugal’s Voluntary Arbitration Law enacted in 2011 is based on the UNCITRAL Model Law, and applies to all arbitration proceedings based in Portugal. The leading commercial arbitration institution is the Arbitration Centre of the Portuguese Chamber of Commerce and Industry: .

The government promotes non-judicial dispute resolution through the Ministry of Justice’s Office for Alternative Dispute Resolution (GRAL), including conciliation, mediation, or arbitration. More information is available in English at AICEP’s website: .

The GRAL website, in Portuguese, is here: .

Portugal has no bilateral investment or free trade agreements containing ISDS provisions with the United States.

The UN Conference on Trade and Development (UNCTAD) “investment navigator” database and the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) database show no cases of investment disputes, pending or concluded, between foreign investors and Portugal.

Portuguese courts recognize and enforce foreign arbitral awards issued against the government.

There have been no recent extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

Arbitration is the preferred alternative dispute resolution mechanism in Portugal. The country has a long-standing tradition of and success in utilizing arbitration in administrative and contract disputes. In recent years, it has also become the standard mechanism for resolving tax disputes between private citizens or companies and tax authorities, as well as in pharmaceutical patent disputes.

There are four domestic arbitration bodies within the country/economy: 1) The Arbitration Center of the Portuguese Chamber of Commerce and Industry (CAC); 2) CONCORDIA (Centro de Conciliacao, Mediacao, de Conflictos de Arbritragem); 3) Arbitrare (Centro de Arbitragem para a Propriedade Industrial, Nomes de Dominio, Firmas e Denominacoes); and 4) the Instituto de Arbitragem Commercial do Porto.

Each arbitration body has its own regulations, but all of them comply with the Portuguese Arbitration Law 63/11, which came into force in March 2012. The Arbitration Council of the Centre for Commercial Arbitration also follows New York Convention, Washington Convention and Panama Convention guidelines.

Arbitration Law 63/11 follows the standard established by the UNCITRAL Model Law, but is not an exact copy of that text.

Under the Constitution of the Portuguese Republic (CPR), the Civil Code of Procedure (CCP) and the New York Convention (applied in Portugal since 1995), awards rendered in a foreign country must be recognized (i.e., an exequatur is obtained) by the Portuguese courts before they can be enforced in Portugal. There is no legal authority in Portugal on the enforceability of foreign awards set aside at the seat of the arbitration.

The Code of Civil Procedure (CCP) sets forth the legal regime applicable to all judicial procedures related to arbitration, including appointment of arbitrators, determination of arbitrators’ fees, challenge of arbitrators, appeal (where admissible), setting aside, enforcement (and opposition to enforcement) and recognition of foreign arbitral awards.

While Portugal’s judicial system has historically been considered inefficient, the country has taken several important steps to increase the efficiency and quality of judicial proceedings in recent years. According to the World Bank 2018 Doing Business Index, enforcing a contract in Portugal takes an average of 547 days compared to the OECD average of 578 days, and costs 17.2 percent of the claim value, below the OECD average of 21.5 percent.

Bankruptcy Regulations

Portugal’s Insolvency and Corporate Recovery Code defines insolvency as a debtor’s inability to meet his commitments as they fall due. Corporations are also considered insolvent when their liabilities clearly exceed their assets. A debtor, creditor, or any person responsible for the debtor’s liabilities can initiate insolvency proceedings in a commercial court.

The court assumes the key role of ensuring compliance with legal rules governing insolvency proceedings, with particular responsibility for ruling on the legality of insolvency and payment plans approved by creditors.

After declaration of insolvency, creditors may submit their claims to the court-appointed insolvency administrator for a specific term set for this purpose, typically up to 30 days. Creditors must submit details regarding the amount, maturity, guarantees, and nature of their claims. Claims are ranked as follows: (i) claims over the insolvent’s estate, i.e. court fees related to insolvency proceedings; (ii) secured claims; (iii) privileged claims; (iv) common, unsecured claims; (v) subordinated claims, including those of shareholders.

Portugal ranks highly (15th of 190 countries) in the World Bank’s Doing Business Index “Resolving Insolvency” measure.

4. Industrial Policies

Investment Incentives

The Portuguese government offers investment incentives which can be tailored to individual investors’ needs and capital based on industry, investment size, and project sustainability. For example, a corporate income tax credit for 10 to 25 percent of eligible investment, 10 percent tax benefits for up to a 10-year period after the conclusion of the investment and exemptions from municipal property tax, municipal tax and stamp tax. There are also financial grants for job creation and for R&D-Research and Development. More information on investment incentives is available at:

The Autonomous Regions of Madeira and the Azores also offer investment incentives. For example, profits derived from offshore operations by licensed industrial, shipping, international services, and financial companies established in the International Business Centre of Madeira (a foreign trade zone) are subject to the reduced corporate tax rate of 5 percent. For more information on the International Business Centre of Madeira’s corporate tax regime, please visit .Since Portugal is an EU Member State, potential investors may be able to access European aid programs, which provide further incentives to investing in Portugal. Such funds have been used by Portugal to co-finance key investments in the areas of research and development, information and communications technology, transport, water, solid waste, energy efficiency and renewable energy, urban regeneration, health, education, and culture. For more information, visit: .

Foreign Trade Zones/Free Ports/Trade Facilitation

Portugal has one foreign trade zone (FTZ)/free port in the Autonomous Region of Madeira, established in 1987. Continued operation of this foreign trade zone/free port has been authorized in accordance with EU rules on incentives granted to member states. Industrial and commercial activities, international service activities, trust and trust management companies, and offshore financial branches are all eligible. Companies established in the foreign trade zone enjoy import- and export-related benefits, financial incentives, tax incentives for investors, and tax incentives for companies.

Under the terms of Portugal’s agreements with the EU, companies incorporated in the Madeira FTZ can take advantage of a reduced corporate tax rate of 5 percent until 2020.For example, profits derived from offshore operations by licensed industrial, shipping, international services, and financial companies established in the International Business Centre of Madeira (a foreign trade zone) are subject to the reduced corporate tax rate of 5 percent. For more information on the International Business Centre of Madeira’s corporate tax regime, please visit .

Performance and Data Localization Requirements

Portugal does not impose performance requirements or mandate local employment conditions for foreign investors. Qualification standards for investment incentives are applied uniformly to both domestic and foreign investors.

As a member of the EU, there is a high level of labor mobility between Portugal and other member states. To work in Portugal, non-EU foreign nationals must be sponsored for a work permit by a Portuguese employer.

There are no nationality-related restrictions that affect a foreign national’s ability to serve in senior management or on a board of directors. Foreign or expatriate workers with appropriate work authorizations are entitled to the same rights and subject to the same duties as employees with Portuguese citizenship.

While Portugal does not force data localization, according to the Portuguese Data Protection Law (pursuant to the EU’s 1995 Data Protection Directive) “data controllers,” i.e., people or corporations that process personal data, must register in Portuguese with the national Data Protection Authority (CNPD). Data transfers outside of the EU are only allowed if the recipient country or company ensures an adequate level of protection.

Portugal is set to be subject to new rules stipulated in the EU’s General Data Protection Regulation: . These will come into effect on May 25, 2018.

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption; the same rules apply to foreign IT providers as apply to national providers.

Data transfers to other countries within the EU do not require prior authorization from the National Commission for Data Protection (CNPD). Data transfers to countries outside the EU can only take place in compliance with the Data Protection Law, meaning the receiving state must also provide an adequate level of protection to personal data.

If the receiving state does not ensure an adequate level of protection, the CNPD can authorize the transfer under specific conditions, namely: if the data’s subject has given clear consent to the proposed transfer; if the transfer is necessary for the performance of a contract between the data subject and the controller; if the implementation of pre-contractual measures is taken in response to the data subject’s request; if necessary for the performance or conclusion of a contract between the controller and a third party that is concluded, or to be concluded, in the data subject’s interests; if necessary or legally required on important public interests grounds, or to establish, exercise or defend legal claims; if necessary to protect the data subject’s vital interests; and if made from a register that is intended to provide information to the public and is open to consultation, either by the public or by any other person who can demonstrate a legitimate interest, provided the conditions laid down in law for consultation are fulfilled.

In addition, the CNPD can authorize a transfer or a set of transfers of personal data to a receiving state that does not provide an adequate level of protection. This can only be achieved if the controller provides adequate safeguards to protect the privacy and fundamental rights and freedoms of individuals. This can be through appropriate contractual clauses or if a transfer to the United States, through adherence to the U.S.-EU Privacy Shield principles.

The CNPD is responsible for overseeing all enforcement of local data storage rules.

5. Protection of Property Rights

Real Property

Portugal reliably enforces property rights and interests. The Portuguese Constitution provides for the right to private property and grants Parliament the power to establish rules on the renting of property, the determination of property in the public domain, and the rules of land management and urban planning. The Civil Code of 1967, modelled after the Bürgerliches Gesetzbuch, provides for the right to absolute and full ownership, which can be restricted by mortgage, liens, or other security interests. Apart from the Civil Code, additional laws have established or modified rules on time-sharing, condominiums, and land registration.

Property registration is fairly easy in Portugal, and can be done quickly online ( ). According to the World Bank’s 2015 Doing Business Index, registration is faster and simpler than in most other OECD countries, taking one day to complete the process. The cost, however, is slightly higher than the OECD average (4.2 percent) at 7.3 percent of the property value.

Foreign investors can directly own/purchase property freehold or leasehold, to build industrial and commercial premises or can purchase through a real estate company.

As of 2013, between 10 and 20 percent of land in Portugal had no clear title. In 2018, Portugal launched an initiative to improve land ownership registration, making it free to do so in the next two years. To reduce the risks of a repeat of the tragic fires of 2017, Portugal started the process of identifying unclaimed land so it can pool it and later promote its use, preferably by cooperatives of forestry producers.

If legally purchased property is unoccupied, Portuguese law allows ownership to revert to other owners (such as squatters), as set out in Chapter VI of the Portuguese Civil Code (CCP), Article 1287.

Intellectual Property Rights

IPR infringement and theft are not common in Portugal. It is fairly easy for investors to register copyrights, industrial property, patents, and designs with Portugal’s Institute of Industrial Property (INPI) and the Inspectorate-General of Cultural Activities (IGAC). Intellectual property can be registered online for a small fee.

For more details, please consult:  and .

The Portuguese government adopted the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and provisions of the General Agreement on Tariffs and Trade (GATT) in 2003. Portuguese legislation for the protection of intellectual property rights has been consistent with WTO rules and EU directives since 2004. The Arbitration Centre for Industrial Property, Domain Names, and Company Names (ARBITRARE) was established in 2009 to facilitate voluntary arbitration of intellectual property disputes in English or Portuguese, and in 2012, the government created an intellectual property court with two judges.

During last year, no new IP related laws or regulations have been enacted. See more at: .

Portugal is a participant in the eMAGE and eMARKS projects, which provide multilingual access to databases of trademarks and industrial designs. Portugal’s Food and Economic Security Authority (ASAE), in partnership with other national law enforcement agencies, provides statistics on seizures of counterfeit goods.

Portugal is not listed in USTR’s Special 301 report, nor is it listed in the notorious market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .

6. Financial Sector

Capital Markets and Portfolio Investment

The Government of Portugal recognizes the value of foreign investment and sees such investment as an important engine of economic growth. The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead agency for promotion of trade and investment.

The Portuguese stock exchange is managed by Euronext Lisbon, part of the NYSE Euronext Group, which allows a listed company access to a global and diversified pool of investors. The Portuguese Stock Index-20 (PSI20), launched in 1993, is Portugal’s benchmark index representing the largest (only 18, not 20, in 2018) and most liquid companies listed on the exchange.

Euronext Lisbon as a whole has 59 listed companies and a market capitalization of EUR 57 billion. In 2017 almost EUR 24 billion in shares were traded and the PSI20 rose 15.2 percent.

There are 185 debt instruments listed in the exchange with a market capitalization of EUR 130 billion.

The Portuguese stock exchange offers a diverse product portfolio: shares, funds, exchange traded funds, bonds, and structured products, including warrants and futures. Various market segments and solutions were developed to meet the different characteristics of issuers and products.

The Portuguese Securities Market Commission (CMVM) supervises and regulates securities markets, and is a member of the Committee of European Securities Regulators and the International Organization of Securities Commissions. Additional information on CMVM can be found here: .

Portugal respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms, and foreign investors are eligible for local market financing. Private sector companies have access to a variety of credit instruments, including bonds.

Money and Banking System

32 banks and nine credit institutions are registered with the Bank of Portugal and the penetration rate of banking services is high. Online banking penetration stood at 31 percent in 2017, a two percent increase from 2016, but still below the European average of 51 percent.

Portugal’s banking assets totaled EUR 381 billion at the end of 2017, a EUR 5 billion decrease from 2017, and continuing of the downward trend that has prevailed since 2012. The country’s largest bank by assets, Caixa Geral de Depositos (CGD), is state-owned and at the end of 2017 had assets worth EUR 93.3 billion. The country’s largest private bank, Millennium BCP closed the year with assets of EUR 71.9 billion.

Though gradually improving, Portuguese banks’ non-performing loan portfolios are among the largest in Europe, with an estimated EUR 25-30 billion of bad loans in the books, approximately 15 percent of total credit portfolios. The financial sector is actively tackling the legacy of the debt crisis.

In November 2017, U.S. private equity firm Lone Star took control of 75 percent of state-rescued Novo Banco for EUR 1 billion. The closing of the deal helped turn the page on a major uncertainty for the Portuguese financial sector. Novo Banco reported a record net loss of EUR 1.4 billion in 2017. This triggered a fresh EUR 800 million capital injection from the country’s bank resolution fund, which holds a 25 percent stake in Novo Banco. This injection was part of the sales contract with Novo Banco.

Caixa Economica Montepio Geral (CEMG), delisted from the stock market in late 2017, has been singled out by some analysts as a possible focus of market concern after the previous fall of two bigger lenders in Portugal in 2014-15, BES and Banif. In June 2017, CEMG completed a EUR 250 million capital increase, and, in September 2017, it became a public liability company, benefiting from changes in the treatment of deferred tax assets boosting its capital ratios. The bank swung to a EUR 30 million net profit in 2017 from a EUR 86.5 million loss the previous year.

The Portuguese state injected EUR 3.9 billion into state-owned Caixa Geral de Depositos in 2017 to, a complex operation done at market terms and needed to shore up the bank, which struggled under massive bad loans on its books after the 2010-13 economic crisis.

Banks’ return on equity and on assets moved into positive territory in 2017 from a negative figure the previous year. In terms of capital buffers, Common Equity Tier 1 ratio improved to 13.9 percent by December 2017 from 11.4 percent a year before.

Foreign banks are allowed to establish operations in Portugal. In terms of decision-making policy, a general ‘four-eyes policy’ must be in place at all banks and branches operating in the country, irrespective of whether they qualify as international subsidiaries of foreign banks or local banks. Branches operating in Portugal are required to have such decision-making powers that enable them to operate in the country, but this requirement generally does not prevent them from having internal control and rules governing risk exposure and decision-making processes, as customary in international financial groups.

There are limitations on both foreign and domestic investments with regard to certain economic activities. Any economic activity that involves the exercise of public authority requires government approval. Private sector companies can operate in these areas only through a concession contract. Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non- EU firms). In both cases, the authorities carefully consider the proposed transaction, but in the case of non-EU firms, the Ministry of Finance especially considers the impact on the efficiency of the financial system and the promotion of exports. Non- EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must receive authorization for such activity by the Ministry of Finance for at least five years.

No restrictions exist on a foreigner’s ability to establish a bank account and both residents and non-residents may hold bank accounts in any currency. However, any transfers of EUR 10,000 or more must be declared to Portuguese customs authorities. See more at: .

Foreign Exchange and Remittances

Foreign Exchange Policies

Portugal does not have exchange controls and there are no restrictions on the import or export of capital. Funds associated with any form of investment can be freely converted into any world currency.

Portugal is a member of the European Monetary Union (Eurozone) and uses the euro, a floating exchange rate currency controlled by the European Central Bank (ECB). The Bank of Portugal is the country’s central bank; the Governor of the Bank of Portugal participates on the board of the ECB.

Remittance Policies

There are no limitations on the repatriation of profits or dividends. There are no time limitations on remittances.

Sovereign Wealth Funds

The Ministry of Labor, Solidarity, and Social Security manages Portugal’s Social Security Financial Stabilization Fund (FEFSS), with total assets of around EUR 14 billion. This is not technically a Sovereign Wealth Fund (SWF) and does not subscribe to the voluntary code of good practices known as the Santiago Principles, or participate in the IMF-hosted International Working Group on SWF’s.

Among other restrictions, the law requires that at least 50 percent of assets are invested in Portuguese public debt, and limits FEFSS investment in equity instruments to that of EU or OECD members. FEFSS acts as a passive investor and does not take an active role in the management of portfolio companies.

7. State-Owned Enterprises

There are currently over 40 state-owned enterprises (SOEs) operating in Portugal in the banking, health care, transportation, water and agriculture.

At the end of the first semester of 2017, total assets were above EUR 14 billion, net income of Parpublica was EUR 6.8 million, and EBITDA came down 13 percent year-on-year to EUR 250 million. When SOEs are wholly owned, the government appoints the board, although when SOEs are majority-owned the board of executives and non-executives nomination depends on the negotiations between government and the remaining shareholders, and in some cases on negotiations with European Authorities as well.

Portugal’s only SOE with revenues greater than one percent of GDP is the Caixa Geral de Depositos (CGD). CGD has the largest market share in customer deposits, commercial loans, mortgages, and many other banking services in the Portuguese market.

Parpublica is a government holding company for several smaller enterprises that audits and reports on smaller SOEs; information on these can be found at: .

The activities and accounts of Parpublica are fully disclosed in budget documents and audited annual reports. In addition, the Ministry of Finance publishes an annual report on SOEs, presenting annual performance data by company and sector, through a specialized monitoring unit (UTAM): .

According to Law No. 133/2013, SOEs must compete under the same terms and conditions as private enterprises, subject to Portuguese and EU competition laws. Still, SOEs often receive preferential financing terms from private banks.

Even before entering the bailout program, the OECD’s 2011 SOE Governance Reform lauded Portugal as “one of the most active jurisdictions” in introducing new legislation and guidelines for SOE governance. In March 2008, Portugal’s Council of Ministers approved resolution no. 49/2007, which defined the Principles of Good Governance for SOEs according to OECD guidelines. The resolution requires SOEs to have a governance model that ensures the segregation of executive management and supervisory roles, to have their accounts audited by independent entities, to observe the same standards as those for companies publicly listed on stock markets, and to establish an ethics code for employees, customers, suppliers, and the public. The resolution also requires the Ministry of Finance’s Directorate-General of the Treasury and Finances to publish annual reports on SOEs’ compliance with the Principles of Good Governance.

Credit and equity analysts generally tend to criticize SOEs’ over-indebtedness and inefficiency, rather than any poor governance and ties to government.

Privatization Program

Portugal launched an aggressive privatization program in 2011 as part of its EU-IMF bailout, including state-owned enterprises in the air transportation, land transportation, energy, communications, and insurance sectors. Foreign companies have been among the most successful bidders in these privatizations since the beginning of the program.

The bidding process has been public, transparent, and non-discriminatory to foreign investors. Chinese, Omani, and French companies have purchased large stakes in Portugal’s electricity utility (EDP), its electricity and natural gas grid operator (REN), its airport operator (ANA), and the insurance arm of the state-owned bank (Caixa Seguros). In addition, Portugal’s postal service (CTT) sold 70 percent of its shares to public investors on the Lisbon stock exchange in 2013, and in 2016 95 percent of Portuguese rail operator CP Carga was sold to the MSC Group.

8. Responsible Business Conduct

There is strong awareness of responsible business conduct in Portugal and broad acceptance of the need to consider the community among the key stakeholders of any company. The Group of Reflection and Support for Business Citizenship (GRACE) was founded in 2000 by a group of companies, primarily multinational corporations, to expand the role of the Portuguese business community in social development.

The Ministry of Economy and AICEP encourage foreign and local enterprises to observe the OECD Guidelines for Multinational Enterprises, and both agencies jointly comprise the National Contact Point (NCP) for the promotion of these guidelines or facilitation of resolving disputes which may arise regarding the Guidelines. For contact information: .

