DOING BUSINESS IN THE SLOVAK REPUBLIC 2016

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DOING BUSINESS IN THE SLOVAK REPUBLIC 2016

PRK Partners s.r.o. advokátska kancelária / / attorneys at law Bratislava

Hurbanovo námestie 3 811 06 Bratislava Tel: +421 232 333 232 Fax: +421 232 333 222 bratislava@prkpartners.com

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2 TABLE OF CONTENTS

ARTICLE 1. GENERAL INFORMATION ... 8

1.1. Location and Area ... 8

1.2. Population and Language ... 8

1.3. Membership in Organizations ... 8

1.4. Currency ... 8

1.5. Sources of Business Information ... 8

ARTICLE 2. ESTABLISHING A BUSINESS ... 9

2.1. Establishment Procedure ... 9

2.2. Principal Forms of Business Entities ... 9

2.3. Limited Liability Company (SRO)... 9

2.3.1. Establishing the Company ... 9

2.3.2. Registered Capital and Contribution... 10

2.3.3. Ownership Interest ... 10

2.3.4. General Meeting and Voting Rights... 10

2.3.5. Statutory Body and Management of the Company ... 10

2.3.6. Supervisory Board ... 11

2.3.7. Accounting ... 11

2.3.8. Auditing Requirements ... 11

2.4. Joint-Stock Company (AS) ... 11

2.4.1. Establishment of the Company ... 11

2.4.2. Registered Capital and Shares ... 11

2.4.3. General Meeting and Voting Rights... 12

2.4.4. Statutory Body and Management of the Company ... 12

2.4.5. Supervisory Board ... 12

2.4.6. Accounting ... 12

2.4.7. Auditing Requirements ... 12

2.5. Branch Offices of Foreign Companies ... 12

2.6. European Company ... 13

2.7. Company in Financial Difficulties ... 13

2.8. Licenses and Permits ... 13

2.8.1. Trade Licenses ... 13

2.8.2. Special Permits and Regulated Activities ... 13

ARTICLE 3. INVESTMENT INCENTIVES ... 16

3.1. Investment Incentives in the Slovak Republic ... 16

3.2. Eligibility for Investment Aid... 16

3.3. Form and Amount of Incentives ... 16

3.4. Proceedings ... 17

ARTICLE 4. EMPLOYMENT AND PERMITS ... 18

4.1. Visas and Permits ... 18 4.1.1. Visas 18

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4.1.2. Work Permits and Employing Foreigners ... 18

4.1.3. Blue Card... 19

4.2. Employment Relationship Regulations ... 19

4.2.1. Bonuses ... 19

4.2.2. Liability ... 19

4.2.3. Employee Representation ... 20

4.2.4. Trade Unions ... 20

4.2.5. Work Councils and Work Trustee ... 20

4.2.6. Employment Termination ... 20

4.2.7. Terms of Employment ... 21

4.2.8. Alternatives to the Employment Relationship ... 22

ARTICLE 5. COMPETITION ... 23

5.1. Merger Control ... 23

5.1.1. Concentration ... 23

5.1.2. Thresholds ... 23

5.1.3. Proceedings ... 23

5.2. Agreements Restricting Competition and Abuse of Dominant Position ... 24

5.2.1. Agreements Restricting Competition ... 24

5.2.2. Abuse of Dominant Position ... 24

5.2.3. Sanctions ... 25

ARTICLE 6. INTELLECTUAL PROPERTY ... 26

6.1. Overview ... 26

ARTICLE 7. TAXATION ... 27

7.1. Tax System Overview ... 27

7.2. Corporate Income Tax... 27

7.2.1. General Principles ... 27

7.2.2. Tax Deductible Items ... 27

7.2.3. Tax Depreciation ... 28

7.2.4. Capital Gains (Participation Exemption) ... 28

7.2.5. Deductions from the Tax Base ... 28

7.2.6. Tax Losses ... 28

7.2.7. Tax Compliance ... 28

7.3. Withholding Taxes ... 29

7.3.1. Dividends ... 29

7.3.2. Interest ... 29

7.3.3. Royalties ... 29

7.3.4. Thin Capitalization ... 29

7.3.5. Transfer Pricing ... 30

7.3.6. Taxation of Foreign Entities ... 30

7.3.7. Permanent Establishment (PE) ... 30

7.3.8. Securing Tax ... 31

7.4. Double-Taxation Relief and Tax Treaties ... 31

7.4.1. Table – Applicable Double-Tax Treaties ... 31

7.5. Personal Income Tax ... 33

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7.5.1. General Principles ... 33

7.5.2. Taxable Income and Tax Base... 33

7.5.3. Tax Exemptions ... 33

7.5.4. Personal Tax Deductions ... 34

7.5.5. Personal Income Tax Return ... 34

7.5.6. Payroll Tax ... 34

7.6. Social Security and Health Insurance ... 34

7.7. Value Added Tax... 35

7.7.1. General Principles ... 35

7.7.2. Registration Duty ... 35

7.7.3. VAT Recovery ... 36

7.7.4. VAT Refund ... 36

7.7.5. VAT Compliance ... 36

7.8. Excise Taxes ... 36

7.9. Transfer Taxes ... 37

7.9.1. Real Estate Transfer Tax ... 37

7.9.2. Gift Tax ... 37

7.9.3. Inheritance Tax ... 37

7.10. Property Taxes (Motor Vehicle Tax and Municipal Taxes) ... 37

7.10.1. Motor Vehicle Tax ... 37

7.10.2. Real Estate Tax ... 37

7.11. Special Levy on Undertakings in Regulated Sectors ... 37

7.12. Special Levy on Specific Financial Institutions ... 37

ARTICLE 8. REAL ESTATE AND CONSTRUCTION ... 39

8.1. Acquisition of Real Estate ... 39

8.1.1. Effectiveness of Real Estate Acquisitions... 39

8.1.2. Real Estate Transfer Fees ... 39

8.1.3. Verification of Title ... 39

8.2. Lease of Real Estate ... 39

8.3. General Information on the Building and Zoning Law ... 40

8.3.1. Zoning Decisions ... 40

8.3.2. Construction Permit ... 41

8.3.3. Use Permit ... 41

8.4. Environmental Impact Assessment ... 41

ARTICLE 9. ENFORCEMENT OF LAW ... 42

9.1. Court Proceedings ... 42

9.2. Arbitration ... 42

9.3. Enforcement Proceedings ... 42

9.4. Insolvency/ Bankruptcy/ Restructuring... 42

9.4.1. Declaration of Bankruptcy ... 43

9.4.2. Sanctions for Not Filing a Petition for Declaration of Bankruptcy ... 43

9.4.3. Satisfaction of a Creditor's Claims in the Bankruptcy ... 43

9.4.4. Denial of Registered Claims ... 43

9.4.5. Participation of Creditors in the Bankruptcy Proceedings ... 43

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5 9.4.6. Contestable Legal Acts ... 43

9.4.7. Operating the Business of a Bankrupt Debtor and Selling Bankruptcy Assets ... 43 9.4.8. Restructuring ... 44

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6 DOING BUSINESS IN THE SLOVAK REPUBLIC

Executive Summary

This paper is intended to guide foreign investors through the business environment in the Slovak Republic. In addition to general information about the Slovak Republic, this paper includes information on establishing a business, investment incentives, employment, competition, intellectual property, taxation, real estate (including construction) and enforcement of law.

Section 1, General Information, contains some fundamental information about the Slovak Republic and points out that it is a member state of majority in all relevant European and international institutions and organizations.

In Section 2 on Establishing a Business we point out that that a company in Slovakia can be registered in two business days. While there are a number of possible corporate structures that can be established in the Slovak Republic (as well as European forms, such as Societas Europea, etc.), the most frequently used entity to perform business in Slovakia is the limited liability company (SRO), which requires as a minimum EUR 5,000 in registered capital. In general, its shareholders are not liable for the company's obligations.

In Section 3 on Investment Incentives you will note that investors are able to request investment aid provided they fulfill statutory requirements. The most important aid is not applicable in the Bratislava region. Once the formal procedure is completed, the Slovak government grants the aid upon a motion from the Ministry of Economy of the Slovak Republic. There is, however, no legal entitlement on granting the investment aid.

Section 4, Employment, points out that principle of free movement of labour applies to all EU, EEA and Swiss nationals working in the Slovak Republic. Employees can be represented by trade unions, work councils or work trustees; however, creation of these bodies is not mandatory. As a general rule, the employer can terminate the employment relationship with an employee with a one to three months' notice and only if there is a statutory reason for termination.

Slovak competition law (Section 5 – Competition) is compliant with European competition rules. It covers merger control as well as agreements restricting competition and abuse of dominant position. The Slovak competition authority has broad powers to investigate (e.g. dawn raids) and is able to exchange a variety of information through its membership in relevant European and international competition networks.

Section 6 on Intellectual Property summarizes that Slovak IP regulation is consistent with European law.

The Slovak Republic is a party to all relevant international treaties, such as the Madrid Agreement or Paris Convention for the Protection of Industrial Property. Particular IP rights are covered by separate legislation on trademarks, designs, patents, and copyright (for the latter no formal requisites need to be fulfilled for protection to arise).