The Portuguese Business Ethics Association (APEE) is dedicated to promoting corporate social responsibility and works in collaboration with the Ministry of Economy’s Directorate-General of Economic Activities. It promotes events like Social Responsibility Week and celebrates protocols and agreements with companies to assure they follow RBC principles incorporated into the Labor Code through Law 99/2003 and Law 35/2004. For more, please see: .

Portugal’s Competition Authority both encourages and enforces competition rules, including ethical business practices. The Competition Authority operates a leniency program for companies that self-identify lapses. For more information,see

There have not been any high profile, controversial instances of private sector impact on human rights. The Portuguese government enforces domestic laws effectively and fairly through the domestic courts system, and through the supra-national European Court of Human Rights. Within its constitution, Portugal states that constitutional precepts concerning fundamental rights must be interpreted and completed in harmony with the Universal Declaration of Human Rights.

The Portuguese legal and regulatory framework on corporate governance includes not only regulations and recommendations from the Portuguese Securities Market Commission (CMVM), but also specific legal provisions from the Portuguese Companies Code and the Portuguese Securities Code. CMVM promotes sound corporate governance for listed companies by setting out a group of recommendations and regulations on the standards of corporate governance. CMVM regulations are binding for listed companies.

Non-governmental organizations also promote awareness of environmental and good governance issues in business. These include Quercus Portugal, which publishes guidelines and organizes events to promote environmental responsibility in business practices, and Transparencia e Integridade Associacao Civica (TIAC), which produces reports on corruption on everything from football match-fixing to conflicts of interest in public and private enterprise. TIAC also allows whistle-blowers to anonymously submit reports of corruption through their website.

Portugal does not participate in the Extractive Industries Transparency Initiative (EITI), or the Voluntary Principles on Security and Human Rights. On April 3, 2017 the Council of the European Union approved a new EU regulation on conflict minerals. The regulation imposes due diligence rules on companies importing tin, tantalum, tungsten, and gold into the EU. It has a transition period for compliance before entering full effect on January 1, 2021.

9. Corruption

Portugal has made legislative strides toward further criminalizing corruption. The government’s Council for the Prevention of Corruption, formed in 2008, is an independent administrative body that works closely with the Court of Auditors to prevent corruption in public and private organizations that use public funds. Transparencia e Integridade Associacao Civica, the local affiliate of Transparency International, also actively publishes reports on corruption and supports would-be whistleblowers in Portugal. In 2010, the country adopted a law that criminalized violation of urban planning rules and increased transparency in political party funding. In 2015, Parliament unanimously approved a revision to existing anti-corruption laws that extended the statute of limitations for the crime of trading in influence to 15 years and criminalized embezzlement by employees of state-owned enterprises with a prison term of up to eight years.

Still, according to a 2018 report by the Council of Europe’s Group of States against Corruption (GRECO), Portugal should improve efforts to reform its legal framework to prevent corruption in respect of MPs, judges and prosecutors.

The report concluded that Portugal has only satisfactorily implemented one of fifteen previous recommendations. Three have been partly implemented, and eleven have not yet been implemented. The situation is qualified by GRECO as “globally unsatisfactory.”

GRECO, however welcomed a reform to bolster integrity, enhance accountability and increase transparency of a wide range of public office holders, including MPs.

See more here: .

The European Commission raised similar issues in its 2014 Anti-Corruption Report on Portugal and also noted an extremely prevalent perception of corruption among the Portuguese populace. According to a 2013 survey, 90 percent of Portuguese respondents stated that “corruption is a widespread problem in their country” (vs. an EU average of 76 percent), while 36 percent of Portuguese respondents said that they “are personally affected by corruption in their daily life” (vs. an EU average of 26 percent). The report is available at: .

The laws extend to family members of officials and to political parties.

Portugal has laws and regulations to counter conflict-of-interest in awarding contracts or government procurement. See more at: .

The Portuguese government encourages (and in some cases requires) private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. See more at: .

Most private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. As described above, the Competition Authority operates a leniency program for companies that self-identify infringements of competition rules, including ethical lapses.

Portugal has ratified and complies with both the UN Convention against Corruption and the OECD Anti-Bribery Convention.

Portuguese government provides pro-bono legal services to NGOs involved in investigating corruption.

U.S. firms occasionally report encountering limited degrees of corruption in the course of doing business in Portugal; they do not identify corruption as an obstacle to foreign direct investment.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:
Jose Tavares
Director General, Council for the Prevention of Corruption
Avenida da Republica, 65
1050-189, Lisbon, Portugal
+351 21 794 5138

Contact at “watchdog” organization:
Luis de Sousa
President, Transparency International – Transparencia e Integridade Associacao Civica
Rua Leopoldo de Almeida, 9B,
1750-137, Lisbon, Portugal
+351 21 752 2075

10. Political and Security Environment

Since the 1974 Carnation Revolution, Portugal has had a long history of peaceful social protest.

Portugal experienced its largest political rally since its revolution in response to proposed budgetary measures in 2012. Subsequent demonstrations against government austerity measures and economic policies have resulted in isolated and low levels of vandalism, generally directed at parliamentary facilities. Public workers, including nurses, doctors, teachers, aviation professionals, and public transportation workers have organized peaceful demonstrations periodically in protest of salary cuts and other austerity measures throughout 2017.

11. Labor Policies and Practices

A stronger labor market has moved the wheels of a virtuous economic cycle. Unemployment has tumbled to below 8 percent from a record high above 17 percent in 2013.

Numerous labor reform packages aimed at improving the productivity of Portugal’s workforce were implemented after the 2011 bailout, but overall low labor productivity remains a key challenge. In its February 2018 post-program monitoring report, the International Monetary Fund (IMF) said after declining for the last years, unit labor costs have started to rise and if they keep going up external competitiveness could be threatened. The IMF indicated that the increase in the minimum wage in 2018 to EUR 580 per month (14 payments per year), from EUR 557 per month, may contribute to increasing future labor costs as the minimum wage covers about a fifth of full-time employees.

Numerous experts and international bodies have identified increased labor market flexibility as a challenge and area ripe for structural policy changes. Nonetheless, as economic recovery has picked up, certain sectors are facing labor shortages, including the tourism, information technology, and engineering fields.

In 2016, 125,400 foreign workers were legally employed in Portugal. Foreign workers, particularly Asian migrants, generally work in the commercial and service sectors and, overall, are self-employed; Africans, most of whom are salaried employees or wage earners, tend to hold low-skilled jobs in the industrial sector (which includes cleaning services, in the case of women, and construction work, in the case of men). EU and American citizens, largely tend to hold highly qualified jobs (skilled professions, directors and administrative staff) or engage in entrepreneurial activities. This group is also correlated with agricultural workers, which are dependent on the number of European citizens (e.g. Dutch, English and French expats) who come to Portugal to enjoy their retirement, investing in large properties destined for agricultural exploration.

The Health, tourism, information technology (IT) and engineering sectors currently have the largest shortages of skilled labor. More information can be found at: .

Employers are allowed to conduct collective dismissals linked to adverse market or economic conditions, or due to technological advancement, but must provide advance notice and severance pay. Depending on the seniority of each employee, an employer must provide between 15 to 75 days of advance notice, and pay severance ranging from 12 days’ to one month’s salary per year worked. Employees may challenge termination decisions before a Labor Court.

Labor laws are uniformly applicable and enforced, including in Portugal’s foreign trade zone/free port in the Autonomous Region of Madeira.

Collective bargaining is common in Portugal’s banking, insurance, and public administration sectors. In 2016, 4,172 Portuguese were fired within collective bargaining agreements. More information is available at: .

Portugal has labor dispute resolution mechanisms in place through Labor Courts and Arbitration Centers.

Labor strikes are more common than in the United States, but are nonviolent and of short duration. In recent years, work stoppages by public sector workers, including transportation workers, teachers, and nurses, as well as by unionized groups including taxi drivers and longshoremen have occurred.

Portugal is a member of the International Labor Organization (ILO), and has ratified all eight Fundamental Conventions as well as all four Governance (Priority) Conventions.

The Labor Code caps the work schedule at eight hours per day, and 40 hours per week. The public sector employee workweek, with certain exclusions, was capped at 35 hours in July 2016. In January 2017, Portugal’s minimum wage was increased from EUR 530 to EUR 557 per month. Employees are entitled to at least 22 days of annual leave per year. In addition, the employer must pay employees a Christmas bonus and vacation bonus, both equivalent to one month’s salary.

In 2016, new rules on access to early retirement were amended. Applicants must now be at least 60 years of age and have at least 40 years of employment and social security contributions to qualify. For individuals between the ages of 55 and 60 who applied for early retirement prior to the passage of the aforementioned statute, they must have had 30 years of documented social security contributions to qualify.

12. OPIC and Other Investment Insurance Programs

Portugal is a country with low political risk; there is no OPIC program in Portugal.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M EUR) 2017 EUR 193,121 2017 EUR 193,048 

Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M EUR, stock positions) 2016 EUR 1,796 2016 USD 2,273

Host country’s FDI in the United States (M EUR, stock positions) 2016 EUR 1,300 2016 USD 937
Total inbound stock of FDI as % host GDP N/A 2016 57.7 % UNCTAD –United Nations Conference on Trade and Development

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 118,671 100% Total Outward 57,576 100%
Netherlands 30,001 25% Netherlands 19,291 33%
Spain 26,984 23% Spain 12,841 22%
Luxembourg 21,790 18% Angola 3,923 7%
United Kingdom 9,061 8% Brazil 2,909 5%
France 6,043 5% United Kingdom 2,345 4%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 149,383 100% All Countries 39,932 100% All Countries 109,451 100%
Spain 20,288 14% Luxembourg 14,186 36% Italy 17,547 16%
Italy 17,646 12% United States 4,736 12% Spain 16,069 15%
Luxembourg 16,969 11% Ireland 4,694 12% Germany 13,962 13%
Germany 15,631 11% Spain 4,219 11% France 9,922 9%
France 11,470 8% United Kingdom 2,662 7% Netherlands 9,253 9%

14. Contact for More Information

Embassy of the United States
Avenida das Forcas Armadas
+351 21-770-2000


Executive Summary

Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors and does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union (EU), relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian, and Near East markets. United States (U.S.) investors have found opportunities in the information technology (IT), automotive, telecommunication, energy, services, manufacturing, consumer products sectors, and banking.

The investment climate in Romania is a mixed picture, and potential investors should undertake due diligence when considering any investment. The EU’s 2018 Country Report for Romania found that cumbersome administrative procedures, slow progress on the provision of e-government solutions, complex insolvency procedures and frequent regulatory changes with limited use of impact assessment and consultation procedures weigh on the business climate. Although the pace of economic reforms has slowed, Romania remains a regional leader in judicial efforts to combat high and medium-level corruption. However, efforts since January 2017 to undermine Romania’s anticorruption prosecutors and weaken judicial independence have shaken investor confidence in the government’s commitment to combat corruption. Some government leaders accused “multinational companies” of sponsoring large street protests against these moves, adding to occasional political rhetoric scapegoating foreign companies for domestic companies’ alleged dire circumstances.

The Government of Romania’s (GOR) mandatory transfer of payroll taxes from employers to employees in January 2018 negatively impacted all companies through additional administrative costs resulting from negotiation and registration of new labor contracts. The GOR’s sale of minority stakes in several state-owned enterprises (SOEs) in key sectors, such as energy generation and exploitation, has stalled since 2014. The GOR has weakened enforcement of its SOE corporate governance code, exempting several SOEs from the code in December 2017.

Consultations with stakeholders and impact assessments are required before enactment of legislation. However, this requirement has been unevenly followed, and public entities generally do not conduct thorough impact assessments. Since 2017, frequent government changes have led to rapidly changing policies that serve to complicate the business climate. Romania has made significant strides to combat corruption to date, but it remains an ongoing challenge. Inconsistent enforcement of existing laws, including those related to the protection of intellectual property rights, also serves as a disincentive to investment. Continuing to attract and retain additional investment will require further progress on transparency, stability, and predictability in economic decision-making, and a reduction of non-transparent bureaucratic procedures.

Although women in Romania have equal access under the law to investment development and protections, women continue to face societal challenges. Despite the lowest gender wage gap in the EU (5.2 percent in 2016 according to a March 2018 Eurostat report) and a high level of participation in STEM professions, Romania continues to have a large gender employment gap. In 2016, this gap was 16.4 percent compared to the 10.5 percent EU average. The problem is worse in rural areas and for Roma women. According to the World Bank, almost half of rural women in Romania have not completed upper secondary education and 43 percent are in the poorest quintile.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 59 of 175

(down 2 spots)
World Bank’s Doing Business Report “Ease of Doing Business” 2017 45 of 190

(down 9 spots)
Global Innovation Index 2017 42 of 128

(up 6 spots)

U.S. FDI in partner country ($M USD, stock positions) 2016 USD 2.6 billion
World Bank GNI per capita 2016 USD 9,480

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Romania actively seeks foreign direct investment (FDI), and offers a market of around 19 million consumers, a relatively well-educated workforce at competitive wages, a strategic location, and abundant natural resources. To date, favored areas for U.S. investment include IT and telecommunications, energy, services, manufacturing – especially in the automotive sector, consumer products, and banking. InvestRomania is the government’s lead agency for promoting and facilitating foreign investment in Romania. InvestRomania offers assistance and advisory services free of charge to foreign investors and international companies for project implementation and opening new offices or manufacturing facilities.

Romania’s accession to the EU on January 1, 2007 has helped solidify institutional reform. However, legislative and regulatory unpredictability, as well as weak public administration continue to negatively impact the investment climate. As in any foreign country, prospective U.S. investors should exercise careful due diligence, including consultation with competent legal counsel, when considering an investment in Romania. Governments in Romania have, on occasion, allowed political interests or budgetary imperatives to supersede accepted business practices in ways harmful to investor interests. For example, a temporary 2013 windfall profit tax on natural gas and electricity liberalization was initially due to expire in December 2015, but was repeatedly extended and made permanent in December 2017.

Investments involving public authorities (central government ministries, county governments, or city administrations) can be more complicated than investments or joint ventures with private Romanian companies. Large deals involving the government – particularly public-private partnerships and privatizations of key SOEs – can be stymied by vested political and economic interests, or bogged down due to a lack of coordination between government ministries. The Public-Private Partnership (PPP) Law was revised repeatedly, including in 2017, but the implementation rules have not been published, making the law ineffective. The contribution of the public partner can now be both in-kind and cash, provided the public contribution complies with state aid rules and with public finance legislation. The public partner can cover costs for stages prior to project implementation, including expropriation, feasibility studies, and permitting, and can assume payment obligations to the project company. According to the new law, the public partner initiates the public-private partnership projects and awards them according to public procurement rules. How the PPP law is implemented will be of considerable interest to investors over the next few years, but the Ministry of Business Climate, Trade, and Entrepreneurship has yet to indicate when it will complete and/or begin public consultations on the implementing regulations.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities are free to establish and own business enterprises, and to engage in all forms of remunerative activity. Romanian legislation and regulation provide national treatment for foreign investors, guarantee free access to domestic markets, and allow foreign investors to participate in privatizations. There is no limit on foreign participation in commercial enterprises. Foreign investors are entitled to establish wholly foreign-owned enterprises in Romania (although joint ventures are more typical), and to convert and repatriate 100 percent of after-tax profits.

Romania has taken established legal parameters to resolve contract disputes expeditiously. Mergers and acquisitions are subject to review by the Competition Council. According to the Competition Law, the Competition Council notifies Romania’s Supreme Defense Council regarding any merger or acquisition of stocks or assets which could impact national security. The Supreme Defense Council then reviews these referred mergers and acquisitions for potential threats to national security. To date, the Supreme Defense Council has not blocked any merger or acquisition. The Romanian capital account was fully liberalized in 2006, prior to gaining EU membership in 2007. Foreign firms are allowed to participate in the management and administration of the investment, as well as to assign their contractual obligations and rights to other Romanian or foreign investors.

Other Investment Policy Reviews

Romania has not undergone any third-party investment policy reviews through multilateral organizations in over 10 years. The Heritage Foundation’s 2017 Index of Economic Freedom report indicates that secured interests in private property are recognized. The report also notes low scores for government integrity and property rights, which outweigh improvements in labor freedom and government spending. It also identifies labor shortages and political instability as the greatest economic risks.

Economic growth rates have increased, but the benefits have not been felt by all Romanians. Progress on implementing reforms and improving the business environment has been uneven. The World Bank’s Doing Business Report indicates that Romania continues to rank below the world average in processing construction permits and establishing utility services. The government’s January 2017 passage of emergency ordinance 13 provoked wide-spread public protests against what was seen as an attempt to roll-back anti-corruption efforts. In February 2017, Transparency International called on the Romanian government to focus on strengthening anti-corruption efforts, including introducing stronger corporate ethics standards and implementing existing anti-corruption legislation.

Business Facilitation

The National Trade Registry has an online service available in Romanian at . Romania has a foreign trade department within the Ministry of Business Climate, Trade, and Entrepreneurship and an investment promotion department in the Ministry of Economy. InvestRomania is the government’s lead agency for promoting and facilitating foreign investment in Romania. InvestRomania offers assistance and advisory services free of charge to foreign investors and international companies for project implementation and opening new offices or manufacturing facilities. More information is available at .

According to the World Bank, it takes seven procedures and 11 days to establish a foreign-owned limited liability company (LLC) in Romania. This is twice as fast as the regional average for Europe and Central Asia (eight procedures and 22 days). In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Romania must authenticate and translate its documents abroad. Foreign companies do not need to seek an investment approval. The Trade Registry judge must hold a public hearing on the company’s application for registration within five days of submission of the required documentation. The registration documents can be submitted, and the status of the registration request monitored, online.

Companies in Romania are free to open and maintain bank accounts in foreign currency, although, in practice, Romanian banks offer services only in certain currencies (including Euros, U.S. dollars, and Swiss francs). The minimum capital requirement for domestic and foreign LLCs is RON200 (USD65). Areas for improvement include making all registration documents available to download online in English. Currently only some are available online, and they are only in Romanian.

Romania defines microenterprises as having less than nine employees, small enterprises as having less than 50 employees, and medium sized enterprises as having less than 250 employees. Regardless of ownership, microenterprises and SMEs enjoy “de minimis” and other state aid schemes from EU funds or from the state budget. Business facilitation mechanisms provide for equitable treatment of women in the economy. According to the World Bank Doing Business Report, women are able to register a LLC with the same amount of time, cost, and number of procedures as men.

Outward Investment

There are no restrictions or incentives for outward investment.

2. Bilateral Investment Agreements and Taxation Treaties

The U.S.-Romanian Bilateral Investment Treaty (BIT) on the Reciprocal Encouragement and Protection of Investment (signed in May 1992 and ratified by the U.S. in 1994) guarantees national treatment for U.S. and Romanian investors. The agreement provides a dispute resolution mechanism, liberal capital transfer, prompt and adequate compensation in the event of an expropriation, and the avoidance of trade-distorting performance requirements. In 2004, the U.S. Government negotiated a political understanding with the EU and eight accession countries, including Romania, to cover any possible inconsistencies between pre-existing BITs and the countries’ impending EU obligations. A resulting revised BIT was ratified by the U.S. Senate and the Romanian Parliament in 2004, and went into effect on February 9, 2007. Other bilateral trade agreements with third countries were terminated upon Romania’s EU accession. Romania has a bilateral taxation treaty with the United States; the treaty was signed in 1973 and entered into force in 1974. It is available at .

As an example of changes to the taxation regime and ongoing systemic tax disputes between the government and foreign investors, the Ministry of Health (MOH) announced in February 2018 an increase in the clawback tax for Q4 2017, from 19.42 percent to 23.45 percent. Pharmaceutical companies pay the clawback tax on all sales of drugs reimbursed through the public health system. The MOH calculates the tax to recover the cost for reimbursed drug sales in the previous quarter that exceed its budget. The pharmaceutical industry, both generic and innovative, immediately decried the tax increase. Industry sees itself as financing the growth in drug consumption in Romania while the MOH’s budget has remained flat since 2011. The International Innovative Pharmaceutical Producers Association (ARPIM) issued a press release noting that from 2013-2017, pharmaceuticals paid USD1.75 billion in clawback taxes, exceeding one year of the MOH’s annual budget for drugs in the public health system. Since implementation of the clawback tax in 2009, the pharmaceutical industry has suggested numerous solutions to address the lack of predictability and transparency in the National Health Insurance House’s computations, but the GOR has shown no interest in increasing government spending for medicine to reduce the tax burden on private companies.

In April 2018, the Foreign Investors Council (FIC) issued an open letter to the Prime Minister, Minister of Finance, and speakers from both chambers of Parliament decrying ongoing uncertainty in the business environment from the GOR’s failure to finalize Emergency Ordinance (EO) 79. In 2017, EO 79 shifted the burden of mandatory payroll deductions for pensions, healthcare, and income taxes from employers to employees. Parliament has yet to confirm or modify the law, leaving employers in the lurch over the final outcome. To avoid reductions in employee net pay, many private businesses and organizations voluntarily increased salaries to offset employee losses. Other companies, wary of further changes, offered monthly bonuses rather than formally amending contracts. In the public sector, the measure counteracted long-promised wage increases, undermining an important component of the GOR’s legislative program. FIC’s letter signals the business sector’s growing frustration with the GOR’s tendency to publish new laws without impact analysis or stakeholder consultation.

3. Legal Regime

Transparency of the Regulatory System

Romanian law requires consultations with stakeholders, including the private sector, and a 30-day comment period on legislation or regulation affecting the business environment (the “Sunshine Law”). Some draft pieces of legislation pending with the government are available in Romanian at . Proposed items for cabinet meetings are not always publicized in advance or in full. As a general rule, the agenda of cabinet meetings should include links to the draft pieces of legislation (government decisions, ordinances, emergency ordinances, or memoranda) slated for government decision. Legislation pending with the parliament is available at  for the Chamber of Deputies and at for the Senate. The Chamber of Deputies is the decision-making body for economic legislation. Regulatory impact assessments are often missing, and Romanian authorities do not publish the comments they receive as part of the public consultation process.

Foreign investors point to the excessive time required to secure necessary zoning permits, environmental approvals, property titles, licenses, and utility hook-ups. In January 2018, the Public Consultation Ministry was downgraded to a directorate within the Ministry of Labor and Social Justice. Except for occasional mentions in the Single Registry of Transparency of Interests (RUTI), the Ministry has had no recorded activity. The ruling coalition has now installed its third Prime Minister in 14 months, which has resulted in frequent changes to government leadership, including mid-level officials and associated staff, and changes to some agencies’ jurisdictions. This lack of both personnel and institutional stability has raised concern among the business community. With one or two exceptions, the current government has had almost no public or media engagement to present their agendas. Government agencies’ websites still have information dating back to the previous government, or provide only scarce information about the current leadership.

Public comments received by regulators are not made public. The Sunshine Law (Law 52/2003 on Transparency in Public Administration) requires public authorities to allow the public to comment on draft legislation and to set the general timeframe for stakeholders to provide input. However, there is no penalty or sanction if the public authority does not follow the Sunshine Law’s public consultation timelines. There have been cases when the public authorities have set deadlines much shorter than the standards set forth in the law. There were no transparency enforcement regulatory reforms announced or implemented in 2017.

International Regulatory Considerations

As an EU member state, Romanian legislation is largely driven by the EU acquis, the body of EU legislation. EC regulations are directly applicable, while implementation of directives at the national level is done through the national legislation. Romania’s regulatory system incorporates European standards. Romania has been a World Trade Organization (WTO) member since January 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since November 1971. Romania has been a member of the EU since 2007. Technical regulation notifications submitted by the EU are valid for all member states. The EU signed the Trade Facilitation Agreement (TFA) in October 2015. Romania has implemented all TFA requirements.

Legal System and Judicial Independence

Romania recognizes property and contractual rights, but enforcement through the judicial process can be lengthy, costly, and difficult. Foreign companies engaged in trade or investment in Romania often express concern about the Romanian courts’ lack of expertise in commercial issues. There are no specialized commercial courts, but there are specialized civil courts. Judges generally have limited experience in the functioning of a market economy, international business methods, intellectual property rights, or the application of Romanian commercial and competition laws. As stipulated in the Constitution, the judicial system is independent from the executive branch and generally considered procedurally competent, fair, and reliable. Affected parties can challenge regulations and enforcement actions in court. Such challenges are then adjudicated in the national court system.

Inconsistency and a lack of predictability in the jurisprudence of the courts or in the interpretation of the laws remains a major concern for foreign and domestic investors and for wider society. Even when court judgments are favorable, enforcement of judgments is inconsistent and can lead to lengthy appeals. Failure to implement court orders or cases where the public administration unjustifiably challenges court decisions constitute obstacles to the binding nature of court decisions.

Mediation as a tool to resolve disputes is gradually becoming more common in Romania and a certifying body, the Mediation Council, sets standards and practices. The professional association, the Union of Mediation Centers in Romania, is the umbrella organization for mediators throughout the country. Court-sanctioned and private mediation is available at recognized mediation centers in every county seat.

There is no legal mechanism for court-ordered mediation in Romania, but judges can encourage litigants to use mediation to resolve their cases. If litigants opt for mediation, they must present their proposed resolution to the judge upon completion of the mediation process. The judge must then approve the agreement.

Laws and Regulations on Foreign Direct Investment

Since becoming an EU member, Romania has worked assiduously to create an EU-compatible legal framework consistent with a market economy and investment promotion. At the same time, implementation of these laws and regulations frequently lags or is inconsistent.

Romania’s legal framework for foreign investment is encompassed within a substantial body of law largely enacted in the late 1990s. It is subject to frequent revision. Major changes to the Civil Code were enacted in October 2011 including replacing the Commercial Code, consolidating provisions applicable to companies and contracts into a single piece of legislation, and harmonizing Romanian legislation with international practices. The Civil Procedure Code, which provides detailed procedural guidance for implementing the new Civil Code, came into force in February 2013.

In 2010, Romania passed a judicial reform law with the objective of improving the speed and efficiency of judicial processes, including provisions to reduce delays between hearings. The Mediation Law, revised in October 2012, provides alternative dispute resolution options. The new Criminal Code, that includes provisions applicable to the economic felonies, came into effect in February 2014. In 2018, Parliamentary leaders announced plans to amend both. The 2003 Fiscal Code and Fiscal Procedure Code, amended several times since their passage, was revised in December 2017. Fiscal legislation is revised frequently, often without scientific or data-driven assessment of the impact the changes may have on the economy.

Given the state of flux of legal developments, investors are strongly encouraged to engage local counsel to navigate the various laws, decrees, and regulations, as several pieces of investor-relevant legislation have been challenged in both local courts and the Constitutional Court. There have been few hostile takeover attempts reported in Romania, yet Romanian law has not focused on limiting potential mergers or acquisitions. There are no Romanian laws prohibiting or restricting private firms’ free association with foreign investors.

Competition and Anti-Trust Laws

Romania has extensively revised its competition legislation, bringing it closer to the EU Acquis Communautaire and best corporate practices. A new law on unfair competition came into effect in August 2014. Companies with a market share below 40 percent are no longer considered to have a dominant market position, thus avoiding a full investigation by the Romanian Competition Council (RCC) of new agreements, saving considerable time and money for all parties involved. Resale price maintenance and market and client sharing are still prohibited, regardless of the size of either party’s market share. The authorization fee for mergers or acquisitions ranges between EUR10,000 (USD12,303) and EUR50,000 (USD61,520). The Fiscal Procedure Code requires companies that challenge an RCC ruling to front a deposit while awaiting a court decision on the merits of the complaint.

Romania’s Public Procurement Directives outline general procurements of goods and equipment, utilities procurement (“sectorial procurement”), works and services concessions, and remedies and appeals. An extensive body of secondary and tertiary legislation accompanies the four laws. Separate legislation governs defense and security procurements. In a positive move, this new body of legislation differs from the previous approach of using lowest price as the only public procurement selection criterion. Under the new laws, an authority can use price, cost, quality-price ratio or quality-cost ratio. The new laws also allow bidders to provide a simple form (the European Single Procurement Document) in order to participate in the award procedures. Only the winner must later submit full documentation.

The public procurement laws stipulate that challenges regarding procedure or an award can be filed with the National Complaint Council (NCC) or the courts. Disputes regarding execution, amendment, or termination of public procurement contracts can be subject to arbitration. The new laws also stipulate that a bidder has to notify the contracting authority before challenging either the award or procedure. Not fulfilling this notification requirement results in the NCC or court rejecting the challenge.

The March 2018 European Semester Report for Romania notes that the share of negotiated public procurement procedures without prior publication was 17 percent in Romania in 2017, among the highest in the EU. More than 40 percent of contracts awarded by public institutions in 2017 were single bids. This raised concerns among businesses about corruption in public procurement, which reduces competition, and decreases efficiency of public spending.

Expropriation and Compensation

The law on direct investment includes a guarantee against nationalization and expropriation or other equivalent actions. The law allows investors to select the court or arbitration body of their choice to settle disputes. Several cases involving investment property nationalized during the Communist era remain unresolved. In doing due diligence, prospective investors should ensure that a thorough title search is done to ensure there are no pending restitution claims against the land or assets.

Dispute Settlement

ICSID Convention and New York Convention

Romania is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Romania is also a party to the European Convention on International Commercial Arbitration concluded in Geneva in 1961 and is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID). Romania’s 1975 Decree 62 provides for legal enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

Romania is a signatory to the New York Convention, the European Convention on International Commercial Arbitration (Geneva), and the ICSID. There have been 13 ICSID cases in total against Romania. Three of them involved U.S. investors. The arbitral tribunal ruled in favor of Romania in two of them. Four investor-state arbitration cases against Romania are currently pending with the ICSID. Local courts recognize and enforce foreign arbitral awards against the government. There is no history of extrajudicial action against investors.

International Commercial Arbitration and Foreign Courts

Romania increasingly recognizes the importance of investor-state dispute settlements and has provided assurances that the rule of law will be enforced. Many agreements involving international companies and Romanian counterparts provide for the resolution of disputes through third-party arbitration. Local courts recognize and enforce foreign arbitral awards and judgments of foreign courts. There are no statistics on the percentage of cases in which Romanian courts ruled against SOEs.

Romanian law and practice recognize applications to other internationally-known arbitration institutions, such as the International Chamber of Commerce (ICC), Paris Court of Arbitration, and the United Nations Commission on International Trade Law (UNCITRAL). Romania has an International Commerce Arbitration Court administered by the Chamber of Commerce and Industry of Romania. Additionally, in November 2016, the American Chamber of Commerce in Romania (AmCham Romania) established the Bucharest International Arbitration Court (BIAC). This new arbitration center will focus on business and commercial disputes involving foreign investors and multinationals active in Romania.

According to the World Bank’s Doing Business report, it takes on average 512 days to enforce a contract, from the moment the plaintiff files the lawsuit until actual payment. Associated costs can total around 26 percent of the claim. Arbitration awards are enforceable through Romanian courts under circumstances similar to those in other Western countries, although legal proceedings can be protracted.

Bankruptcy Regulations

Romania’s bankruptcy law contains provisions for liquidation and reorganization that are generally consistent with Western legal standards. These laws usually emphasize enterprise restructuring and job preservation. To mitigate the time and financial cost of bankruptcies, Romanian legislation provides for administrative liquidation as an alternative to bankruptcy. However, investors and creditors have complained that liquidators sometimes lack the incentive to expedite liquidation proceedings and that, in some cases, their decisions have served vested outside interests. Both state-owned and private companies tend to opt for judicial reorganization to avoid bankruptcy.

In December 2009, the debt settlement mechanism Company Voluntary Agreements (CVAs) was introduced as a means for creditors and debtors to establish partial debt service schedules without resorting to bankruptcy proceedings. The global economic crisis did, however, prompt Romania to shorten insolvency proceedings in 2011.

According to the World Bank’s Doing Business report, resolving insolvency in Romania takes 3.3 years on average and costs 10.5 percent of the debtor’s estate, with the most likely outcome being a piecemeal sale of the company. The average recovery rate is 35.6 cents on the dollar. Globally, Romania stands at 51 in the ranking of 190 economies on the ease of resolving insolvency.

4. Industrial Policies

Investment Incentives

Currently, customs and tax incentives are available to investors in six free trade zones. State aid is available for investments in free trade zones under EU regional development assistance rules. Of the 36 companies that applied for state aid in 2016, only six were selected. As of December 31, 2017, 63 percent of the 38 applications for regional development aid were rejected, and the rest were under review. Large companies may receive aid up to 50 percent of their eligible costs. The ceiling is 35 percent in the counties of Ilfov, Timis, Arad, Caras Severin, and Hunedoara. In Bucharest, the ceiling is 10 percent. The ceiling for small and medium-sized enterprises (SMEs) is 10 percent higher than permissible aid for large companies, and for the smallest category of companies the ceiling is higher by 20 percentage points. Prospective investors are advised to thoroughly investigate and verify the current status of state incentives.

In 2007, Romania adopted EU regulations on regional investment aid, and instituted state aid schemes for large investments and SMEs. Both Romanian and EU state aid regulations aim to limit state aid in any form, such as direct state subsidies, debt rescheduling schemes, debt for equity swaps, or discounted land prices. The EC must be notified of, and approve, GOR state aid that exceeds the pre-approved monetary threshold for the corresponding category of aid. To benefit from the remaining state aid schemes, applicants must secure financing that is separate from any public support for at least 25 percent of the eligible costs, either through their own resources or through external financing, and must document this financing in strict accordance with Ministry of Finance guidelines. Amendments made in 2010 to the state aid scheme for regional projects score applications based not only on the economics of the project, but also on the GDP per capita and unemployment rate for the county of intended investment. When granting state aid, the Ministry of Finance requires that the state revenues through taxes equal the state aid granted. Numerous foreign and American firms have successfully applied for and received Romanian State Aid.

The Green Certificate System, part of the Renewable Energy Law, provides incentives for certain types of renewable energy. The Green Certificates are traded in parallel with the energy produced. Although the Green Certificates are intended to provide an additional source of revenue for renewable energy producers, repeated revisions to the support system including deferring release of the certificates, and lowering the mandatory green certificate quota that consumers and suppliers have to acquire have created instability in the renewables investment climate. Energy intensive industrial consumers receive exemptions from acquiring green certificates. In March 2017, the government revised the renewable energy support legislation. The changes include extending the validity of tradable green certificates to allow trading until 2032 and requires green certificates trading to be done anonymously, with the intention of leveling the playing field for all green certificates sellers on the market.

As a member of the EU, Romania must receive European Commission (EC) approval for any state aid it grants that is not covered by the EU’s block exemption regulations. The Romanian Competition Council acts as a clearinghouse for the exchange of information between the Romanian authorities and the EC. The failure of state aid grantors to notify the EC properly of aid associated with privatizations has resulted in the Commission launching formal investigations into several privatizations. Investors should ensure that the government entities with which they work fully understand and fulfill their duty to notify competition authorities. Investors may wish to consult with EU and Romanian competition authorities in advance, to ensure a proper understanding of notification requirements.

Companies operating in Romania can also apply for aid under EU-funded programs that are co-financed by Romania. In 2017, Romania obtained EC accreditation for its management authorities for 2014-2020 programs and met outstanding ex-ante conditions. These are the preconditions for Romania to start absorbing EU funds from the 2014-2020 budgetary cycle. When planning a project, prospective applicants must bear in mind that the project cannot start before the financing agreement is finalized; the application, selection, and negotiation process can be lengthy. Applicants also must secure financing for non-eligible expenses and for their co-financing of the eligible expenses. Finally, reimbursement of eligible expenses – which must be financed upfront by the investor – is often very slow. Procurements financed by EU-funded programs above a certain monetary threshold must comply with public procurement legislation. In an effort to increase the absorption rate of EU funds, Romania has amended regulations to allow applicants to use the assets financed under EU-funded programs as collateral. However, understaffing and a lack of expertise on the part of GOR management entities, cumbersome procedures, and applicants’ difficulty obtaining private financing still remain significant obstacles to improved absorption of EU funds and project implementation by Romania.

Foreign Trade Zones/Free Ports/Trade Facilitation

Free Trade Zones (FTZs) received legal authority in Romania in 1992. General provisions include unrestricted entry and re-export of goods, and exemption from customs duties. The law further permits the leasing or transfer of buildings or land for terms of up to 50 years to corporations or natural persons, regardless of nationality. Foreign-owned firms have the same investment opportunities as Romanian entities in FTZs.

Currently there are six FTZs, primarily located on the Danube River or close to the Black Sea: Sulina, Constanta-Sud Agigea, Galati, Braila, Curtici-Arad, and Giurgiu. The administrator of each FTZ is responsible for all commercial activities performed within the zone. FTZs are under the authority of the Ministry of Transportation.

Performance and Data Localization Requirements

The government does not mandate local employment. There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors or their employees. There are no government imposed conditions on permission to invest. The government does not require investors to establish or maintain data storage in Romania. Romania neither follows nor is there legislation requiring a “forced localization” policy for goods, technology or data. Romania does not have requirements for foreign IT providers to turn over source code or provide access for government surveillance. Romania’s Constitutional Court has twice ruled such specific legislative drafts are unconstitutional. There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. There are no performance requirements imposed as a condition for establishing, maintaining or expanding an investment.

5. Protection of Property Rights

Real Property

The Romanian Constitution, adopted in December 1991 and revised in 2003, guarantees the right to ownership of private property. Mineral and airspace rights, and similar rights, are excluded from private ownership. Under the revised Constitution, foreign citizens can gain land ownership through inheritance. With EU accession, citizens of EU member states can own land in Romania, subject to reciprocity in their home country.

Companies owning foreign capital may acquire land or property needed to fulfill or develop company goals. If the company is dissolved or liquidated, the land must be sold within one year of closure, and may only be sold to a buyer(s) with the legal right to purchase such assets. Investors can purchase shares in agricultural companies that lease land in the public domain from the State Land Agency.

The 2006 legislation that regulates the establishment of specialized mortgage banks also makes possible a secondary mortgage market, by regulating mortgage bond issuance mechanisms. Mortgage loans are offered by commercial banks, specialized mortgage banks, and non-bank mortgage credit institutions. Romania’s mortgage market is now almost entirely private. The state-owned National Savings Bank, CEC Bank, also offers mortgage loans. Since 2000, Romania has had in place the Electronic Archives of Security Interests in Movable Property (AEGRM) that represents the national recording system for the priority of mortgages structured by entities and assets, ensuring the filing of transactions regarding mortgages, assimilated operations, or other collateral provided by the law, as well as its advertising. Most urban land has clear title, and the National Cadaster Agency (NCA) is slowly and deliberately working to identify property owners and register land titles. According to the National Cadaster Plan, 2023 is the deadline for full registration of lands and buildings in the registry. According to NCA data, 10.9 million (27 percent) of the estimated real estate assets (land and buildings) were registered in the cadaster registry as of March 2018.

Romania has made marginal improvement in implementing digital records of real estate assets, including land. The 2018 World Bank Doing Business Report ranks Romania 45th for the ease of registering property up from 57th in the 2017 report. The cadaster property registry is far from complete, and the lack of accurate and complete information for land ownership continues to be a challenge for private investors ‎and SOEs alike.

Intellectual Property Rights

Romania is on the U.S. Trade Representative’s Special 301 watch list. As elsewhere in the EU, Internet piracy – both Torrent site peer-to-peer (P2P) file sharing and business-to-consumer piracy – remains a top intellectual property rights (IPR) concern. Despite the low priority placed on IPR enforcement at the policy level, cooperation between law enforcement authorities, including prosecutors and police officers, and intellectual property-based private industry continues to exist at the working level. This cooperation leads to innovative approaches to prosecuting IPR crimes within a constrained legal and fiscal environment: to increase the odds of IPR cases being heard in court, law enforcement authorities, when appropriate, are bundling related charges of fraud, tax evasion, embezzlement, and organized crime activity with IPR violations. Not only has this increased the odds of IPR cases going to court, it also strengthens the evidence of “social harm” stemming from IPR violations, as lack of social harm was often cited as a reason for dismissing IPR cases in the past.

Romania’s Customs Authority reported the seizure of approximately 1.40 million pieces of counterfeit goods in 2017 compared to 1.52 million pieces in 2016 and 6.17 million pieces in 2015. The declining trend continues at an accelerated pace, in line with growing purchasing power and demand for genuine physical goods. Batteries (other than car batteries), toys, sweets, cigarettes, clothing, stickers, footwear, pens, accounted for the majority of those seizures. The amount of seized pharmaceuticals had fallen from 370 pieces in 2016 to zero in 2017. While there was a significant increase in seized quantities of batteries, candy, bracelets, caps, clothing, glasses and glass accessories, there was a significant drop in seized quantities of footwear, cosmetics, mobile phone accessories, car parts, cigarettes, toys, headphones, and memory cards. According to both the National Customs Authority and the national police, the vast majority of counterfeit goods seized in Romania originate in China.