Section 7 on Taxation contains basic information on the Slovak tax system. The Slovak Republic has a standard set of direct and indirect taxes. It is notable that the Slovak corporate income tax is flat – 22%

and dividends are not subject to any taxation. Transfer pricing principles and thin capitalization rules apply both in domestic and cross-border transactions. The Slovak VAT scheme is in compliance with the relevant EU directives. VAT has two rates – basic 20% rate and reduced 10% rate.

Section 8 on Real Estate and Construction point out that Slovak real estate law does not adhere to the old Roman principle of superficies solo cedit. While there are some restrictions on foreigners acquiring certain plots of land, some structures exist to address this issue, for example establishing a Slovak- based business company, such as an SPV, for acquisition. In any event, before acquiring any real estate a due diligence review is strongly recommended.

In Section 9 (Enforcement of Law) we briefly point out that in addition to the Slovak court system, parties to transactions may opt for an arbitration body to have potential disputes resolved. Enforcement of decisions is generally done through private enforcement bodies, known as executors. Insolvency is governed by a separate law and except for bankruptcy it also enables restructuring. It is notable that under certain circumstances prescribed by the bankruptcy law the statutory bodies of companies must declare bankruptcy; otherwise, they may be liable for damage and/or imposed sanctions.

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7 This paper reflects legal status as of 1 January 2016. Please note that it contains only general

information and in no event constitutes legal advice. It is of an informative nature only and may not be relied upon or copied by any person. In order to conduct business in the Slovak Republic, specific legal advice should be sought.

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8 Section 1.

General Information

1.1. Location and Area

The Slovak Republic is a landlocked country in the heart of Europe. The country borders Poland to the north, the Czech Republic to the west, Austria to the southwest, Hungary to the south and Ukraine to the east. The Slovak Republic comprises 49,035 square kilometers.

Originally part of Czechoslovakia, it is divided into eight regions, and the capital city is Bratislava.

1.2. Population and Language

The Slovak Republic has approx. 5.5 million inhabitants (2013 Census). The majority of inhabitants are Slovaks; the national minorities are Hungarians, Czechs, Poles, Ukrainians and others. The official language is Slovak.

1.3. Membership in Organizations

Since 2004, the Slovak Republic is a member of the European Union. The Slovak Republic is also a member of the OECD, WTO, WIPO, NATO, IMF, OSCE and many other international organizations.

1.4. Currency

Since 2009, the official currency of the Slovak Republic is the euro (EUR), which replaced the original Slovak crown.

1.5. Sources of Business Information

(a) SARIO, the Slovak Investment and Trade Development Agency, address: Trnavská cesta 100, Bratislava, Postal Code: 821 01, phone: +421 258 260 100, fax:

+421 258 260 109, www.sario.sk;

(b) Slovak Business Agency, address: Miletičova 23, Bratislava, Postal Code: 821 09, phone: +421 250 244 500, fax: +421 250 244 501; www.sbagency.sk;

(c) Ministry of Economy of the Slovak Republic, address: Mierová 19, Bratislava, Postal Code: 827 15, phone: +421 248 541 111; fax: +421 243 337 827, www.mhsr.sk;

(d) Ministry of Finance of the Slovak Republic, address: Štefanovičova 5, Bratislava, P.O.

BOX: 82, Postal Code: 817 82, phone: +421 259 581 111, fax: +421 259 583 048, www.finance.gov.sk;

(e) National Bank of the Slovak Republic, address: Imricha Karvaša 1, Bratislava, Postal Code: 813 25, phone: +421 257 871 111, fax: +421 257 871 100, www.nbs.sk.

(f) Commercial Register, www.orsr.sk.

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9 Section 2.

Establishing a Business

2.1. Establishment Procedure

Forming a company or a partnership in the Slovak Republic is a two-step process. Firstly, the company or partnership must be established by execution of a deed of foundation by all of its founders. Following its establishment, the company or partnership must be incorporated by registration in the Commercial Register (an official register administered by the courts, containing relevant information about companies and partnerships).

Registering a company or partnership in the Commercial Register is carried out in court proceedings which generally take two business days; however, the court may prolong the period for an additional ten days. In these proceedings the court assesses whether the newly established entity meets all statutory requirements for its formation (validly executed deed of foundation, payment of registered capital, legal title to use its registered office, and others). If all statutory requirements are fulfilled, the court will issue a decision on registration in the Commercial Register of the company or partnership. The company or partnership is then fully incorporated on the day the court's decision enters into legal force.

2.2. Principal Forms of Business Entities

In the Slovak Republic, business entities are governed primarily by the Commercial Code. In addition, the legal regulation of certain specific business entities, such as banks and insurance companies, is contained in special laws.

There are four principal forms of business entities:

(a) partnership (in Slovak verejná obchodná spoločnosť – "VOS"), is a company whose partners are personally jointly and severally liable for the company's obligations in full;

(b) limited partnership (in Slovak komanditná spoločnosť – "KS"), is a company which has two types of members (partners): limited partners (analogical to SRO as explained below) and unlimited partners (analogical to VOS as mentioned above);

(c) limited liability company (in Slovak: spoločnosť s ručením obmedzeným – "SRO"), which is the most commonly used business form in the Slovak Republic; and

(d) joint-stock company (in Slovak: akciová spoločnosť – "AS") is the corporate form most widely used for operating a business involving larger investments.

Since the partners of a VOS or a KS (for unlimited partners) are personally liable for the company's obligations in full (and their liability for the company's obligations cannot be decreased or excluded), these forms of entities are rarely used. For the same reason, we have provided below further details regarding only the SRO and AS forms:

2.3. Limited Liability Company (SRO)

As mentioned above, the SRO is the most commonly used business form in the Slovak Republic. Among the advantages of the SRO are the relatively low minimum registered capital requirement (EUR 5,000), and limited liability of SRO members (interest holders) for the company's obligations.

Each member of an SRO is jointly and severally liable for the obligations of the SRO only up to the aggregate amount of unpaid capital contributions, as registered in the Commercial Register. Once all capital contributions are paid up and registered in the Commercial Register, the members' liability for the company's obligations terminates.

2.3.1. Establishing the Company

An SRO may be established by one or more natural or legal persons. There can be a maximum fifty members. Slovak law provides for the chaining prohibition principle, meaning that a sole-member company may not be the sole member in another SRO.

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10 An SRO is established upon the execution by all its founders of the deed of foundation

(signatures of the founders must be verified by a notary public). Apart from the deed of foundation, an SRO may also adopt articles to further govern selected corporate matters.

2.3.2. Registered Capital and Contribution

The minimum registered capital requirement for an SRO is EUR 5,000, while the minimum capital contribution of a member is EUR 750. The total amount of all contributions must equal the amount of registered capital.

The members' capital contributions to the registered capital of the SRO may be in cash or in- kind contributions. The value of an in-kind contribution to an SRO must be appraised by an independent expert.

The contributions must be paid up within five years from the incorporation of the company at the latest. Before filing the application for incorporation at Commercial Register (i) at least 30%

of the amount of each contribution must be paid up and (ii) the aggregate amount of paid-up contributions must be at least EUR 2,500. However, for sole founder (shareholder), the contributions to the registered capital of SRO must be paid up in full before incorporation. The same applies also to any in-kind contributions.

2.3.3. Ownership Interest

Each member of an SRO may have only one ownership interest. The amount of a member's ownership interest stake is determined according to the ratio of the amount of the members' capital contribution and the total amount of the company's registered capital, unless the deed of foundation provides otherwise.

2.3.4. General Meeting and Voting Rights

The members (interest holders) of an SRO exercise their voting rights at the general meeting, which is the supreme corporate body of the SRO. At the general meeting, the company's members decide on the company's most important corporate matters. Matters which fall within the powers of the general meeting are listed in the Commercial Code. The deed of foundation of the SRO may generally increase (but not decrease) the scope of powers of the general meeting.

The general meeting must be held at least once a year. To adopt resolutions, at least a majority of the votes of members present at the general meeting must be in favour of the proposed resolution (unless the law or deed of foundation stipulates otherwise). In most fundamental corporate matters, a higher quorum of votes is required).

2.3.5. Statutory Body and Management of the Company

The statutory body of an SRO, generally empowered to act on behalf the company in all matters, is one or more executives, who are elected and recalled by the general meeting. Each executive is authorized to act individually on behalf of the company (unless the deed of foundation or articles of association stipulate otherwise).

The deed of foundation, articles or general meeting may limit or restrict the rights of the executive(s) to act on behalf of the company in relations with third parties (typically, the deed of foundation may set forth financial thresholds for the execution of certain transactions by the executive which require the prior approval of the general meeting of the company). However it is a concept of Slovak law that any such limitations are not effective towards third parties (even if known to them), and an act of an executive in breach of any such restriction is fully valid and binding for the company.

Executives are responsible for the overall business management of the company (organization and management of the company's business affairs, strategic decisions, day-to-day operations, accounting, etc.).

Executives may not, among other things, be engaged in business activities connected with the business activities of the company or be a statutory body in a company with a similar scope of activities, except for the subsidiaries of the relevant company. Such restrictions can be broadened (but not reduced) by the deed of foundation/memorandum of association.