Romania is a signatory to international conventions concerning IPR, including Trade-Related Aspects of Intellectual Property Rights (TRIPS), and has enacted legislation protecting patents, trademarks, and copyrights. Romania has signed the Internet Convention to protect online authorship. While the IPR legal framework is generally good, enforcement remains weak and ineffective, especially in the area of internet piracy. The once-flagrant trade of retail pirated goods has largely been eliminated, but unlicensed use of software and personal use of pirated audio-video products remains high. Romania has passed broad IPR protection enforcement provisions, as required by the WTO, yet judicial enforcement remains lax.

Romania is on the Special 301 Watch List primarily due to weak enforcement efforts against online copyright piracy. Customs officers can seize ex-officio, and then destroy counterfeit goods after the rights holder first inspects the goods and drafts a declaration. The government is responsible for paying for the storage and destruction of the counterfeit goods. Counterfeit goods are not prevalent in the local market. Romania is not listed in the notorious market report.


Romania is a party to the Paris Convention for the Protection of Industrial Property, and subscribes to all of its amendments. Romanian patent legislation generally meets international standards, with foreign investors accorded equal treatment with Romanian citizens under the law. Patents are valid for 20 years. Romania has been a party to the European Patent Protection Convention since 2002. Patent registration can be filed online. Since 2014, Romania has also enforced a distinct law regulating employee inventions. The right to file a patent belongs to the employer for up to two years following the departure of the employee.


In 1998, Romania passed a trademark and geographic indications law, which was amended in 2010 to make it fully consistent with equivalent EU legislation. Romania is a signatory to the Madrid Agreement relating to the international registration of trademarks and the Geneva Treaty on Trademarks. Trademark registrations are valid for ten years from the date of application and renewable for similar periods. Beginning 2014, trademark registrations can be filed online. In 2007, Romania ratified the Singapore Treaty on the Law of Trademarks.


Romania is a member of the Bern Convention on Copyrights. The Romanian Parliament has ratified the latest versions of the Bern and Rome Conventions. The Romanian Copyright Office (ORDA) was established in 1996, and promotes and monitors copyright legislation. The General Prosecutor’s Office (GPO) provides national coordination of IPR enforcement, but copyright law enforcement remains a low priority for Romanian prosecutors and judges. Many magistrates still tend to view copyright piracy as a “victimless crime” and this attitude has resulted in weak enforcement of copyright law. Due to the popularity of downloading pirated content, copyright infringement of music and film is widespread throughout Romania.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at .

6. Financial Sector

Capital Markets and Portfolio Investment

Romania welcomes portfolio investment and is working to increase the efficiency of its capital markets. In September 2016, the FTSE included Romania on its “Watch List” to possibly reclassify the country to “Emerging Market” status. Currently FTSE states that Romania still fails to meet the turnover velocity criteria. The Financial Regulatory Agency (ASF) is responsible for regulating the securities market. The ASF implements the registration and licensing of brokers and financial intermediaries, the filing and approval of prospectuses, and the approval of market mechanisms.

The Bucharest Stock Exchange (BVB) resumed operations in 1995, after a hiatus of nearly 50 years. The BVB operates a two-tier system. The main market lists a total of 87 companies. The official index, BET, is based on a basket of the 10 most active stocks listed. BET-TR is the total return on market capitalization index, adjusted for the dividends distributed by the companies included in the index. Since 2015, the BVB also has an alternative trading system (ATS) with 283 listed companies targeting small and medium-sized enterprises (SMEs), and requesting more relaxed listing criteria. The BVB allows trade in corporate, municipal, and international bonds, and in 2007, the BVB opened derivatives trading. Starting July 2015, investors can use gross basis trade settlement, and beginning March 2015, trades can be settled in two net settlement cycles. The BVB’s integrated group includes trading, clearing, settlement, and registry systems. The BVB’s Alternative Trading System (ATS) International allows trading in local currency of six foreign stocks listed on international capital markets.

Despite a diversified securities listing, the situation on the international capital and financial markets has adversely affected the Romanian capital market, and liquidity remains low. Neither the government nor the Central Bank imposes restrictions on payments and transfers. The red tape associated with capital market access, still high trading fees, and inconsistent enforcement of corporate governance rules have kept Romania within the frontier market tier. Country funds, hedge funds, and venture capital funds continue to participate in the capital markets. Minority shareholders have the right to participate in any capital increase. Romanian capital market regulation is now EU-consistent, with accounting regulations incorporating EC Directives IV and VII. The BVB has been since September 2016 on the FTSE-Russell watch list for a possible upgrade to emerging capital market status.

Money and Banking System

There are 35 banks and credit cooperative national unions currently operating in Romania. The largest, Romanian Commercial Bank (BCR), was privatized in 2006 by sale to Austria’s-owned Erste Bank and has a 16.3 percent market share according to the National Bank of Romania. The second-largest is the privately-owned Transilvania Bank (13.1 percent), followed by French-owned Romanian Bank for Development (BRD-Société Générale) with 12.9 percent market share, Austrian-owned Raiffeisen (8.5 percent), and Italian-owned UniCredit (8.3 percent).

The banking system is stable and well-provisioned. According to the National Bank of Romania, as of February 2018, non-performing loans account for 6.2 percent of total bank loans and interest. As of December 2017, the solvency rate of the banking system is 18.9 percent.

The GOR has encouraged foreign investment in the banking sector, and there are no restrictions on mergers and acquisitions. The only remaining state-owned banks are the National Savings Bank (CEC Bank) and EximBank, comprising 8.3 percent of the market combined. Parliament is considering draft legislation to establish a state-owned development bank that would focus on SME financing and large infrastructure projects.

While the National Bank of Romania must authorize all new non-EU banking entities, banks, and non-bank financial institutions already approved in other EU countries need only notify the National Bank of Romania of plans to provide local services based on the EU passport.

The Romanian Association of Banks has promoted a dialogue with interested parties – institutions, representatives of consumers’ associations, businesses, and the media –to improve the legal framework to allow adoption of digital technologies in the financial and banking sectors. The current stance of Romania’s regulators toward bitcoin and digital currencies is one of caution. The National Bank of Romania is reserved about bitcoin and has issued several statements warning users about digital currencies. The National Bank of Romania has stated they will not permit risky products that could undermine consumer protection or the banking sector.

Foreign Exchange and Remittances

Foreign Exchange Policies

Romania does not restrict the conversion or transfer of funds associated with direct investment. All profits made by foreign investors in Romania may be converted into another currency and transferred abroad at the market exchange rate after payment of taxes.

Romania’s national currency, the Leu, is freely convertible in current account transactions, in accordance with the International Monetary Fund’s (IMF) Article VII.

Remittance Policies

There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital gains, returns on intellectual property, or imported inputs. Proceeds from the sales of shares, bonds, or other securities, as well as from the conclusion of an investment, can be repatriated.

Romania implemented regulations liberalizing foreign exchange markets in 1997. The inter-bank electronic settlement system became fully operational in 2006, eliminating past procedural delays in processing capital outflows. Commission fees for real-time electronic banking settlements have gradually been reduced.

Capital inflows are also free from restraint. Romania concluded capital account liberalization in September 2006, with the decision to permit non-residents and residents abroad to purchase derivatives, treasury bills, and other monetary instruments.

Sovereign Wealth Funds

Romania does not have a sovereign wealth fund. The current government has indicated an intention to create two sovereign wealth funds, the National Fund for Development and Investment (NFID), and a National Investment Fund. The Ministry of Finance has the lead in drafting the implementation blueprints.

7. State-Owned Enterprises

According to the World Bank, there are approximately 1,200 SOEs in Romania, of which around 300 are majority-owned by the GOR. There is no published list of all SOEs since some are subordinated to the national government and some to local authorities. SOEs are governed by executive boards under the supervision of administration boards. The 2016 Corporate Governance Code (Law 111) improved implementation of corporate governance in SOEs. However, the government exempted several SOEs from the Code in 2017, and implementation of the Code remains incomplete.

SOEs are required by law to publish an annual report. Majority state-owned companies that are publicly listed, as well as state-owned banks, are required to be independently audited. The Corporate Governance Code (enacted through Government Emergency Ordinance 109 / 2011 and revised through Law 111 / 2016) does not have language requirements for SOE executive and non-executive board members. Enforcement of the Corporate Governance Code has been uneven; many SOEs are currently managed by interim boards, often with politically appointed members that lack sector and business expertise. The March 2018 European Semester Report for Romania noted that corporate governance of SOEs was substantially weakened in 2018 and points to a significant backtracking on past reforms.

Privatization Program

The Ministry of Energy oversees energy generation and distribution assets, and uranium and coal mining. The Ministry of Economy has authority over state-controlled natural gas carrier Transgaz, national electricity carrier Transelectrica, national salt company Salrom, national waters company SNAM, and copper mining company Cuprumin. The Ministry of Transportation (MOT) has authority over the entities in the transportation sector, including rail carrier CFR Marfa. Romania’s privatization law permits the responsible authority to hire an agent to handle the entire privatization process, though ultimate decision-making authority remains with the government. Joint ventures between state-owned energy companies and private investors for electric power production have been stalled due to decreasing energy consumption and declining energy prices.

The terms of Romania’s 2013-2015 precautionary stand-by agreement with the IMF included the sale of minority stakes in several state-owned energy companies through initial public offerings (IPOs) and secondary public offerings (SPOs) on the Bucharest Stock Exchange (BVB). To date, successful transactions have included a 15 percent SPO for natural gas transmission operator Transgaz in April 2013 (following a 10 percent IPO in November 2007), an IPO for 10 percent stake in nuclear power producer Nuclearelectrica in September 2013, an IPO for a 15 percent stake in natural gas producer Romgaz in October 2013, and an IPO on the BVB and London Stock Exchange for the majority privatization of state-controlled electricity distributor Electrica in June 2014. Privatization has stalled since 2014. The government has repeatedly postponed IPOs for hydropower producer Hidroelectrica and integrated coal mining and coal-fired power production company Oltenia Energy Complex.

Romania has implemented the Electricity Directive and the Gas Directive of the EU’s Third Energy Package, introducing a structural separation between transmission system operator activities, and generation, production, and supply activities. Ownership unbundling rules apply to investors with participation in energy transmission, generation, production, and/or supply activities. According to the Third Energy Package directives, the same entity cannot control generation, production and/or supply activities, and at the same time control or exercise any right over a transmission system operator (TSO). Furthermore, the same entity cannot control a TSO and at the same time control or exercise any right over generation, production and/or supply activities. Consequently, the Ministry of Economy oversees the national natural gas carrier Transgaz and national electricity carrier Transelectrica, while the Ministry of Energy has authority over state-controlled electricity producers. Prospective investors are strongly advised to conduct thorough due diligence before any acquisition, particularly of state-owned assets.

As a member of the EU, Romania is required to notify the European Commission’s General Directorate for Competition regarding significant privatizations and related state aid. Prospective investors should seek assistance from legal counsel to ensure compliance with relevant legislation. The state aid schemes aim to enhance regional development and job creation through financial support for new jobs or investment in new manufacturing assets. The Ministry of Finance issues public calls for applications under the schemes. GOR failure to consult with, and then formally notify, the European Commission properly has resulted in delays and complications in some previous privatizations.

Private enterprises compete with public enterprises under the same terms and conditions with respect to market access and credit. Energy production, transportation, and mining are majority state-owned sectors, and the government retains a monopoly on electricity and natural gas transmission.

Investors receiving state aid, whose investments have been affected by the global economic crisis, have found renegotiation of their state aid agreements to be cumbersome, in part due to local authorities’ failure to acknowledge that market conditions have changed. Some investors have experienced problems due to the occasional failure of GOR entities to fully honor contractual obligations following conclusion of privatization agreements.

Romanian law allows for the inclusion of confidentiality clauses in privatization and public-private partnership contracts to protect business proprietary and other information. However, in certain high-profile privatizations, parliamentary action has compelled the public disclosure of such provisions.

8. Responsible Business Conduct

Romania adhered to the OECD Declaration on International Investment and Multinational Enterprise in 2004. The government regularly sends representatives to the working sessions of the OECD Investment Committee and its Working Party on Responsible Business Conduct. Romania established an OECD National Contact Point in 2005 to promote the OECD Guidelines for Multinational Enterprises. Romania’s investment promotion agency InvestRomania currently serves as the contact point.

Romania defines responsible business conduct (RBC) in its National Anticorruption Strategy (NAS) as promoting a competitive business environment with integrity and implementing international standards and best practices in the public and private sector. The Ministry of Justice organized a second round of NAS cooperation meetings in May 2017 with stakeholders from public institutions, independent agencies, civil society, and the business community. These meetings established evaluation criteria for whistleblower protections and the declaration of gifts.

Several NGOs in Romania monitor, advocate, and raise concerns on RBC issues. No high-profile cases of private sector impact on human rights were recorded in 2017. However, the National Council for Combating Discrimination, the government agency responsible for applying domestic and EU anti-discrimination laws, imposed several fines on companies for discrimination against their own staff or prospective employees. The cases involved gender-based discrimination and harassment over labor union membership and child care leave. The government has not fully implemented a law which prohibits discrimination against persons with physical, sensory, intellectual, and mental disabilities in employment, education, transportation, and access to health care.

Romania does not participate in the Extractive Industries Transparency Initiative (EITI), but is an adherent to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas since 2012.

9. Corruption

Romania’s fight against high and medium-level corruption has become increasingly credible, with significant numbers of prosecutions and convictions of corrupt public officials in recent years. Its prosecutorial efforts have become a model in Southeastern Europe. Romania was ranked 59 of 180 countries in Transparency International’s 2017 Corruption Perception Index, still among the lowest ranked EU member states, but ahead of Bulgaria and Hungary. Over the past year, judicial institutions, NGOs, the EU, and NATO allied governments have all raised concerns about GOR legislative initiatives that, if implemented, could significantly weaken anti-corruption efforts and judicial independence.

The European Commission’s (EC) 2017 Report on Progress under the Cooperation and Verification Mechanism (CVM) in Romania, which measures progress in the area of judiciary reform and anti-corruption since 2007, stated that in 2017 reform momentum was lost, challenges to judicial independence were a source of concern, and the government had implemented only one of a dozen EC recommendations. As in previous CVM reports, Parliament emerges as the worst offender, with members adopting amendments that weakened conflict of interest rules and introducing “problematic or uncoordinated proposals” without consultation with stakeholders. Despite opposition from stakeholders and judicial leaders, and without any impact assessments, the government pushed through several judicial statutes, repeatedly challenged over constitutionality, which the judicial community feared would weaken judicial independence, professional standards, and quality. In an ad hoc report, the Group of States against Corruption (GRECO) warned the statutes will weaken judicial independence. A report by the Venice Commission adopted in March 2018 warned that proposed changes to the NGO legislative framework would place onerous reporting requirements on the civil society sector.

Despite numerous attacks by Romanian politicians and allied media organizations, the National Anticorruption Directorate (DNA) continued to investigate and prosecute corruption cases involving medium- and high-level political, judicial, and administrative officials throughout 2017, with nearly 1,000 indictments, of which one-third held senior public offices and 189 were on abuse-of-office charges. Both the national cabinet and Parliament adopted codes of conduct, yet their overly general provisions have so far rendered them inconsequential. Conflicts of interest, respect for standards of ethical conduct, and integrity in public office in general remained a concern for all three branches of government. Individual executive agencies were slow in enforcing sanctions, and agencies’ own inspection bodies were generally inactive. Changes at several key regulators’ and tax agencies’ leadership raised concerns of politicization.

Progress on the implementation of the national anti-corruption strategy for 2016-2020, which the previous government adopted in 2016, has been slow, especially as far as its prevention component is concerned. The strategy focused on strengthening administrative review and transparency within public agencies, preventing corruption, increased and improved financial disclosure, conflict of interest oversight, more aggressive investigation of money laundering cases, and passage of legislation to allow for more effective asset recovery. The strategy includes an increased focus on corruption prevention, including education in civics and ethics for civil servants, a requirement for peer reviews of state institutions, stepped-up measures to strengthen integrity in the business environment, a significant decrease in public procurement fraud, and an increased role for ethics advisors and whistle-blowers. There has been little action in these areas, especially on the prevention component. Absent political support from the top, the new National Agency for Managing Seized Assets (ANABI) has only made limited progress.

In March 2002, to reduce corrupt practices in public procurement, the GOR inaugurated a web-based e-procurement system ( ) designed to provide a transparent listing of both ongoing and closed solicitations with the names of the winners and the closing prices made available to the public. The use of “e-licitatie” has increased government efficiency, reduced vulnerability to corruption, and improved fiscal responsibility in government procurement. State entities, as well as public and private beneficiaries of EU funds, are required by law to follow public procurement legislation and use the e-procurement system. Sectorial procurements, including private companies in energy and transportation, also have to follow the public procurement laws and tender via the e-licitatie website.

Romania implemented the revised Public Procurement Directives with the passage in May 2016 of four new laws to improve and make the public procurement process more transparent. The National Agency for Public Procurement has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities. The 2016 CVM report points to low acceptance and even resistance to integrity rules within a substantial number of local authorities, with implications for public procurement. In October 2016, the “Prevent” IT system, an initiative sponsored by the National Integrity Agency for ex-ante check of conflicts of interests in public procurement, was signed into law. The mechanism aims to avoid conflicts of interest by automatically detecting conflict of interests in public procurement before the selection and contract award procedure. The March 2018 European Commission Country Report for Romania, points to low efficiency in project preparation and prioritization of public investments and public procurements.

The laws extend to politically exposed persons, yet, at the same time, criticism of magistrates by politicians and in the media and lack of respect of judicial decisions remain frequent. Laws prohibit bribery, both domestically and for Romanian companies doing business abroad. The judiciary remains paper based and inefficient, and Romania loses a number of cases each year in the European Court of Human Rights (ECHR) due to excessive trial length. Asset forfeiture laws exist, but a functioning asset forfeiture regime remains under development. Fully 80 percent of cases in the court system are property related.

While private joint stock companies use internal controls, ethics, and compliance programs to detect and prevent bribery, since 2017 the Government has rolled back corporate governance rules for SOEs. U.S. investors have complained of both government and business corruption in Romania, with the customs service, municipal officials, and local financial authorities most frequently named. The European Commission Country Report and reports from companies point to concerns about corruption in the procurement of medical devices, and in the authorization and procurement of pharmaceuticals. In environmental projects, the use of obsolete feasibility studies has resulted in favoring existing businesses already operating locally. In some cases, demands for bribes by low- to mid-level officials reach the point of harassment. For example, companies report demands for bribes when local infrastructure improvements are needed to facilitate business operations, especially for roads which are funded from the local budget.

Romania is a member of the Southeast European Law Enforcement Center (SELEC). NGOs enjoy the same legal protections as any other organization, but additional protections are not provided to NGOs involved in investigating corruption. Recent regulations have increased costs and administrative burdens for NGOs and reduced the pool of potential donors.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Romania is member of the UN Convention Against Corruption. Romania is not a member of the OECD Anti-Bribery Convention.

Romania expressed interest to join the new anti-corruption working group of the Open Government Partnership initiative.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:

National Anti-corruption Directorate (DNA)
Str. Stirbei Voda nr. 79-81, Bucuresti
+40 21 312 73 99 

Contact at “watchdog” organizations:

Expert Forum
Strada Semilunei, apt 1, Sector 2, Bucuresti,
+40 21 211 7400

Freedom House Romania
Bd. Ferdinand 125, Bucuresti
+4021 253 28 38

Funky Citizens
Colivia, Pache Protopopescu 9
+40 0723 627 448

10. Political and Security Environment

Romania does not have a history of politically motivated damage to foreign investors’ projects or installations. However, anti-shale gas protestors invaded the site of a U.S. energy company’s exploratory well in October 2013, damaging the perimeter fence and some equipment. Major civil disturbances are rare. During the February 2017 anti-government protests, and off and on since then some government leaders pointed to “multinationals” as among the orchestrators. As of March 2018, there has been no tangible effect of this claim, and there has been no retribution taken against “multinational” companies by the government or protestors. However, the GOR started an effort in 2017 aimed at questioning the validity of the CVM mechanism and EU institutions as a whole.

11. Labor Policies and Practices

Romania has traditionally boasted a large, skilled labor force at comparatively low wage rates in most sectors. The labor pool has tightened in highly-skilled professions, in particular the IT and health sectors, as a result of emigration. The university system is generally regarded as good, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market. Payroll taxes remain steep, resulting in an estimated 25-30 percent of the labor force working in the underground economy as “independent contractors,” where their salaries are neither recorded nor taxed. Even for registered workers, underreporting of actual salaries is common.