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11 2.3.6. Supervisory Board

An SRO may form a supervisory board, if the deed of foundation so provides. The main competences and responsibilities of the supervisory board are supervision of the executives' activities, revision of the company's accounts and financial statements, and it must inform the general meeting of its findings at least once per year. The supervisory board must have at least three members, who are elected by the general meeting. Executives of the company cannot be members of the supervisory board.

2.3.7. Accounting

An SRO is obliged to keep accounts from the day of its incorporation. The accounting period of an SRO is generally one calendar year, but the company may change its accounting period to a fiscal year different from the calendar year.

An SRO is obliged to prepare its financial statements for every accounting period. The financial statements must be approved by the general meeting and filed with the relevant tax office. The relevant tax office then files the financial statements to the Register of Financial Statements and Collection of Documents of Commercial Register.

2.3.8. Auditing Requirements

An SRO is obliged to have its financial statements audited if, at the end of the final day of the given accounting period; at least two of the following conditions are fulfilled:

(a) the total book value of the company's assets is greater than EUR 1,000,000;

(b) the company's yearly turnover exceeded EUR 2,000,000;

(c) the average number of company employees in the given accounting period was greater than thirty.

2.4. Joint-Stock Company (AS)

A Slovak AS is the corporate form most widely used in the Slovak Republic for operating a business involving larger investments. The company is fully responsible for its obligations towards third parties; however, the shareholders are not personally liable for the company's obligations.

2.4.1. Establishment of the Company

The company may be established by one or more legal entities or by at least two natural persons. The company is established by executing a deed of foundation by all its founders in the form of a notarial deed. The company may be established:

(a) without a public offering of shares – in this case the founders subscribe shares whose nominal value equals the total amount of the company's registered capital; or

(b) with a public offering of shares – in this case the founders subscribe shares whose nominal value forms part of the company's registered capital, and the remaining part of the registered capital is formed by the nominal value of shares to be subscribed by future shareholders, who may subscribe the shares in a public offering of shares.

An AS is obliged to adopt articles of association which supplement the deed of foundation and govern matters such as the rights and obligations of the shareholders and rules regarding management of the company. The articles of association form an inseparable part of the deed of foundation.

2.4.2. Registered Capital and Shares

The minimum registered capital of an AS is EUR 25,000. The registered capital of an AS is divided into shares, the aggregate nominal value of which corresponds to the total amount of the registered capital. Before incorporation, the entire amount of the registered capital must be subscribed and at least 30% of it must be paid-up.

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12 2.4.3. General Meeting and Voting Rights

The shareholders of an AS exercise their voting rights at the general meeting, which is the supreme corporate body. At the general meeting, the shareholders may decide on the most fundamental issues regarding the company. Matters which fall within the powers of general meeting are listed in the Commercial Code (the list may be extended in the articles of association. The general meeting may not, however (contrarily to the general meeting of an SRO), reserve the right to decide upon matters not entrusted to it by law or by the articles of association.

The general meeting must be held at least once a year. To pass a resolution, at least a majority of the votes of the current shareholders must vote in favour of the proposed resolution (unless the law or articles of association stipulate otherwise. In most fundamental corporate matters, a higher quorum of votes is required).

Voting rights at the general meeting are connected to a share (i.e., its nominal value). The number of votes per one share is determined according to the ratio of the nominal value of shares belonging to the particular shareholder to the entire registered capital of the company.

2.4.4. Statutory Body and Management of the Company

The statutory body of an AS is the board of directors. Each director may act on behalf of the company individually, unless provided otherwise in the articles of association. The board of directors is also responsible for management of the company and its business.

The right of directors to act on behalf of the company toward thirds persons may be limited; however, such limitations or restrictions are not effective vis- à-vis third parties (analogically to an SRO), and an act of a director in breach of any such restriction is fully valid and binding for the company.

The general meeting elects and recalls the directors, unless the articles of association provide that the supervisory board elects and recalls them.

2.4.5. Supervisory Board

An AS is obliged by law to form a supervisory board. The main competences and responsibilities of the supervisory board are to supervise activities of the board of directors, revise the company's accounts and financial statements, and inform the general meeting of its findings at least once per year.

The supervisory board must have at least three members who are elected by the general meeting. In companies with more than fifty employees, one-third of the members of the supervisory board must be elected by the employees of the company. Members of the board of directors cannot be members of the supervisory board.

2.4.6. Accounting

An AS is obliged to keep its books from the day of its incorporation. With regard to the accounting period and financial statements, the accounting requirements of an SRO described above also apply mutatis mutandis to an AS.

2.4.7. Auditing Requirements

An AS is obliged to have its financial statements audited by an independent auditor if, at the end of the final day of a given accounting period, at least two of the following conditions are fulfilled:

(a) the total book value of the company's assets is greater than EUR 1,000,000;

(b) the company's yearly turnover exceeded EUR 2,000,000;

(c) the average number of company employees in the given accounting period was greater than thirty.