The unemployment rate in Romania declined by one percent to 4.9 percent in 2017, but additional data show a shrinking labor supply. At 63.4 percent in the fourth quarter of 2017, the labor force participation rate, the portion of the working age population (15-64 years) who are either employed or actively seeking employment, remains among the lowest in the EU. Romanian employers in the engineering, machinery, IT services, and healthcare sectors report difficulties in hiring and retaining employees, as Romania faces a shortage of medium- to high-skilled workers. Approximately 3.4 million Romanians work abroad. Many emigrants are younger and more qualified than the remaining population, constraining the supply of skilled labor. While the unemployment rate among youth aged 15-24 declined from 20 percent in 2016 to 17.3 in 2017, the number of young people neither in education, employment nor training (NEETs) remains very high. Long-term unemployment affected 3 percent of the labor force in 2016 and 2.1 percent in 2017.

Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated not only by the higher salaries, but also by the country’s antiquated medical system. About 15,700 Romanian physicians work abroad and nearly a third of domestic hospital positions are currently vacant. The GOR lacks a comprehensive strategy to remedy staff shortages, despite having taken some steps in the past years to attract and retain talent. Employees in some sectors have benefitted from fiscal incentives; for example, IT professionals are eligible for certain income tax exemptions. In 2016, the GOR launched a program to encourage relocation as part of its National Mobility Program, which identified marginalized cities and localities eligible for employment subsidies and transport allowances. In 2017, it adopted a unitary wage law to establish a more consistent framework for wages across the public sector. The law provided for a 25 percent salary increase for most public sector employees, though wages for some workers in the healthcare sector will double in nominal terms as of March 2018. Discussions with unions and businesses continue on the specific applications of the Unitary Wage Law.

The Labor Code regulates the labor market in Romania, controlling contracting, how regulations are applied, and jurisdiction. It applies to both national and foreign citizens working in Romania or abroad for Romanian companies. As an EU-member state, Romania has no government policy that requires the hiring of nationals, but has annual work permit quotas for other, non-EU nationals. For 2018, Government Decision no. 946/2017 set the annual limit at 7,000 new work permits, up from 5,500 in 2017. Work permits are issued for a maximum of one year for a fee of about 200EUR (payable in the RON equivalent of that day’s exchange rate) and are automatically renewable with a valid individual work contract. However, current legislation makes it very costly to hire non-EU citizens in Romania. Foreign companies often resort to expensive staff rotations, special consulting contracts, and non-cash benefits.

Since Romania’s revolution in December 1989, labor-management relations have occasionally been tense, the result of economic restructuring and personnel layoffs. Trade unions, much better organized than employers’ associations, are vocal defenders of their rights and benefits. Employers are required to make severance payments for layoffs according to the individual labor contracts, company terms and conditions, and the applicable collective bargaining agreements. The Labor Code differentiates between layoffs and firing; severance payments are due only in case of layoffs. There is no treatment of labor specific to special economic zones, foreign trade zones, or free ports.

Romanian law allows workers to form and join independent labor unions without prior authorization, and workers freely exercise this right. Labor unions are independent of the government. Unions and employee representatives must typically notify the employer before going on strike, and must take specific steps provided by law before launching a general strike, including holding discussions and attempting reconciliation with management representatives. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor dispute mechanisms are in place to mediate any conflicts between employers and employees regarding economic, social, and professional interests. Unresolved conflicts are adjudicated in court according to the civil code. Proceedings can be initiated by the employee, employer, or labor union. Several public sector strikes took place in Romania during 2017, bringing doctors, nurses, teachers, civil servants, prison guards and local policemen to the streets. The protestors sought higher pay, better working conditions, and sufficient staffing, especially in the healthcare sector, in which staff often work excessive overtime due to personnel deficits.

Union representatives alleged that few incidents of anti-union discrimination are officially reported because it is difficult to prove legally that employers laid off employees in retaliation for union activities. The government has generally respected the right of association, and union officials state that registration requirements stipulated by law were complicated, but generally reasonable. The current law permits, but does not impose, collective labor agreements for groups of employers or sectors of activity. Collective bargaining is used for companies with more than 21 employees and provides for written agreements between employees and the employer or employer’s association. According to the Ministry of Labor, 9,366 collective labor agreements were concluded at the company level in 2016. Since 2014, parliament has periodically considered a bill to reintroduce collective bargaining at the national level, a practice which previously established minimum pay and working conditions for the entire economy, but was eliminated in 2011 by the new Social Dialogue Act.

As an EU-member state and ILO-affiliated country, Romania observes international labor rights. The law prohibits all forms of forced or compulsory labor, but is not uniformly and effectively enforced. Such practices often involving Roma and children continue to occur in Romania, as penalties are insufficient to deter violations. The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15, provided the tasks are correlated with their abilities. Employment in harmful or dangerous jobs is forbidden for those under the age of 18; the government maintains a list of dangerous jobs in which the employment of minors is restricted.

Labor laws and regulations are not waived or derogated to attract or retain investments. Since 2011, employers have had more flexibility to evaluate employees based on performance, and hiring and firing procedures have been significantly relaxed. The main objective for Romania’s national labor strategy for 2014-2020 is the development of an efficient, dynamic, and flexible workforce. Romania aims to ensure that, by 2020, 70 percent of people aged 20-64 will have access to a quality workplace which rewards them based on their capacity and competence and ensures a decent standard of living. The minimum wage has more than doubled since 2012. The monthly gross minimum wage increased from RON700 (USD186) in 2012 to RON1,450 (USD385) in 2017 and RON1,900 (USD505) in 2018, including employees’ social contributions. However, at 18.9 percent, Romania has the highest rate of employed persons at risk of poverty among all EU member states, nearly twice the EU average of 9.6 percent.

The GOR adopted and changed a number of labor laws and regulations in 2017. In January 2017, the government removed the cap on social welfare contributions, imposing these mandatory payroll deductions for pensions, healthcare, and income taxes on employees’ entire gross salary. In June, the GOR passed the Unitary Wage Law with the dual aim to raise and standardize public sector salaries across the government, resulting in a 25 percent wage increase across the board for most public workers starting January 1, 2018. However, some sectors including health and education are scheduled for larger increases effective March 1, 2018, while some individual government employees have seen a reduction resulting from standardization.

In July, the GOR then announced that it would shift the burden of paying social contributions and payroll taxes, approximately 22.5 percent of salary, from employers to employees, effective January 1, 2018. The measure applies to both the public and private sectors. Although not required by the law, many businesses have voluntarily increased employee salaries to cover the cost of social contributions and avoid reductions in employees’ net pay. However, the rapid pace of change and the government’s tendency to change laws without consultation with the private sector has created an uncertain environment. Some companies have preferred to temporarily offer monthly bonuses rather than amend employee contracts to reflect higher gross wages, hoping to avoid problems in the event the law is changed again.

Separately, in an effort to curtail underreporting of work, the GOR increased the minimum required payroll taxes that employers must pay for their part-time employees to equal those of a full-time employee earning minimum wage. Coupled with the change in the legal tax incidence of social contributions described above, the new law has had the unintended consequence that some employees owed more in social contributions than their monthly earnings. Subsequently, the GOR issued a government ordinance in February 2018 to allow part-time workers to pay social contributions for their actual gross income only, mandating that the employer make up the difference.

12. OPIC and Other Investment Insurance Programs

OPIC has been authorized to do business in Romania since the signing of the 1992 bilateral agreement. OPIC-supported investment funds in Romania and Southeast Europe include the 2013 Treetops Capital Agribusiness Fund (Romania), and the 2012 Accession Mezzanine Capital (Poland, Romania, Bulgaria, Ukraine, and Czech Republic). The 2009 OPIC-supported non-bank financial institutions in Romania included CAPA Finance, Verida Credit, and Express Finance. Third country governments do not provide significant investment financing or insurance to their firms in Romania to a level that makes it difficult for U.S. firms to compete.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data





Host Country Gross Domestic Product (GDP) ($M USD)


$211.4 billion


$186.7 billion 


Host Country Statistical Source**

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)


$1,137.81 million


$2.6 billion

BEA data available at

Host country’s FDI in the United States ($M USD, stock positions)



$85 million

BEA data available at

Total inbound stock of FDI as percent host GDP





*Source: National Statistics Institute (INS).
**Source: National Office of the Trade Register (ONRC).

Table 3: Sources and Destination of FDI

FDI domestic data from the National Office of Trade Register are below CDIS and National Bank of Romania data. Tax havens sources of inward FDI, i.e., Cyprus, are domestically reported as such, without mentioning the ultimate source as another possible country of origin. The CDIS source does not report outward direct investments from Romania.

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment 2016 Outward Direct Investment: N/A
Total Inward 73988 100% The CDIS source does not report outward direct investments from Romania.
Netherlands 18003 24% N/A
Germany 9768 13%
Austria 8797 12%
France 5140 7%
Cyprus 4776 6%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars) end-June 2017
Total Equity Securities Total Debt Securities
All Countries 4,153 100% All Countries 1,681 100% All Countries 2,472 100%
Luxembourg 936 23% Luxembourg. 844 50% The Netherlands 391 16%
Austria 729 18% Austria 352 21% Austria 377 15%
Netherlands 493 12% The Netherlands 102 6% International Organizations 238 10%
International Organizations 238 6% Germany 101 6% Turkey 158 6%

Romania did not attract significant FDI until after the 1990s, due to delays in post-Communist economic reforms. According to data provided by the National Office of the Trade Registry, the cumulative net stock of FDI from January 1990 to December 2017 totaled USD61.03 billion. n direct investments abroad from January to December 2017 totaled USD5.11 billion.

Major sectors for foreign investment include:

  • Automobile and automotive components (Renault, Daimler Benz, Ford, Siemens, Continental, Alcoa, Delphi Packard, Johnson Controls, Adient, Honeywell Garrett, Michelin, Pirelli);
  • Banking and finance (Citibank, Société Générale, MetLife, ING, Generali, Raiffeisen, Erste Bank, Unicredit, Alpha Bank, , Intesa Sanpaolo, Garanti Bank, Credit Agricole, Allianz, Fairfax);
  • Information Technology (Amazon, Hewlett Packard, Adobe, Intel, Microsoft, Oracle, Cisco Systems, IBM);
  • Telecommunications (Orange, Deutsche Telekom, Telesystem International Wireless Services, Vodafone, Liberty Media/UPC);
  • Hotels (Hilton, Marriott, Best Western, Crowne Plaza, Accor, Ramada, Radisson, Sheraton);
  • Manufacturing (Timken, General Electric, Cameron, LNM, Marco, Flextronics, Holcim, Lafarge, Heidelberg, Plexus, Toro);
  • Consumer products (Procter and Gamble, Unilever, Henkel, Coca-Cola, PepsiCo, Parmalat, Danone, Lactalis);
  • Retail chains (Metro, Delhaize, Kingfisher, Dm Drogerie, Carrefour, Cora, Selgros, Auchan, Kaufland, Praktiker, Leroy Merlin).

According to Romanian Trade Registry statistics, the value of U.S. direct investment in Romania as of December 2017 was about USD1.13 billion. The U.S. is the 14th-ranked foreign investor nation, after the Netherlands, Austria, Germany, Cyprus, France, Italy, Greece, Spain, Luxemburg, Czech Republic, Switzerland, UK, and Hungary. U.S.-source investment represented 1.9 percent of Romania’s total FDI. As official statistics do not fully account for the tendency of U.S. firms to invest through their foreign, especially European-based, subsidiaries, the actual amount of U.S. FDI is higher. Romanian statistics also over-emphasize physical, capital-intensive investments, while overlooking the impact of foreign investment in services and technology.

Significant U.S. direct investors (including investments made through branches or representative offices) include:

  • Advent Central and Eastern Europe – investment fund;
  • AECOM – engineering and design;
  • Adient – automotive;
  • MetLife – life insurance;
  • Alcoa – automotive, aluminum processing;
  • Bunge – grain trading;
  • Cargill – grain export and food processing;
  • Citibank – banking;
  • Coca-Cola – beverage, food;
  • Cooper Cameron – gas field equipment manufacturer;
  • Delphi – automotive parts;
  • EuroTire – mining and heavy equipment tires;
  • Flextronics – medical, telecom, automotive;
  • Ford – automotive assembly;
  • General Electric – diversified industrial products;
  • Hewlett Packard – IT equipment, services;
  • Hoeganaes – iron powder for automotive;
  • Honeywell – automotive;
  • IBM – IT equipment;
  • Intel – software development services;
  • JC Flowers – investment fund;
  • McDonald’s – food;
  • Microsoft – software services;
  • New Century Holding – investment fund;
  • Office Depot – office and business supplies;
  • Oracle – IT services, consulting;
  • Pepsico – beverage;
  • Philip Morris – tobacco products;
  • Procter and Gamble – consumer products;
  • Qualcomm – telecommunications;
  • Timken – industrial bearings;
  • Liberty Media UPC – cable television operator;
  • Visa – financial services;
  • URS – engineering;
  • Hunt Oil, Stratum Energy, Mazarine – oil and gas production.

In addition to these companies, the European Bank for Reconstruction and Development (EBRD) remains the single largest investor (debt plus equity) in Romania, with some USD9.54 billion invested. The United States is a 10 percent shareholder in the EBRD.

14. Contact for More Information

Monica Dragan
IRC Director
B-dul Dr. Liviu Librescu 4-6

Slovak Republic

Executive Summary

With a population of 5.4 million, the Slovak Republic is a small, open, export-oriented economy. Slovakia joined the European Union (EU) in 2004 and the Eurozone in 2009. In 2017 Slovak GDP grew by an estimated 3.4 percent, fueled by increased domestic consumption and strong labor market recovery, and good economic growth is projected for the coming years.

A favorable geographic location in the heart of Central Europe, relatively low-cost yet skilled labor force, and a generally investment -friendly climate make Slovakia an attractive destination for foreign direct investment (FDI). Many established companies continue to make new investments in their production facilities, and only a few major investors have exited.

Nevertheless, businesses begin to feel a growing tightness in the labor market, and Slovakia’s immigration policies make it difficult to employ large numbers of workers from outside the EU. Social insurance contributions are compulsory and include healthcare, unemployment, and pension insurance. The relatively heavy reliance on social insurance increases the cost of labor, especially on low-skilled, low-wage workers.

Persistent corruption issues and an inadequate judiciary, as well as a lack of investment in innovation, could potentially harm the attractiveness of the Slovak market. A recent political crisis led to the resignation of the ruling government and its replacement by a new government consisting of the same coalition partners but headed by new Prime Minister Peter Pellegrini. The new cabinet has received the vote of confidence in Slovak parliament and is expected to remain in power until the next general elections, scheduled for March 2020. However, a recent investment survey by foreign chambers of commerce indicated that continued concerns about corruption and rule of law could potentially damage the image of Slovakia and raise questions about future stability.

The automotive industry continues to attract significant FDI, and Slovakia remains the largest per capita car producer in the world, with four major car producers and more than 340 auto suppliers. Traditionally, manufacturing industries, including machinery and precision engineering, metallurgy and metal processing, electronics, chemical and pharmaceutical remain attractive and have further growth potential. Slovakia has the ambition to focus more on high added value investments in research and development (R&D), innovation, design, technology centers, and business process outsourcing. The Deputy Prime Minister’s Office for Investments is currently drafting a National Investment Plan 2018-2030, which will focus on investment programs in the green economy, including transport, ICT, energy, green infrastructure, waste management, climate change mitigation, R&D/innovations, healthcare, and education.

Positive aspects of the Slovak investment climate include:

  • Membership in the EU and the Eurozone, unique among the Visegrad Four Group (Slovakia, Czechia, Hungary, and Poland);
  • Open, export-oriented economy close to western European markets;
  • Qualified and relatively inexpensive workforce;
  • Financial incentives for investors, including foreigners;
  • Firm government commitment to EU deficit and debt targets;
  • Sound banking sector, deep economic and financial integration within Europe.

Negative aspects of the Slovak investment climate include:

  • High sensitivity to regional economic developments;
  • Shortages in qualified labor, due in part to education system inadequacies;
  • Inefficiencies in public administration and allegations of corruption;
  • Inefficiencies in the judicial system with uneven enforcement of contracts and laws;
  • Regional disparities and incomplete national transport network;
  • Heavy reliance on EU structural funds, with limited accountability in administration and allocation;
  • Low rate of public and private R&D High electricity costs for industries.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 54 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2017 39 of 190
Global Innovation Index 2017 34 of 128 https://www.globalinnovation
U.S. FDI in partner country (M USD, stock positions) 2016 USD 568
World Bank GNI per capita 2016 USD 16,800

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Slovakia is one of the most open economies in the EU, and the government’s overall attitude toward foreign direct investment (FDI) is positive, not limiting or discriminating against foreign investors. FDI plays an important role in the country’s economy, traditionally attracting 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 presence, including Hewlett-Packard, Cisco, IBM, Dell, AT&T, Accenture, Whirlpool, Adient, Amazon, GlobalLogic, and U.S. Steel. Laws and practices in Slovakia do not discriminate against foreign investors and the government is often ready to provide investment incentives to foreign investors, including U.S. companies. Extensions of existing investments are also often eligible for incentives.

The government supports foreign investors and offers investment incentives based on specific criteria, and are usually delivered in the form of tax allowances, and grants to support employment, regional development, and training. Eligibility is specified in the Act on Investment Aid (561/2007 Coll.), last amended in 2017, to be replaced by a new Act on Regional Investment Aid (57/2018) in April 2018. Section four covers investment incentives in more detail.

Foreign investors credit the government for maintaining an open dialogue regarding business concerns, while protecting Slovakia’s strategic interests. The Ministry of Economy drafts strategies and concepts to improve business environment, innovation intensity, and support for least developed regions. Improving the business climate is an inter-agency effort involving a number of state institutions and other actors. The most significant laws and regulations are described in more detail in section three.

According to the National Bank of Slovakia, inward FDI flows to Slovakia reached EUR -267 million (EUR 698 million in equity capital and reinvested earnings, and EUR -965 million in other capital), and inward FDI stock reached EUR 41.5 billion. According to the Department of Commerce’s Bureau of Economic Analysis, the U.S. direct investment position in Slovakia (outward) was USD 568 million in 2016, a decrease of 24 percent from 2015; however, a lot of U.S. investment is funneled through U.S. entities based elsewhere in the EU and not tracked by this data. Fellow EU member states are traditionally largest foreign investors, including the Netherlands, Austria, Czechia, Luxemburg, and Germany. South Korea remains an important investor among non-EU countries, given its importance in global automotive supply chains.

After a sharp decline in investments in 2016, private and public investments picked up again in the second half of 2017. Analysts foresee solid growth in investment in 2018, driven by new private investment in the automotive industry (Jaguar Land Rover), as well as public investment spending in infrastructure projects, including drawing of EU funds. The Slovak Investment and Trade Development Agency (SARIO) identified the best investment opportunities in R&D, design, innovation, technology centers, ICT, business process outsourcing, and tourism.

Traditionally, manufacturing industries, including machinery and precision engineering, automotive, metallurgy and metal processing, electronics, chemical and pharmaceutical remain attractive and have further growth potential. The United States, the UK, France, Germany, the Netherlands and other EU member states, as well as Japan, South Korea, Israel, the Middle East and the Gulf countries, Singapore, Hong-Kong and China, will remain priority countries in the area of investment cooperation, offering a strong FDI potential.

SARIO is a specialized Economy Ministry’s agency responsible for proactively identifying potential foreign investors. SARIO counsels potential investors about the Slovak political, business, and investment climate, discusses investment incentives, assists with investment project implementation, and advises on business launch issues such as site location. SARIO’s services are available to all potential investors. The Deputy Prime Minister’s Office for Investments and Informatization is currently drafting a National Investment Plan 2018-2030, which will focus on investment programs in the areas of green economy, including transport, ICT, energy, green infrastructure, waste management, climate change mitigation, R&D and innovations, healthcare, and education.

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 (Commercial Code, 98/1991  Coll.).

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. Non-residents from EU and OECD member countries can acquire real estate for business premises.

Slovakia has no formal performance requirements for establishing, maintaining, or expanding foreign investments. Large-scale privatizations can be done via direct sale or public auction.

Foreign entities face no impediments in participating in R&D programs financed and/or subsidized by the Slovak government, and are treated like domestic entities when established in Slovakia. Much of R&D funding is financed though EU funds; private R&D intensity remains modest. Total R&D investment in 2016 represented just 0.8 percent of GDP, down from 1.2 percent in 2015. Year 2017 was marked by a scandal at the Ministry of Education regarding a non-transparent distribution of several hundred million euros EUR worth of EU funds for R&D, which consequently led to investigation by domestic institutions and by the European Anti- Fraud Office (OLAF), and to significant delays in allocation and drawing of R&D funds. The Minister of Education resigned after information of these activities became public. In its “Country Report – Slovakia 2018,” the European Commission (EC) noted overall weakness in the governance of R&D policy, lack of reform efforts, and inefficiencies in Slovakia’s R&D environment. In an attempt to improve transparency of projects financed through EU funds, the Deputy Prime Minister’s Office for Investments and Digitalization introduced an Action Plan consisting of 38 measures which should be implemented through spring 2018. Furthermore, as a part of measures aiming to improve the business environment, the Finance Ministry increased the tax deductible R&D costs to 100 percent from the previous 25 percent.

The Slovak government holds stakes in a number of energy companies, and has proven less open to private investment in key energy assets that are considered sensitive to national security interests. The Government has expressed potential interest to increase state ownership of some key energy assets. There are no domestic ownership requirements for telecommunications and broadcast licenses. Operation of air transportation is limited to enterprises with a non-EU foreign equity participation not exceeding 49 percent.

The Slovak Constitution protects ownership rights. Expropriation or enforced restriction of ownership rights is admissible only if it is unavoidable and in the public interest, on the basis of law, and in return for adequate compensation (Act on Expropriation of Land and Buildings, 282/2015 Coll.).

There are no formal requirements to approve FDI besides the provision of investment incentives, which are ultimately approved by the Government. If investment incentives apply, the Economy Ministry manages the associated legislative process. Eligibility is specified in the Act on Investment Aid (561/2007 Coll.), last amended in 2017, to be replaced by a new Act on Regional Investment Aid (57/2018) in April 2018.

Other Investment Policy Reviews

The OECD has produced a 2018 Economic Forecast Summary for Slovakia: .

In March 2018 the European Commission published its regular Country Report – Slovakia 2018, addressing various aspects of the Slovak economy: .

Business Facilitation

According to the World Bank’s Doing Business 2018 report, Slovakia ranks 83 out of 190 countries surveyed in ease of starting a business. It takes around 12 days to start a business in Slovakia. Generally, the process is as follows:

  • Select company name at the Commercial Register (less than a day at the District Court);
  • Notarize articles of association and related documents (one day at the Notary Public);
  • Apply for a trade license at the One Stop Shop and income tax registration with the District Court (three days);
  • Obtain partners’ tax arrears forms at the Tax Authority Office (five days);
  • Open a bank account (one day);
  • Register for pension, sickness, and disability insurance and unemployment insurance at the local social insurance company (one day).

Registered businesses (LLC) in Slovakia can be tracked at an online registry ( ).

The Economy Ministry’s 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 runs a National Business Center (NBC) in Bratislava, another one-stop-shop providing information and services to starting and established businesses. The Economy Ministry aims to establish NBCs in all regions across Slovakia. Furthermore, since January 2017, startups can use a simplified procedure to register their company in order to facilitate entries of potential investors. The Interior Ministry operates Client Centers around the country where many formal procedures for both natural persons and companies can be done under one roof.

Programs to support female entrepreneurs and underrepresented minorities are usually supported by NGOs. Slovak Business Agency runs programs targeting female entrepreneurs. The Ministry of Labor, Social Affairs and Family in cooperation with the Central Office of Labor, Social Affairs and Family set rules for, and assist with the establishment of Social Enterprises, and Social Enterprises for Labor Integration. Furthermore, there is a set of tools for active labor market policies including integration of disadvantaged groups, training, and others.

The Central Public Administration Portal provides useful information on eGovernment services in the area of starting and running a business, citizenship, justice, registering vehicles, social security, etc. The Economy Ministry plans to launch a portal providing all necessary information for starting a business. The state of play of eGovernment in Slovakia is moderate to fair compared to other EU countries, according to European Commission report on eGovernment in Slovakia 2017 (the report features useful links to various public administration services provided online, please see the link below).

Please consult the following websites for more information:

Slovak Business Agency: .

Slovak Investment and Trade Development Agency: .

Central Public Administration Portal: .

Portals offering useful information on taxes, new legislation, and other business-related topics exist, but their full content may not always be available in English:  and .

European Commission report on eGovernment: .

Outward Investment

The Slovak government does not restrict domestic investors from investing abroad. The Government priorities in the area of investment and trade are set forth in the Strategy for External Economic Relations of the Slovak Republic for 2014-2020.

There are several state agencies that share responsibilities for supporting investment (inward and outward) and trade. Slovak Investment and Trade Development Agency (SARIO) is officially responsible for export facilitation and attracting investment. The Slovak Export-Import Bank (EXIM BANKA) 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 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 the export and investment opportunities. The Slovak Republic’s diplomatic missions, the Ministry of Finance’s Slovak Guarantee and Development Bank, and the Deputy Prime Minister’s Office for Investments and Digitalization also play a role in facilitating external economic relations.

The majority of Slovak exports are directed to fellow EU countries. Outward investment opportunities by Slovak companies are limited by their relatively small size. In terms of sectors, the Government would like to promote collaboration on innovations and technology transfers, with key partners including the United States, Japan, Israel, South Korea, China, Turkey, Switzerland, and the EU. According to SARIO, the Western Balkans, Turkey, Vietnam and potentially some African countries will be priority areas for Slovak capital export, particularly for exports of technological equipment, including power plants and manufacturing technologies, but these markets also offer opportunities for suppliers in the area of construction, infrastructure and services.

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.

Like other newer EU members, when it joined the EU, Slovakia had to negotiate an amendment to its bilateral investment treaty with the United States to address inconsistencies with EU legislation. The amended treaty entered into force on May 14, 2004.

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).

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 EUR 3 million, and the coefficient applied is currently set at 0.00726 per month (8.712 percent per year). A special 0.2-percent levy also applies to the banking sector based on the Act Special Levy on Selected Financial Institutions (384/2011 Coll., and later amendments). The Finance Ministry views both measures as temporary, and they should remain valid until 2021.

An amendment to the Act on Income Tax (344/2017 Coll.) valid as of January 1, 2018, introduced an obligation for sharing economy platforms to register a permanent platform in Slovakia if they systematically offer their services in the area of transport and housing. The income will be 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 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.

Furthermore, in line with the OECD and Global Forum principles, and amidst an EU-wide discussion on taxing digital businesses, the Slovak Finance Ministry is currently considering ways to tax digital companies for the proportion of their business activities on the territory where the activity occurs, or where profits and revenues are registered.

Cryptocurrencies are not accepted as an official currency in Slovakia or in the EU; nevertheless, being aware of the necessity to adapt to the 21st century instruments, and recognizing possible positive impact of the new innovative technologies (blockchain, security chain), the Finance Ministry issued a guidance on cryptocurrencies stating that all income has to be taxed based on valid corporate income tax legislation.

The complete list of Slovakia’s bilateral investment agreements, including copies of the agreements, can be found on the Finance Ministry’s website: ; and on UNCTAD’s website: .

The complete list of Slovakia’s bilateral taxation treaties can be viewed on the Finance Ministry’s website: .

Please consult the following websites for more information:

U.S.- Slovakia Bilateral Investment Treaty: .

U.S.- Slovakia Bilateral Taxation Treaty: .

Digital Taxation: .

3. Legal Regime

Transparency of the Regulatory System

Slovakia lacks full transparency in its regulatory system, and the long-term predictability of regulation affecting the business and legal environment is weak.

The Legislative and Information Portal of the Ministry of Justice Slov-Lex is a publicly accessible centralized online portal for laws and regulations, including information about inter-agency and public review processes. Draft bills 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 to react to comments prior to final submission to the cabinet. Additionally, MPs or parliamentary groups propose draft bills outside the standard participatory legislative procedure, which has no strict rules guaranteeing opportunities for public comment, thus rendering the legislative process less predictable and less transparent. In January 2018, the Cabinet approved a document proposed by the Economy Ministry called the Better Regulation Strategy – Regulatory Impact Assessment 2020 (RIA) which aims to further improve the business environment and reduce bureaucratic burden. The goal of RIA 2020 is to have better quality laws and regulations by providing a more transparent and open legislative process, including expert and public consultations, conducting systematic impact assessments of both proposed and existing regulations.

Regulations are not reviewed on the basis of scientific data assessments. Analytical institutes at some ministries (mostly under the value- for- money umbrella) produce data-driven assessments of state policies or big investment projects at their discretion. 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.

Slovakia still struggles with a lack of transparency in the regulatory processes in several industries. The business community has registered concerns that a number of regulatory bodies are not fully impartial and their decisions are unpredictable. A frequently changing and complex legislative environment is often cited as a business obstacle for both local and global companies.

The European Commission (EC) has criticized burdensome regulation in the energy sector, with its 2018 Slovakia Country Report saying the regulatory framework governing the energy sector “still has deficiencies”, pointing to the fact that “all household consumers and SMEs are considered as vulnerable consumers and therefore are supplied electricity and gas at regulated prices, which hampers market development.” Slovakia leads the EU in terms of share of regulated fees in the final price of electricity, supporting generous subsidies for both renewable energy and domestic lignite mining at the same time.

In early 2017, the Regulatory Office for Network Industries (URSO) played a central role in political turbulence caused by regulatory changes that caused dramatic price hikes for some customers. Quick cancellation of the changes and replacement of the Head of URSO damped the loudest complaints, although the election of the new URSO Head was criticized for being political and not producing a more independent regulator. In 2017 and early 2018, Slovak courts ruled against a controversial URSO regulation on the so-called G-component, which was forcing electricity producers to pay distribution companies for access to their distribution networks. The courts decided that the distribution companies must return those payments to producers, contributing to the perception of an uncertain and unpredictable regulatory framework.

The latest available OECD sectorial indicators on product market regulation show that Slovakia performs close to the OECD average in terms of regulatory burdens in electricity, gas, telecom, post, rail and road transport. The OECD praised Slovakia for having some of the largest improvements in sectoral indicators.

The Commercial Code (98/1991  Coll.) and the Act on Protection of Economic Competition (136/2001 Coll.) govern competition policy in Slovakia. The Protection of Competition Act prohibits bid rigging, and contains a leniency provision which allows the Anti-Monopoly Office to impose or reduce fines for entrepreneurs’ participation in a cartel. The reward for providing evidence of a cartel agreement is fixed at one percent of the total amount of fines imposed on cartel participants capped at EUR 100,000. Slovakia also transposed into its domestic legislation Directive 2014/104/EU of the European Parliament and of the Council on Certain Rules Governing Actions for Damages under National Law for Infringements of the Competition Law Provisions of the Member States and of the European Union Text with EEA relevance.

The Anti-Monopoly Office, a part of the EU’s European Competition Network (ECN), is an independent state administration body responsible for ensuring competition, including in state aid. It investigates cartel cases, monopolies, the abuse of vertical agreements, and the interactions between state and local governments. It also serves to enhance competition by representing Slovakia during international negotiations or fora on competition, supporting competition principles, and implementing other protection measures.

The Office for Public Procurement supervises and administers public procurement. Public procurement legislation is being reformed but challenges remain to fair competition and eradicating corruption. According to Transparency International Slovakia findings, more than 50 percent of public tenders in 2016 from all levels of government were either sole-sourced or had only two bidders. The Public Procurement Act (343/2015) implements three European directives and mandates a more centralized approach towards general government purchases, which are currently administered by the Interior Ministry. The Act also aims to increase the efficiency of public procurement through e-commerce and simplified access for SMEs. A September 2017 amendment to the Act should help streamline and further simplify procedures.

All state institutions, municipalities, districts and other entities managed by these institutions (such as hospitals and schools) must procure through an online platform. However, services and goods are capped that public institutions can purchase via this “e-market”; larger procurements are still managed through the traditional process. The Interior Ministry credits the platform with saving an average of 16 percent on purchases. The Ministry of Health has introduced price benchmarking and quality criteria for certain hospital equipment purchases, which reduces the risk of corruption and manipulation of procurement value. Despite these positive steps, aggregated procurement still appears to be under-utilized. New leadership selected for the Public Procurement Office in September 2017 concluded an agreement with the National Audit Office, Anti-Monopoly Office, and the Prosecutor’s General Office in order to be more effective in managing public spending and responding when fraudulent activities are identified.

There is no regulation on lobbying in Slovakia.

Please consult the following websites for more information:

Legislative and Information Portal Slov-Lex: 
(Note: all legal acts and regulations mentioned throughout this report can be found on this portal).

Anti-Monopoly Office of the Slovak Republic: .

Office for Public Procurement: .

Electronic Auctions Portal: .

World Bank: .

International Regulatory Considerations

Slovakia is an EU Member State, thus, 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’s latest notification to the WTO Committee on Technical Barriers to Trade occurred in April 2010. A 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. The EC notified the WTO about implementation of individual articles of the agreement throughout 2017 and 2018.

Legal System and Judicial Independence

Slovakia is a civil law country. The Slovak judicial system is comprised of general courts, the Supreme Court, and the Constitutional Court. General courts decide civil and criminal matters and also review the legality of decisions by administrative bodies. The 54 district courts are the courts of first instance. The eight regional courts hear appeals. The Supreme Court of the Slovak Republic is the court of final review in selected cases. 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; they are adjudicated in the national court system.

The Constitutional Court of the Slovak Republic is an independent judicial body that determines the conformity of legal norms, adjudicates conflicts of authority between government agencies, and hears complaints – including individuals’ and legal entities’ complaints regarding constitutional rights violations, e.g. human rights violations – and interprets the Constitution or constitutional statutes. The President appoints Constitutional Court Judges from a list of candidates elected by Parliament. Judges are appointed to 12-year terms.

The Judicial Council – the highest self-governing judicial body – nominates general court judges. Judges receive lifetime appointments from the President of the Slovak Republic and may only be removed for cause. The President can remove a judge upon reaching the age of 65 based on a proposal submitted by the Judicial Council. The judicial system remains independent of the executive branch, with the Justice Ministry exercising control of the judiciary’s budget and initiating legislation concerning the judiciary.

In practice, public confidence in the judicial system is among the lowest in the EU. Despite recent improvements, the justice system remains relatively slow and inefficient, and judges remain divided on the need for reform. Some judges have been suspected of manipulating the case assignment system, and critics suggest verdicts lack predictability and are often poorly justified. As a result, investors generally prefer international arbitration to resolution in the national court system. U.S. companies have complained of a leaked court decision before it was officially announced, and biased procedural decisions violating the principle of equal treatment.

Recent judicial reforms includes new rules for selection of judges, a new specialized court to deal with the enforcement agenda, and legislation on personal bankruptcy.

Property rights are guaranteed by the Slovak Constitution and the European Convention of Human Rights. The country 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.

Please consult the following website for more information:

U.S.- Slovakia Bilateral Investment Treaty: .

Laws and Regulations on Foreign Direct Investment

Several government entities are involved in building an investment-friendly environment, including the Economy Ministry, the Finance Ministry, the Deputy Prime Minister’s Office for Investments and Digitalization, and the Justice Ministry.

The Deputy Prime Minister’s Office for Investments and Digitalization is currently drafting a National Investment Plan for 2018-2030, which will focus on investment programs in the green economy, including transport, ICT, energy, green infrastructure, waste management, climate change mitigation, R&D and innovations, healthcare, and education.

A whole range of Slovak laws and regulations affect the business climate and foreign direct investment. In 2017, the Slovak government approved several measures designed to improve the investment climate. In the area of tax collection, the Cabinet approved the Action Plan to Combat Tax Fraud 2017 – 2018, which includes 21 measures aiming at fighting tax evasion. The plan covers company mergers, registering sales from cash registers, excessive deductions, and indexing the reliability of taxpayers. As part of the plan, the Act on Tax Administration (563/2009 Coll.) was amended to include a “tax reliability index” starting in 2018 that will classify taxpayers as reliable, less reliable, or unreliable. The ranking aims to encourage and reward transparent tax behavior. The law also transposes an EU directive on access of tax authorities to information used to combat money laundering, and should improve efforts to fight tax fraud and increase transparency.

The 2017 amendment to the Commercial Code (513/1991 Coll.) addresses fraudulent company mergers and bankruptcies, and introduces greater responsibilities and liabilities for statutory bodies in order to tackle “straw man transactions.”

The cabinet approved the new “Act Against Bureaucracy” in February 2018. The goal is to reduce the bureaucratic burden for companies and private individuals as a part of continuing e-Government efforts. The act is based on the “once is enough” philosophy, obliging state agencies to share information and use digital communication rather than requiring multiple files of the same information with different government entities. The act is now awaiting Parliament’s approval.

In January 2018, the Cabinet approved a document proposed by the Economy Ministry called the Better Regulation Strategy – Regulatory Impact Assessment 2020 (RIA) which aims to further improve the business environment and reduce bureaucratic burdens. The goal of RIA 2020 is to have better quality laws and regulations thanks to a more transparent and open legislative process, expert and public consultations, systematic impact assessments of proposed regulations, including ex-ante approach, and ex-post evaluation.

In terms of international rankings, Slovakia ranked 39th out of 190 countries in the World Bank’s Doing Business 2018 ranking (down from 33rd), and 59th out of 137 in the 2017-2018 World Economic Forum’s Global Competitiveness Index (up from 65th in previous ranking). With the aim to further improve the business climate and reduce the regulatory burden, the Economy Ministry has proposed, and the Cabinet approved, a set of 35 measures divided into five priority areas: employment, public service, competitiveness, taxes, and business support. A second package of pro-business measures is currently being drafted by the Ministry.

The American Chamber of Commerce in Slovakia regularly issues valuable Legislative and Policy updates, covering a wide range of issues: .

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 it also controls compliance of mergers with antitrust law. The key antitrust legislation regarding fair competition is the Competition Law (136/2001 Coll.). Slovakia complies with the EU competition policy.

All of the competition cases (abuse of dominant position and other competitive cases) are published online at the Anti-Monopoly Office’s website, see link below.

Please consult the following website for more information:

The Anti-Monopoly Office: 

Expropriation and Compensation

The Slovak legislation related to expropriation has been criticized for being split among many different regulations and for favoring state and private investors’ interests. For example, the Constitution of Slovakia and the Commercial and Civil Codes permit expropriation only in the case of public interest, with a requirement to provide compensation. The law also provides for an appeal process. At the same time, the Act on Expropriation of Land and Buildings (282/2015 Coll.) sets legal conditions for expropriation, including that it must only occur to the extent necessary; be in the public interest; provide appropriate compensation; and the goal of expropriation cannot be reached through any other means.

In the past, significant expropriation efforts included the government’s plan to revert to a single-payer healthcare system and to expropriate two private health insurance companies (currently on hold). Expropriation most often occurs in the construction of road or industrial infrastructure.

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 also 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 also 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 U.S. is governed by our 1992 Slovakia Bilateral Investment Treaty.

To date, ten known cases of international arbitration have concluded. There is currently one ongoing international arbitration case.

An important milestone was reached in an arbitration case involving private health insurance company Achmea, which claimed it had suffered damages based on a 2008 law that banned private health insurance companies from paying dividends to their shareholders, severely limited allowable overhead costs, and required companies to direct their profits from public health insurance back into the healthcare system. In March 2018, the European Court of Justice (CJEU) issued a decision on a preliminary ruling from Germany’s Federal Court of Justice. The CJEU concluded that the arbitration clause in the Slovakia-Netherlands BIT applicable to the arbitration between Achmea and Slovakia had an adverse effect on the autonomy of EU law and declared that the 2008 Slovak law was incompatible with EU law. This CJEU decision is seen as a precedent affecting investment agreements between EU members, as it underscores the Commission’s long-standing position that investor-State dispute settlement is not viable between members. The ruling has no implications for commercial arbitration.

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 2018 report, Slovakia ranked 84th out of 190 countries in the “enforcing contracts” indicator, with a 775 day average for enforcing contracts (up from 538 days in 2016). 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 significant problems. U.S. and other investors privately describe 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

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.). In addition, the Slovak Chamber of Commerce and Industry (SOPK) has a court of arbitration for alternative dispute resolution, and has a number of bilateral cooperation agreements with Chambers of Commerce or similar institutions abroad. Nearly all cases involve disputes between Slovak and foreign parties.