2.5. Branch Offices of Foreign Companies

Under Slovak commercial law, a foreign company is a company which has its registered office outside the Slovak Republic. Foreign companies may establish branch offices in the Slovak Republic and carry out their business activities in the Slovak Republic via their branch offices in the same extent as Slovak entities.

A branch office of a foreign company is not a legal entity, but serves to represent a foreign company.

Therefore, all rights and obligations arising from the business activity of the branch office are not rights and obligations of the branch office, but of the foreign company itself.

In order for a branch office of a foreign company to be entitled to commence business activities in the Slovak Republic, the branch office must be registered in the Slovak Commercial Register, on the basis of

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13 an application filed by the foreign company. In addition, the branch office must also obtain all relevant

Slovak trade licenses and must appoint a head of the branch in the Slovak Republic.

2.6. European Company

In the Slovak Republic, European forms of commercial companies may also be incorporated. One such form is the societas europaea (European company or SE), which is primarily governed by EU Legislation1. An SE with its registered seat in the Slovak Republic is also governed by the provisions of the Commercial Code (mainly those regulating a joint-stock company) and by provisions of a specific Act2.

2.7. Company in Financial Difficulties

As of 1 January 2016 a rather extensive amendment of the Commercial Code came into force. Among others, this amendment incorporated into the Commercial Code the rules regarding Slovak companies in financial difficulties (in Slovak: spoločnosti v kríze).

Its purpose, as declared by the Slovak government, is to set up rules for providing the loans to Slovak companies and, in case of shareholder financing to motivate the shareholders to prefer equity financing instead. The new rules apply to certain Slovak companies, among others also to the AS and the SRO.

The company in financial difficulties is defined as a company which:

(i) is insolvent; or

(ii) with respect to which an insolvency is threatened. A company is considered under an insolvency threat if its ratio of equity to all liabilities is less than 4:100 in 2016, 6:100 in 2017 or 8:100 from 2018.

2.8. Licenses and Permits

2.8.1. Trade Licenses

In order for a company or partnership to be entitled to carry out business activities, the company or partnership must obtain the relevant trade licenses. The Trade Licensing Act3 contains the requirements for an entrepreneur or, in the case of a company or partnership, its statutory body. These requirements must be fulfilled before the company or partnership is able obtain the required trade license(s) authorizing it to carry out the relevant trade activity.

The general requirements for obtaining trade licenses, which must be fulfilled by the entrepreneur (or for companies and partnerships, by its statutory body), are as follows:

(a) minimum 18 years of age (required for all trades);

(b) full legal capacity (required for all trades);

(c) integrity in the sense of the Trade Licensing Act (i.e. a clean criminal record in respect of a broad range of criminal acts – required for all trades);

The special requirements (required for carrying out regulates trades and crafts), mainly involve prescribed education, professional qualification and/or professional expertise in the relevant field. If a company/partnership intends to carry out any regulated trades or crafts it must appoint a so-called responsible representative, who needs to meet in addition to the general requirements also the special requirements for the relevant type of activity performed by the company/partnership and who is either a Slovak resident or a foreigner with other permit of residency in the Slovak Republic. In addition, as a general rule, a responsible representative has to be a full-time or part-time employee of the company/partnership.

2.8.2. Special Permits and Regulated Activities

In addition to trade licenses issued by the Trade Licensing Office, other state authorities grant licences for carrying out certain specific activities. These regulated sectors include insurance, banking, energy, broadcasting and retransmission and pharmaceuticals.

Insurance

1 Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European Company (SE) and Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European Company with regard to the involvement of employees

2 Act No. 562/2004 Coll., on European Company, as amended

3 Act No. 455/1991 Coll., the Trade Licensing Act, as amended

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14 The Slovak Insurance Act4 is a primary law governing the activities of insurance companies in the Slovak

Republic. Insurance activities may be carried out in the Slovak Republic by Slovak insurance companies (i.e., companies with their registered office in the Slovak Republic), insurance companies from other EU member states or foreign insurance companies (i.e., companies with their registered office outside the EU).

Insurance companies in the Slovak Republic may be established either as a joint-stock company or a European company (societa europea). A Slovak insurance company is authorized to carry out its insurance business based on a license granted by the National Bank of Slovakia (NBS), which also determines the extent of such business.

An insurance company from other EU member state is authorized to carry out its insurance business in the Slovak Republic either under the freedom of establishment or under the freedom to temporarily provide services within the same scope as it is authorized to carry out its insurance business in its home member state (i.e. the state of its registered office).

A foreign insurance company from a non-EU country may carry out insurance business in the Slovak Republic only through its branch, based on a separate license granted by the NBS.