Local courts in Slovakia recognize and enforce foreign arbitral awards, subject to delays, thus limiting the courts’ relevance in dispute resolution.

A recent arbitration involving an SOE was the case when electric utility Slovenske Elektrarne (34 percent state-owned) sued fully state-owned Vodohospodarska Vystavba (VV) over a cancellation of a contract for operations of a major hydropower plant in Gabcikovo, signed between the two companies, and later cancelled by VV. In July 2017, the Vienna International Arbitration Center rejected SE’s EUR 600 million claim against the Economy Ministry (which owns VV).

Please consult the following websites for more information:

U.S.- Slovakia Bilateral Investment Treaty: .

Belmont Resources claim: .

Bankruptcy Regulations

The Law on Bankruptcy and Restructuring (377/206 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. Extensive amendments to the Act have been in effect since 2016 to prevent preferential treatment for creditors over company shareholders. Further measures limiting space for arbitrariness in bankruptcy administrators’ conduct and stricter liability rules for those responsible to initiate bankruptcy proceedings entered into force in January 2018.

Slovakia ranked 42nd out of 190 in the World Bank’s Doing Business 2018 ranking of the ease of resolving insolvency, with an average of four years for resolving insolvency.

Please consult the following websites for more information:

Slovak Banking Credit Bureau: .

Non-Banking Credit Bureau: .

Justice Ministry: .

Insolvency Register: . .

4. Industrial Policies

Investment Incentives

Eligibility for investment incentives is specified in the Act on Investment Aid (561/2007 Coll., 231/2011), last amended in 2017, to be replaced by a new Act on Regional Investment Aid (57/2018 Coll.) in April 2018. The Economy Ministry manages and coordinates investment aid. The Finance Ministry and the Ministry of Labor, Social Affairs and Family also have specific competencies, depending on the form of investment aid granted.

The new Act on Regional Investment Aid (57/2018) valid as of April 2018 reflects the changing economic environment, and better addresses current needs of the Slovak economy. The two main goals of the new Act are tackling persisting regional differences, and supporting Slovakia’s transition to “industry 4.0,” i.e. investments in progressive technologies and high added value sectors. The investment incentives are available to foreign and domestic investors for projects in sectors including industry, technology centers, shared service centers, and tourism. The incentives are provided as tax relief, cash grant, contributions for the newly created jobs, and transfer of state/municipal property for 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 the period of two years.

A quick overview of the basic provisions, including minimum investment amounts per category of eligible investment, and maximum aid intensity, is available on the portal of the Slovak Investment and Trade Development Agency (SARIO). SARIO has identified the best investment opportunities in R&D, design, innovation, technology centers, ICT, business process outsourcing, and tourism. Traditionally, manufacturing industries, including machinery and precision engineering, automotive, metallurgy and metal processing, electronics, chemicals and pharmaceuticals remain attractive and have further growth potential.

Slovakia granted investment aid amounting to nearly EUR 84 million in 2017 to fifteen categories (over EUR 1.7 billion in 2002-2017), of which 48 percent was in the form of tax relief. Apart from investment aid, the Economy Ministry also runs projects eligible for support from EU funds, with a particular focus on research and innovations; the ministry also offers innovation vouchers and special loans through its Investment Fund, as well as support for industrial clusters. Other ministries run EU-supported projects in their respective areas of expertise (i.e. agriculture, environment, infrastructure, R&D, 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 Act on State Aid (358/2015 Coll.), and there is a dedicated state aid web portal (link below). Other relevant domestic acts include: the Act on Supporting Least Developed Districts (336/2015 Coll. and successive amendments, the most recent one being 58/2018 Coll.), the Act on Employment Services (5/2004 Coll. And successive amendments, the most recent one being 64/2018 Coll.), the Act on Income Tax (595/2003 Coll. and successive amendments, the most recent one being 344/2017 Coll.), and a government regulation defining the maximum intensity of investment aid and the amount of investment aid (481/2011 Coll. and successive amendments, the last one being 219/2015 Coll.).

Please consult the following websites for more information:

Investment Aid: 

State aid:

Foreign Trade Zones/Free Ports/Trade Facilitation

All foreign trade zones and free ports were eliminated in Slovakia in 2006.

Performance and Data Localization Requirements

There are no special requirement 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. As of early 2018, there are no measurements that would prevent companies from freely transmitting customer or other business related data outside the country. However, as a member of the EU, Slovakia will implement the EU General Data Protection Regulation 2016/679 (GDPR) imposing stricter data protection compliance regime. There are also no mechanisms in place that would enforce rules on local data storage. Slovakia supports the proposed EU regulation on the free flow of data 2017/0228 (COD) that abolishes data localization requirements within the EU space while ensuring access rights to competent authorities for regulatory control. The relevant authority for data localization issues is Deputy Prime Minister’s Office for Investments and Digitalization.

In January 2018, the Slovak parliament adopted its first law on cybersecurity. The bill, prepared by the National Security Authority (NBU), transposes the EU Directive on Security of Network and Information Systems (NIS Directive). The Act aims to address system security, incident response, and reporting requirements with minimal regulation of the private sector. It also proposes housing a Computer Security Incident Response Team at every Ministry relying heavily on ICT. Along with the NBU, the main public stakeholders in Slovak cybersecurity sector are Deputy Prime Minister’s Office for Investments and Digitization and National Agency for Network and Electronic Services (NASES).

It is hard to estimate Slovak cyber preparedness as Slovakia has never faced a major cyber-attack. In early 2018, Slovakia was ranked first of 64 countries in the National Cyber Security Index, a global index compiled by Estonian NGO e-Governance Academy Foundation that measures country preparedness for cyber threats. The assessment was based on publicly accessible sources and data collection was done in cooperation with the NBU. However, the index does not look at policy implementation or the actual performance of relevant institutions. In October 2017, security experts identified and publicized a vulnerability in Slovak e-ID cards making it possible to falsify a person’s electronic signature and putting approximately 300 000 Slovaks at risk. The government responded by invalidating the affected e-ID certificates.

Slovakia does not mandate local employment, follow “forced localization,” or impose conditions on permission to invest.

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. The decision on investment aid may be cancelled based on provisions stipulated in the Act, and these requirements apply to domestic and foreign recipients of investment aid equally. Along with investment incentives, other tools to support investment, including the 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.

Temporary and long-term residence permits are issued by the Alien Police Department (APD). The legislative framework on residence and adjacent permits is specified in the Act on Residency of Foreign Nationals (404/211 Coll. and successive amendments, last amended in 2017 as 179/2017 Coll.). Although foreign nationals have criticized the process of obtaining residency permits as difficult and time-consuming, Slovak authorities have made significant concessions to expedite this process for American citizens. This has included accepting expired FBI background checks, accepting applications at the Slovak embassy in Washington, D.C. prior to departure for Slovakia, and adopting suggested new wording on their APD and embassy sites to clear up common misconceptions. The embassy’s Consular Section has reported a significant drop in Americans looking for help with this issue since the implementation of these changes. However, even with these welcome changes, there are still problems with authorities not always being consistent in their recommendations or enforcement of regulations. The regulations themselves, however, do not differ significantly from those of other EU countries.

Please consult the following websites for more information:

Alien Police Department: .

The application for a work permit must be submitted at a competent Labor Office, using an official application form: .

The Migration Information Center IOM portal features useful information for foreign nationals: .

The Foreign Affairs Ministry provides information and services for foreign nationals: .

The Ministry of Labor, Social Affairs and Family and the competent Labor Office provide services to foreign nationals related to their employment: .

Deputy Prime Minister’s Office for Investments and Digitalization of Society: .

5. Protection of Property Rights

Real Property

The mortgage market in Slovakia is growing rapidly, and a reliable system of record keeping exists. In 2017 and early 2018, National Bank of Slovakia introduced measures to cool down the mortgage market by introducing more strict assessments and limiting the size of the mortgage. 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 rare instances when the property owner is unknown. This is a result of unclear record keeping dating back to 20th century. 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.

A dedicated web portal makes it possible to verify information about land and property ownership.

Foreigners and EU citizens can acquire property in Slovakia under the same conditions as Slovak residents with the exception of agricultural and forest land, which can be purchased after having a residency permit in Slovakia for ten years and farming land for at least three years. In 2017, Slovak government proposed a law liberalizing these measures, dropping the condition of holding a residency permit for at least 10 years but retaining the requirement of farming land in the location of interest for at least three years. The law was still in legislative process as of March 2018.

Approximately 80 percent of all agricultural land in Slovakia is leased. In 2017, an amendment to the law on the lease of agricultural land was passed, with the goal of strengthening protections against speculators who have leased land without the intention to use it for agricultural purposes. When leasing agricultural land, the Slovak Property Fund will prioritize young and new farmers, as well as farmers creating a final food product. The maximum lease period will decrease from 25 to 15 years.

It is estimated that Slovak residents own approximately 75 percent of the land in Slovakia. However, Slovakia lacks a database specifying country of origin of the landowners.

Squatting is illegal in Slovakia and ownership of unoccupied property will not be reverted to squatters or other parties unless they are entitled to own the land.

Slovakia remained 7th out of 190 countries in the World Bank’s 2018 Doing Business “registering property” indicator, averaging 16.5 days to register property.

Please consult the following websites for more information:

Cadastral portal on land and property ownership: .

Intellectual Property Rights

Slovak law protects patents, copyrights, trademarks and service marks, trade secrets, and semiconductor chip design. The protection of intellectual property rights (IPR) falls under the jurisdiction of two agencies. The Industrial Property Office is responsible for most areas, including patents, while the Culture Ministry is responsible for copyrights, including software.

Slovakia is a member of the WTO, the European Patent Organization, and the World Intellectual Property Organization (WIPO). The WTO TRIPS agreement is legally in force in Slovakia, although no cases have occurred to test enforcement. Slovakia adheres to other major intellectual property agreements including the Bern Convention for Protection of Literary and Artistic Works, the Paris Convention for Protection of Industrial Property, and numerous other international agreements on design classification, registration of goods, appellations of origin, patents, etc. The Industrial Property Office of the Slovak Republic is the central government body overseeing industrial property protection. The Financial Administration (under the Finance Ministry) deals with customs and adjacent IPR, including the fight against counterfeit goods.

A robust amendment to the “patent law” came into force in October 2017, aimed at strengthening the protection and rights of patent holders as well as improving enforcement of industrial property rights. The most prominent measures are extending the statute of limitation in cases of infringement of industrial property rights, improving coordination among relevant authorities, and better definition of what compensation for rights holders.

Slovakia was taken off the Watch List of the U.S. Trade Representative’s annual interagency “Special 301” review thanks to significant progress that the government had made in addressing concerns related to the protection of pharmaceutical patents in Slovakia. Slovak authorities adopted legal and administrative measures to ensure that patent-infringing drugs are not given market authorization; some of those measures have since been weakened to comply with current EU norms. The government built a new secure facility to house confidential pharmaceutical test data.

Slovakia is not listed in the notorious market report.

According to the Financial Administration, there were 1,363 suspected breaches of intellectual property rights in 2017 (for goods imported from third countries, especially textile and shoes), with a value of seized counterfeit goods reaching more than EUR 1.5 million (down 42 percent from 2016).

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at .

Please consult the following websites for more information:

Ministry of Culture, Act on Intellectual Property: .

Intellectual Property: .

Industrial Property Office: .

Financial Administration: .

Financial Administration Annual Report for 2017:

American Chamber of Commerce in the Slovak Republic: .

6. Financial Sector

Capital Markets and Portfolio Investment

According to an expert analysis issued by the Central Bank of Slovakia (NBS), the stock market in Slovakia is among the smallest in Europe, and largely dominated by bonds that represent more than 99 percent of all volume.

The Bratislava Stock Exchange (BSSE) is a joint-stock company operating in compliance with the Stock Exchange Act No 429/2002. The BSSE was admitted as an associate member of the Federation of European Securities Exchanges (FESE) in 2002, and became a full member in 2004. In 2017, the total volume of transactions at the BSSE reached slightly over USD 8 billion. Market capitalization of shares reached roughly USD 5.5 billion, and market capitalization of bonds USD 52.1 billion.

The European Single Market and existing European policies facilitate the free flow of financial resources. Slovakia respects the IMF Article VIII by refraining from restrictions on 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.

In April 2014, the Slovak Government approved the national strategy for developing the Slovak capital market, prepared by the Finance Ministry in cooperation with the National Bank and the BSSE. The strategy aims to motivate private stakeholders to invest in liquid tradable securities and increase shares at the BSSE. It includes measures to support institutional investors, modernize market infrastructure, and decrease administrative and tax burdens. The Central Depository of Securities was established in 2014 and is responsible for maintaining the shareholders’ register and records of dematerialized and certificated securities, as well as to settle financial instrument transactions.

Slovakia follows the EU rules and regulation on securitization of properties for lending purposes. Slovakia does not have a national regime for securitization. In January 2018, an amendment to the Act on Banks (483/2001 Coll.) came into force profoundly changing the system of covered bonds – the old system of mortgage deeds was replaced by a new regime of covered bonds, making it conform with internationally recognized rules on covered bonds and recommendations of European Banking Authority on covered bonds.

Please consult the following websites for more information:

Bratislava Stock Exchange: .

Central Depository of Securities: .

Central Bank of Slovakia: .

EU regulation on securitization: .

EBA recommendations on covered bonds: .

Money and Banking System

Slovakia became part of the Eurosystem, which forms the central banking systems 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, with a primary objective to maintain price stability through inflation targeting. NBS supervises financial market participants (banking, capital market, insurance and pension funds), and is a party to the European System of Financial Supervision  (ESFS). As part of its supervision of the financial market, NBS also conducts macro-prudential policy . NBS participates in the Single Supervisory Mechanism (SSM),  which entered into operation in November 2014 as the first pillar of the EU banking union. NBS issues euro banknotes and coins, promotes the smooth operation of payment and clearing systems, regulates currency circulation, maintains and disposes of foreign reserve assets, implements foreign exchange operations, supports the stability of the financial system, and issues financial statistics.

While most banks operating in Slovakia are subsidiaries of foreign-owned institutions, they report minimal dependence on their mother companies for financing. The combined total assets of the monetary financial institutions active in the Slovak market were over EUR 77 billion at the end of 2017.

As of December 2017, three major banks were under direct supervision of the European Central Bank (ECB) – Tatra Banka (Raiffeisen), Vseobecna Uverova Banka (Intesa Sanpaolo), and Slovenska Sporitelna (Erste Group Bank). Due to the size of the international groups they belong to, the ECB also supervised: Ceskoslovenska Obchodna Bank and CSOB Stavebna Sporitelna (KBC Group); mBank S.A., (Commerzbank); Komercni banka, a.s., (Societe Generale); UniCredit Bank Czech Republic and Slovakia, a.s. (UniCredit).

All three major Slovak banks (Tatra Banka, Vseobecna Uverova Banka, and Slovenska Sporitelna) that participated in the ECB “stress tests” in October 2014 assessing the quality of individual bank assets were certified as sound and stable. The results of a 2016 EU-wide “stress tests” in which the parent institutions of the Slovak branches participated, demonstrated resilience of the EU banking sector.

According the 2017 Financial Stability Report issued by NBS, rap­id growth in household debt increased households’ vulnerability to any worsening of the economic situation. The debt burden of Slo­vak households is twice as high as it was in the pre-crisis period. NBS introduced statutory limits on the debt-service to income for housing loans and the loan-to-value ratio for such loans. Starting in 2018, NBS’s prudential recommenda­tions for lending conditions will also become le­gally binding for consumer loans. Banks compensate with falling interest margins with increased lending, making themselves more vulnerable. The second vulnerability identified by NBS is liquidity risk also associated to strong credit growth. Corporate credit is expanding, and lend­ing to non-financial corporations (NFC) increased by 9 percent year-on-year. Loans from domestic banks were only its third largest component, as foreign loans and bond is­sues recorded greater growth. Another contribu­tor to the overall growth was intercompany credit. The ag­gregate non-performing loan ratio for NFC loans fell to 5.6 percent in September 2017. Housing loans continued to record a zero net default rate, while non-performing consumer loans had stabilized at around five percent. The banking sector’s net profit remained stable. Banks’ total capital and leverage ratios increased. Profitability of asset management companies increased in both the pension fund sector and investment fund sector.

Besides banks, other types of financial institutions that operate in the Slovak market include factoring companies, leasing companies and consumer credit companies, insurance companies and pension funds, and investment funds. Non-banking credit institutions are under strict supervision by NBS and need a license to operate.

Foreign nationals can open bank accounts by presenting their passport and/or residence permit, depending on the bank.

The Ministry of Finance established a working group Centre for Financial Innovations (CFI) dedicated to development of new financial technologies in February 2018. Its goal is to create a platform for discussion on introducing financial innovations to Slovak financial market. Its stakeholders are the Ministry of Finance, the National Bank of Slovakia, and the Deputy Prime Minister’s Office for Investments and Digitalization of society and market participants. Part of the discussion is application of blockchain technology or distributed ledger technologies (DLT) for the needs of the Slovak market. Specific measures should be proposed by the end of the year. If agreement is reached on the positive contribution of DLT, the group will proceed with implementation of the measures. Stakeholders have confirmed there is open and positive approach to exploring these options both from the government and the market.

Please consult the following websites for more information:

Central Bank of Slovakia: ; ; =.

European Central Bank:
; .

Finance Ministry: .

Foreign Exchange and Remittances

Foreign Exchange Policies

Slovakia joined the Eurozone on January 1, 2009. As an OECD member, Slovakia meets all international standards for conversion and transfer policy. 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.

Non-residents may hold foreign exchange accounts. No permission is needed to issue foreign securities in Slovakia, and Slovaks are free to trade, buy, and sell foreign securities.

There are strict rules governing commercial banking and credit institutions in Slovakia, which must abide by existing banking and anti-money laundering laws. As a result of the 2008 financial and economic crisis, some EU countries started a discussion on a potential tax on financial transactions (EU FTT), but this yet to be implemented.

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.

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 now have the obligation 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; nevertheless, Slovakia receives FATF recommendations, and is a member of MONEYVAL which is a FATF associate member.

Slovakia does not impose any limitations on remittances. In 2016 Slovakia introduced a 7 percent tax on dividends. Transfer pricing for controlled transactions must be based on market prices. For a fee, the Financial Administration provides tax consulting services which can result in issuance of a deed of compliance on transfer pricing valid for up to five years, in line with the Advance Pricing Agreement.

Please consult the following websites for more information:

U.S.-Slovakia Bilateral Investment Treaty: .


Sovereign Wealth Funds

Slovakia does not maintain a Sovereign Wealth Fund (SWF). However, in 2014, Slovakia established a fund of funds – the Slovak Investment Holding (SIH), which launched operations in 2016 and is managed by SZRB Asset Management, a subsidiary of the Slovak Guarantee and Development Bank. SIH is financed by drawing three percent of allocations from five EU 2014 – 2020 operational programs, currently totaling EUR 622 million in capitalization. Resources are allocated as revolving financial instruments (guarantees, risk sharing loans, equity and mezzanine instruments) mainly through financial intermediaries, i.e. commercial lenders who will leverage the funds. Resources are focused on strategic investment priorities in the following sectors: transport infrastructure, energy efficiency, waste management, energy production, small and medium-sized enterprises, and social economy.

Please consult the following websites for more information:

Slovak Investment Holding: .

7. State-Owned Enterprises

State-owned enterprises (SOEs) and private companies generally compete on a level playing field. SOEs are mostly active in certain strategic sectors, including health and social insurance, airports, railways, and electricity transmission networks. There are almost 70 SOEs in Slovakia, 80 percent of which are wholly state-owned. There are approximately 250,000 employees working in SOEs with the state-owned Slovak Rails, a rail infrastructure company, and Slovak Post being the two biggest employers in Slovakia, each with approximately 14,000 employees.

Transparency International Slovakia (TIS) reports that five of the ten biggest employers in Slovakia are SOEs and 80 public companies (including municipally and regionally owned companies) have a combined budget of EUR 9.5 billion, which represents half of the total state budget. The thirty biggest SOEs have a combined value of EUR 25 billion.

In the energy sector, combined state and private ownership is common. The state fully owns the national gas supplier Slovak Gas Industry (SPP), and it also holds 51 percent stakes in all three electricity distribution companies (without managerial control), and a 49 percent stake in the gas transmission system operator. Based on an MOU signed with the Italian utility giant Enel, the Economy Ministry holds an option to increase its stake in Slovenske Elektrarne, which controls around 70 percent of the domestic electricity generation market, from the current 34 percent to a 51 percent majority.

The Ministry of Economy is currently planning to convert SPP to an Energy Holding, that would entail not only gas but also other energy SOEs. This would follow the model of neighboring countries’ energy frameworks, such as Hungary’s MOL, Austria’s OMV, or Czech Republic’s CEZ.

In 2017, private railway company Regiojet decided to stop providing rail services between the two biggest Slovak cities, Bratislava and Kosice, claiming it cannot compete with the state-owned railway company which enjoys subsidized intercity trains with free travel for pensioners and students.

The government imposed strict return guarantee requirements and fee limits on private pension funds in the past. This step could have negatively influenced competition with the state-run “pay-as-you-go” pension system, and the government actively encouraged investors to move their savings back into the state system.

The government has attempted to legislatively limit profits of health insurers in the past. Although the Constitutional Court ruled that the law was anti-constitutional, the government is still looking at other means to limit the profits of health insurers in accordance with the Constitution.

Most SOEs are structured as joint-stock companies governed by boards that include government representatives and government appointees. 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. Nonetheless, Transparency International has deemed the SOEs to be generally non-transparent.

The Finance Ministry posts a list of companies that are fully or partially state-owned and most other ministries also publish a list of such companies on their web portals. The list includes SOE equities and profits broken down by enterprise, and is publicly available.

Slovakia is a signatory of the WTO Agreement on Government Procurement (GPA) since 2004, which also covers SOEs. Slovak SOE ownership is exercised in accordance with the Act on State-owned Enterprises (111/1990), which is consistent with the OECD Guidelines on Corporate Governance for SOEs.

Please consult the following website for more information:

Register of Financial Statements: .

Analysis on SOEs by Transparency International Slovakia: .

List of SOEs in Slovakia:

Privatization Program

Foreign investors are free to participate in privatization programs for SOEs, however, no privatization efforts are currently under way. Privatization frequently occurs through direct sale, although Slovakia has a track record of doing major privatization projects through public tender, especially in the energy sector. The last significant SOE considered for privatization was the wholly state-owned Bratislava airport, but the process has been stopped. In late 2017, the government announced it is committed to plans to lease the airport for 30 years.

More generally, statements by government officials and political leaders indicate that the trend is not in favor of privatization but the opposite. There is interest in increasing the state’s stake in so-called “strategic” sectors, particularly energy. Current government strategic documents calls for a ban on further privatization of “strategic” SOEs.

According to Act on Transfer of State Assets to Other Entities (92/1991 Coll.,) privatization of an SOE in case of a direct sale is decided by the government based on a proposal from the relevant Ministry and in case of a public tender, the relevant Ministry decides about the privatization project. In both instances, the Ministry plays a central part in the process. Privatization of natural monopolies such as electricity distribution companies or a gas distribution company are always based on a government decision. Once a decision is made over the privatization of a project, the Ministry is obliged to publish an advert in domestic media. In previous cases of privatization through public tenders, the relevant Ministry also opened a tender for a privatization advisor (awarded to a major consultancy firm). The advisor placed adverts in domestic and international media outlets (such as the Financial Times) and contacted potential international investors. Websites of relevant ministries owning the SOEs are also a good place to find more information in case a tender is opened. Public tenders are monitored by the Public Procurement Office, which makes sure the process is transparent. Nonetheless, previous instances of public tender privatization were criticized by the media as nontransparent.

Please consult the following website for more information:

Public procurement Office: .

Ministry of Economy: .

Ministry of Transport: 

8. Responsible Business Conduct

Responsible business conduct (RBC) is the basis of the European Commission’s “Europe2020” strategy aimed at creating conditions for smart, sustainable, and inclusive growth. The Ministry of Labor, Social Affairs and Family prepares reports on RBC and its business implications, but states that the term is not yet clearly defined. By adhering to the EU directive on social responsibility, state institutions can demand through public procurement requirements that the offered goods and services consider ecological, social, and ethical criteria. Slovakia currently has no unified or comprehensive national plan towards RBC at the government level.

As an OECD member, Slovakia adheres to the OECD Guidelines for Multinational Enterprises, which represent the global gold-standard on the due diligence approach to RBC. SARIO was designated in 2000 as the National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises. Please see below for the NCP’s contact information:

Mr. Marcel Sladok
Slovak Investment and Trade Development Agency (SARIO)
Trnavska cesta 100, 821 01 Bratislava, Slovakia
Tel: +421 2 4854 2309

Additionally, Slovakia encourages observance of related OECD voluntary guidelines, such as the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. Slovakia has also ratified the Extractive Industry Transparency Initiative (EITI).

An increasing number of NGOs, businesses, and multinational companies promote the due diligence approach of RBC and are aware of its associated expectations and standards. The Pontis Foundation – an NGO promoting corporate philanthropy, transparency, and ethics – has an almost 20 year tradition of recognizing the country’s best RBC programs with its prestigious Via Bona Awards attended by top Slovak companies.

In a 2017 public survey, 53 percent of respondents were able to name a company with a corporate social responsibility (CSR) program. Under Slovak law, corporations can contribute up to 2 percent of their corporate income taxes to non-governmental organizations (NGOs), making this program a key funding source for NGOs. Many corporations have their own CSR programs. Programs range from employment and education programs for marginalized groups, to environmental initiatives, to fundraising for charities and NGOs. Multiple U.S. companies have been recognized by the government and civil society for excellence in their community service efforts.

In late 2017, the Ministry of Labor, Social Affairs and Family proposed a law that will define a “social enterprise” as an entity aimed at profoundly improving the conditions for integrating disadvantaged and vulnerable groups. Labor Code updates in recent years were enacted to strengthen employee rights protections while increasing employer obligations.

A number of laws and regulations address and enforce environmental protection, including waste management, air protection, nature and landscape, and water management. After legislative changes in recent years, environmental impact assessments are now systematically carried out for all proposed new projects. Slovakia is a party to the Aarhus Protocol. In December 2017, the Ministry of Environment published draft Environmental Strategy 2030 that analyzes key challenges including air pollution, deforestation, and waste management, and calls for a binding “green public procurement” in certain categories of procurement. Consumer protection is guaranteed and enforced through the Civil Rights Act, Consumer Protection Act, and the Act on E-Commerce.

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 operating equipment producing emissions, including emissions limits, monitoring, and reporting in line with valid national and EU legislation. The Act on Waste valid as of January 2017 establishes the obligations for companies producing packaging, as well as rules on waste recycling and recovery, and other waste management issues. The Environment Ministry and its agencies, as well as dedicated public administration structures in municipalities, share responsibility for implementing and enforcing legal obligations on environmental protection.

Large industrial companies also annually report their emissions, hazardous waste, and environmental management programs. Due to recent EU legislation aiming for low-carbon economy, U.S. Steel Kosice, the biggest employer in Eastern Slovakia, is planning a multimillion investment to curb their emissions. The project will receive EUR 100 million in co-financing from EU funds.

Some concerns about RBCs persist as Roma face ongoing discrimination in private sector employment and services. Not all victims seek legal redress for discrimination. Nonetheless, domestic courts have -in a few cases – ruled in favor individuals who were represented by NGOs. After several media articles were published about poor conditions for Serbs working in Slovakia, the Ministry of Labor, Social Affairs and Family confirmed that labor agencies had circumvented domestic labor regulations by issuing falsified work permits for hundreds of Serbs working in the auto manufacturing industry. In early 2018, parliament adopted a law making it easier for third country nationals (statistically affecting mostly Serbs, Ukrainians, and Vietnamese) to find work in Slovak regions with less than 5 percent unemployment.

Please consult the following website for more information:

Ministry of Labor, Social Affairs and Family: .

9. Corruption

Slovakia is a party to international treaties on corruption. Among them 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. In July 2016, criminal liability for legal persons, including corporations, was introduced into Slovak criminal law. Nevertheless, corruption continues to be among the most serious issues for the business community. According to the World Economic Forum survey, Slovakia placed among the worst performers in the EU on the diversion of public funds, favoritism in decision-making and irregular payments and bribes. According to the Special Eurobarometer survey of October 2017, 81 percent of respondents believed that corruption is part of Slovakia’s business culture. There are no data available on whether U.S. firms identify corruption as an obstacle to foreign direct investment. In a February – 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 marked 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.

Some opposition politicians and NGO analysts claim that conflict of interest and asset declaration regulations lack the necessary level of detail to be implemented and enforced in practice. 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 say 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, and their case is still under appeal.

Some members of civil society and most opposition politicians claim political influence over the police and prosecution services impedes corruption investigations, allowing individuals with strong political connections to the ruling coalition to avoid prosecution for corrupt practices. Some police investigators claim that the police corps’ politically nominated leadership discourages investigation of politically sensitive cases, manipulates police statistical data on criminality, and forces honest police officers to leave the force. One of the steps the government took to increase transparency in governmental contracting is an anti-shell company law (315/2016 Coll.) requiring private companies to specify their ownership structure before entering into business contracts with state entities, in effect since 2017. In March 2017, the government also adopted a third National Action Plan to combat corruption under the Open Government Partnership (OGP).

In January 2018 strict new rules on mergers between companies came into force. The rules were designed to eliminate the widespread practice of companies abusing mergers to avoid contractual and statutory obligations to pay debts and taxes without legal consequences.

Slovak law provides for an independent judiciary; however, public confidence in the judicial system is among the lowest in the EU, according to 2017 EU Justice Scoreboard. Experts argue the justice system is inefficient and officials remain divided on the need for reform. There are concerns about manipulation of case assignments, and court verdicts are often inconsistent and poorly justified.

In 2017, new rules for selecting judges came into effect. The changes are designed to increase transparency of the selection process and competency of the judicial corps. A new specialized court to deal more efficiently with enforcement actions. A number of communication technology projects were introduced in 2016 to improve the quality of the justice system, but they have not yet been completed.

Disclosure of contracts in the Central Registry of Contracts by public administrators and state-owned enterprises s is compulsory, providing additional transparency. However, media reports alleging corruption in public tenders and EU subsidy programs remain frequent. In summer 2017 the Minister of Education resigned following accusations of bribery and non-transparent evaluation of projects seeking EU funds for research and development.

Following the publishing of reports by murdered investigative journalist Jan Kuciak about serious irregularities in the distribution of agriculture subsidies, the European Anti-Fraud Office (OLAF) opened in March an investigation into EU agricultural subsidies abuses by the Agriculture Ministry’s Land Office.

Private businesses, especially those with foreign ownership, often have internal codes of ethics, in many cases also extending to contractors.

Some commercial banks offer services to clients for vetting potential local investment partners. The Slovak Business Angels offer services to facilitate contacts between “adequately prepared entrepreneurs and potential serious investors” ( ).

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

Martin Fritz
Deputy Director of the National Anti-Corruption Unit
Ministry of Interior, National Police Headquarters
National Criminal Agency
Pribinova 2
812 72 Bratislava
Telephone: +420 9610 56371

Contact details of “watchdog” organizations:

Gabriel Sipos
Executive Director
Transparency International Slovakia
Bajkalska 25
82718 Bratislava
Telephone: +421 2 5341 7207

Pavel Sibyla
Executive Director
Stop Corruption Foundation
Stare Grunty 18
841 04 Bratislava

Zuzana Wienk
Executive Director
Fair Play Alliance
Smrecianska 21
811 05 Bratislava
Telephone: +421 2 207 39 919

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.

While the environment in the country is generally stable and secure, the murder of an investigative journalist and his fiancee in February 2018, believed by police to be related to the journalist’s work, led to an escalation of tension and dissatisfaction in society. A series of country-wide anti-government protests throughout the month of March drew the largest crowds since the fall of communism and the Velvet Revolution in November 1989. The peaceful protests coincided with the resignation of the ruling government and its replacement by a new government consisting of the same coalition partners but led by a new Prime Minister. The new cabinet has passed a parliamentary confidence vote in March and will remain in power until the next general elections, scheduled for March 2020. Peaceful public protests remained ongoing into April.

11. Labor Policies and Practices

The Slovak labor market continued to improve in 2017, reaching historically low levels during some parts of the year. The unemployment rate in 2017 dropped to 8.1 percent according to preliminary data, down from a peak of over 14 percent in 2013, and is projected to continue to drop through 2018. The employment rate for the first three quarters of 2017 reached 71 percent, and employment is projected to grow at a 1.7 percent rate in 2018. Youth unemployment has improved, but remains significantly higher than average at more than 18 percent for the first three quarters of 2017. Structural long-term unemployment and unemployment of marginalized communities remain a challenge, with significant regional variation due to diverse regional economic development and low labor mobility. Integration of Roma remains problematic, with the employment rate of Roma at only 25 percent according to OECD, while unemployment reaches nearly 50 percent. A lack of childcare facilities discourages mothers from returning to work – according to OECD, only 3 percent of small children attend nurseries, compared to over 30 percent on average in OECD. Part-time work is relatively rare in Slovakia.

Slovakia’s economically active population was 2.75 million in 2017, of which roughly 73 percent work in services, 23 percent in industry, and the rest in agriculture. Slovakia’s engineering and mechanical production sectors remain strong. Foreign companies frequently praise younger workers’ motivation, abilities, and productivity, especially in foreign language and computer skills. However, some businesses have complained 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, but also a lack of support for critical thinking and managerial skills.

The education system poses a challenge – while 70 percent of population aged 25-64 has attained at least upper secondary education (compared with an OECD average of 43 percent), and 22 percent tertiary education (OECD average 36 percent), Slovakia’s educational outcomes lag behind. Quality of tertiary education in international standards, including university research, is low by OECD standards. As a result, employers across the economy, and in the IT and manufacturing sectors in particular, lament a shortage of qualified labor. The Education Ministry aims to make the dual education more attractive, currently working on an amendment to the Act on Dual Education (vocational 61/2015 Coll.). Through incentives for companies to partner on vocational training programs for students, the Ministry aims to attract 12,000 students to enroll in apprenticeship programs by 2020, up from the current level of under 3,000.

The Ministry of Labor, Social Affairs and Family in cooperation with the Central Office of Labor, Social Affairs and Family has established rules for the establishment of Social Enterprises for Labor Integration. This includes a set of tools for active labor market policies including integration of disadvantaged groups, training, and others. Nevertheless, according to the OECD Economic Survey of the Slovak Republic from June 2017, spending on active labor market policies is low, and training remains insufficient or inadequate.

Nominal wages grew at 4.6 percent in 2017 and are expected to grow at over 5 percent in 2018. Labor productivity grew at a 2.6 percent rate. Average wage in the economy reached EUR 944 in the second quarter of 2017. Nevertheless, average hourly wage in Slovakia at EUR 9.50 is significantly lower than EU average (EUR 22.80).

The Slovak Labor Code (311/2001 Coll. and later amendments, the latest as of February 2018) governs relations on the labor market, including for foreigners. Businesses cite labor regulations and frequent changes to the Labor Code as one of obstacles to doing business in Slovakia. The newly introduced provisions include limits on seasonal work, temporary posting, and increased pay for night and Sunday shifts and work on holidays. Employers in Slovakia also have an obligation to contribute to food expenses during work hours of between EUR 1.86 and EUR 2.48 per meal, and this contribution constitutes taxable income.

Slovakia has a standard workweek of 40 hours, and the Labor Code caps overtime at 400 hours annually, and sets minimum remuneration for overtime work (25-35 percent of average earnings). A 2016 minimum wage law indexes the minimum wage to overall wage growth in the economy. The minimum wage in 2017 was EUR 435 per month, and had increased to EUR 480 in 2018, which corresponds to EUR 2.76 per hour.

The Labor Code contains provisions against discrimination at the work-place (also stipulated in 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.

Few foreign nationals from non-EU countries currently work in Slovakia. According to the Slovak Labor Office statistics, the number of foreign workers from non-EU countries was below 9,000 in December 2017, with the nationals of Serbia and Ukraine accounting for nearly 70 percent of total. A February 2018 amendment to the Act on Employment Services (5/2004 Coll.) aims to ease the conditions for employment of non-EU nationals in selected professions where there is a lack of qualified domestic labor force, and only in the regions with unemployment rate below five percent. At the same time, the number of such employees will be limited to 30 percent of all employees (per employer). To further support labor mobility and to mitigate regional differences, the amendment also increased contributions for relocation.

The corporate income tax is currently 21 percent. The rate is below the OECD average of 23 percent and in line with comparable small OECD economies; however, it is the highest among the “Visegrad Four Group” of regional partners (Slovakia, Czechia, Poland, Hungary), who often compete for the same investments.

Social insurance contributions are compulsory and include healthcare, unemployment, and pension insurance. The cap to calculate health contributions for employees with higher wages was abolished. The social insurance cap is still in use, and was recently increased from five times the average wage to seven times the average wage. 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 on low-skilled, low-wage workers.

The tax wedge for a single person with no children at 67 percent of average wage reached 39 percent in 2016 (compared to OECD average of 32 percent). Tax revenue (i.e. the revenues collected from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on the ownership and transfer of property, and other taxes) represented 32.7 percent of GDP in Slovakia in 20116, compared to OECD average of 34.3 percent.

Union membership has declined in recent years. The so-called “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 recent years, there were labor actions by both teachers and nurses, with both groups complaining about insufficient budgets and low salaries, but also in some industries.

The cost to lay off employees stipulated by the Labor Code is generally less expensive than in Western Europe. These costs depend mostly on the employee’s service time:

  • up to 1 year – 1 month notice period, with no severance pay;
  • 1 to 5 years – 2 month notice period, 1 or 2 months’ salary severance;
  • 5 to 10 years – 3 month notice period, 2 or 3 months’ salary severance;
  • 10 and more years – 3 month notice period, 3 to 5 months’ salary severance.

Nevertheless, many companies have collective agreements that go beyond these thresholds.

Please consult the following websites for more information:

European Commission Country Report – Slovakia 2018: .

OECD Economic Survey – Slovak Republic: .

The Migration Information Center IOM portal features useful information for foreign nationals: .

The Foreign Affairs Ministry provides information and services for foreign nationals: .

The Ministry of Labor, Social Affairs and Family and the competent Labor Office provide services to foreign nationals related to their employment: ; .

12. OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) offers U.S. investors in Slovakia insurance against political risk, expropriation of assets, damages due to political violence, and currency inconvertibility through its 1990 agreement between Slovakia and the United States. OPIC can provide specialized insurance coverage for certain contracting, exporting, licensing, and leasing transactions that U.S. investors undertake in Slovakia. Slovakia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) that also provides political risk insurance.

Collection of data on investment insurance provided to incoming FDI is not a national competence; however, the OECD and the Berne Union (i.e. The International Union of Credit and Investment Insurers, ) might be able to provide country-level data on investment insurance activities.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) 2017 USD 101,982 2016 USD 89,769 
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2016 USD -72** 2016 USD 568
Host country’s FDI in the United States (USD M USD, stock positions) 2016 USD 26 2016 USD 21
Total inbound stock of FDI as % host GDP 2016 51% 2016 46.5% UNCTAD

* Sources:
Eurostat, GDP data: ;
Central Bank of Slovakia, FDI data: ;
UNCTAD, FDI data: .
(Note: Values from host country sources are converted from their original euro denomination)

**USD 218 million in equity capital and reinvested earnings; USD -290 million in other capital. National data on inward U.S. FDI position provided by the Central Bank of Slovakia (NBS) is consistent with the IMF data ( ).

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward USD 43,741 100% Total Outward USD 2,652 100%
Netherlands 10,839 25% Czechia 930 35%
Austria 7,004 16% Netherlands 262 10%
Czechia 5,106 12% Austria 160 6%
Luxemburg 4,653 11% Luxemburg 153 6%
South Korea 3,077 7% Cyprus 143 5%

* Sources:

IMF: ;
Data are consistent with host country data provided by the Central Bank of Slovakia ( );
Data on FDI are inconsistent as much of U.S. FDI is channeled through subsidiaries located inside the EU.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries USD 27,809 100% All Countries USD 5,779 100% All Countries USD 22,011 100%
International Organizations 5,067 18% Luxemburg 2,290 40% International Organizations 5,066 23%
Luxemburg 2,624 9% Ireland 945 16% Spain 1,761 8%
Austria 1,873 7% Austria 778 13% Italy 1,663 7%
Spain 1,761 6% USA 461 8% Czechia 1,313 6%
Ireland 1,709 6% Germany 347 6% UK 1,211 5%

* Sources:
IMF: .

14. Contact for More Information

D.R. Seckinger
Senior Economic Officer
U.S. Embassy Bratislava
+421 (2) 5922 3412