Banking

Banking in the Slovak Republic is governed primarily by the Slovak Act on Banks5. Banks may be established in the Slovak Republic only as a joint-stock company. Apart from Slovak banks (banks with their registered office in the Slovak Republic), banking activities may also be carried out in the Slovak Republic by foreign banks (banks with their registered office outside the Slovak Republic) via their branches (and in certain cases also without having a branch established in the Slovak Republic.).

In order to be entitled to carry out banking activities in the Slovak Republic, Slovak banks and generally also foreign banks need to obtain a license from the NBS. The licence determines the scope of banking activities which the bank is allowed to carry out in the Slovak Republic.

Foreign banks from non-EU countries which intend to carry out banking activities in the Slovak Republic are required to establish a branch in the Slovak Republic and obtain a license from the NBS.

Banks with their registered office in an EU country may carry out banking activities in the Slovak Republic on the basis of a license granted in their member state under a procedure known as a single banking passport. However, in order to carry out mortgage-related business or activities of depository in the Slovak Republic, a separate license for these activities must be always obtained from the NBS; these activities may not be passported.

The minimum amount of a Slovak bank's registered capital is EUR 16.6 million. At least EUR 33.2 million is required for a mortgage bank.

Broadcasting and Retransmission

Broadcasting and retransmission in the Slovak Republic are generally governed by the Slovak Act on Broadcasting and Retransmission6 and the Slovak Act on Digital Broadcasting7.

Generally, a license issued by the Slovak Council for Broadcasting and Retransmission is required to carry out broadcasting in the Slovak Republic. According to Slovak law, a license for broadcasting may be granted to an individual or to a legal entity. A license may only be granted to a legal entity if it has the form of a commercial company, has its registered seat in the Slovak Republic or has established a branch in the Slovak Republic that is registered with the Commercial Register. If a legal entity was incorporated in the form of a joint-stock company, the issued shares must be registered share and must be recorded by the Slovak Central Securities Depository, or the shareholders must be recorded in a list of shareholders maintained by the Slovak Central Securities Depository.

Unless specific conditions are met, in order to provide retransmissions a registration with the Slovak Council for Broadcasting and Retransmission is required. Individuals as well as legal entities may be registered as providers of retransmission. A legal entity seeking to register for retransmission must be registered with the Slovak Commercial Register and have its seat in the Slovak Republic.

Pharmaceuticals

4 Act No. 38/2015 Coll., on Insurance, as amended

5 Act No. 483/2001 Coll. on Banks, as amended

6 Act No. 308/2000 Coll. on Broadcasting and Retransmission, as amended

7 Act No. 220/2007 Coll. on Digital Broadcasting, as amended

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15 A legal entity or an individual may only dispose with drugs and medical devices based on a license granted

in accordance with the Slovak Act on Drugs and Medical Devices8 and is required to appoint at least one professional representative; particular requirements regarding the number of professional representatives vary based on types of drugs and medical devices.

Other

Other fields of business, for example telecommunications, electronic communications, production and distribution of energy are also governed by specific laws.

8 Act No. 362/2011 Coll. on Drugs and Medical Devices, as amended

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16 Section 3.

Investment Incentives 3.1. Investment Incentives in the Slovak Republic

The Slovak Republic is characterized by considerable regional differences due to various reasons.

Investment incentives are one of the tools used to motivate investors to also set up their projects in less developed regions, i.e. regions with higher unemployment, lower infrastructure quality, etc.

Any investment incentives provided by the Slovak Republic must comply with the applicable EU legislation, especially Articles 107 and 108 of the Treaty on the Functioning of the European Union. Thus, as a general rule, state aid is prohibited. There are some exceptions, however, that could be considered to be compatible with the internal market, most importantly if the aid is aimed at promoting economic development in areas where the standard of living is abnormally low, or where there is serious underemployment.

The positive impact of a new investment must be evidenced by jobs creation, by more opportunities for graduates as well as by new entrepreneurial opportunities for local companies.

3.2. Eligibility for Investment Aid

According to the Act on Investment Aid9, a beneficiary of investment aid should be a legal person or an individual entrepreneur with its registered seat in the Slovak Republic, who will implement the investment in the Slovak Republic. In other words, branches of foreign entrepreneurs cannot be recipients of national regional aid. The beneficiary must be fully owned by the applicant, or the applicant must be a controlling person of the beneficiary.

The Act on Investment Aid divides projects which may be supported by the investment incentives into four categories:

(a) industry;

(b) technological centres;

(c) shared services centres;

(d) tourism.

Conditions that have to be met in order to be eligible for investment aid are defined separately for each type of project. For example, the minimum amount of investment differs, subject to the type of investment and the level of unemployment in the particular region. For industry projects, it ranges from EUR 3.5 mil. to EUR 14 mil. For technology centres and centres of strategic services it is EUR 0.5 mil and EUR 0.4,mil respectively. For tourism it ranges from EUR 5 mil to EUR 10 mil.

Also, EU legislation excludes certain sectors from applying for regional aid at all. These include: fisheries, the coal industry, shipbuilding, transport, and agriculture. These sectors follow a specific legal regime. The steel industry and synthetic fibers sector may apply for regional aid only after a careful examination of the project.

There is no legal entitlement to receive investment aid. The decision is influenced by numerous factors, such as the amount of investment, the number of newly created jobs, their structure and the comprehensive impact on the particular region.

3.3. Form and Amount of Incentives

Investment aid is awarded for the set-up of initial investments and job creation linked to initial investments, relating to (i) setting up a new establishment, (ii) expanding or (iii) diversifying the output of production or fundamentally changing the overall production process of an existing establishment, (iv) setting up a new technology centre or expanding of an existing one, (v) setting up a centre for shared services or expanding an existing one, (vi) setting up a complex centre of tourism or expanding an existing one..

Incentives are provided in the form of:

(a) subsidies for the acquisition of long-term material assets and long-term immaterial assets;

(b) income tax relief;

(c) contribution for created new jobs;

(d) transfer of immovable property or exchange of immovable property at a price lower than the general asset value.

9 Act No. 561/2007 Coll. on Investment Aid, as amended

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17 Eligible costs are expenditures on (i) long-term material assets – land, buildings and machinery located in

the Slovak Republic, (ii) long-term immaterial assets (with certain limitations in relation to its value), and (iii) wages of employees hired in connection with the investment plan, including health insurance and social insurance deductions or contributions to pension savings. Material and immaterial assets have to be purchased from third parties under standard market conditions.

"Intensity of the aid" means the maximum proportion of the eligible costs which may be approved for the investor in the form of particular investment incentives. The maximum intensity differs depending on the district and it may vary from 25%-35%.

The limits in particular regions (percentage of total eligible costs which are reimbursed) are as follows:

(a) Bratislava region– 0%;

(b) Western Slovakia –25%;

(c) Central Slovakia – 35%;

(d) Eastern Slovakia – 35%.

The above amount could be increased depending on the size of the applicant's enterprise. Note that apart from investment aid, investors could also apply for other types of permitted state aid, e.g., for training aid (cash grants for either general or specific employee training) or for aid for research, development and innovation (in the form of subsidies or as a proportional tax credit).

3.4. Proceedings

In the Slovak Republic, the Act on Investment Aid applies to all proceedings related to investment incentives. The procedure consists of the following main steps:

 the investor submits the investment project to the Ministry of Economy or the Ministry of Transport, Construction and Regional Development (in case of investment aid for tourism);

 the investment project is evaluated and an expert report on such evaluation is prepared;

 if the evaluation is positive, the Ministry prepares a proposal for the provision of investment aid and sends this to the providers of the investment aid for comments;

 the providers assess the proposal and provide to the Ministry their opinions on the provision of the investment aid;

 based on the affirmative opinions of the providers, the Ministry draws up an offer of investment aid, which is sent to the applicant and provider of the investment aid;

 having received the offer, the applicant may file an application with the Ministry for provision of the investment aid;

 if the applicant meets the conditions for provision of the investment aid, the Ministry submits to the government of the Slovak Republic a proposal for the provision of investment aid (the proceedings vary to some extent for investments with a value over EUR 200 million).

The investment project should mainly include the applicant's details, amount of investment, number of created jobs, amount and forms of incentives requested. Additional requirements are described in more detail in the Act on Investment Aid.

Work on a project cannot be started before the Ministry of Economy issues a formal statement that the investor has fulfilled all conditions required when applying for the regional aid. If work on project starts before this statement is issued, the whole project loses its eligibility for investment aid.

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18 Section 4.

Employment and Permits Article 1.

4.1. Visas and Permits

4.1.1. Visas

All non-EU and non-EEA nationals (third-country nationals) are generally required to hold a visa before entering the country, unless the Slovak Republic has entered into a bilateral visa-waiver agreement with the foreign national's country of citizenship. A list of countries falling outside the visa waiver regime is available at http://www.minv.sk/?bezvizovy-rezim.

There are different types of visas in the Slovak Republic — the Schengen visa or National visa. A Schengen visa (under Regulation of the European Parliament and of the Council No. 810/2009 establishing a Community Code on Visas) allows the holder stay for a total of up to 90 days within a period of 180 days for tourist or business purposes. A national visa may be granted to a third country national, inter alia, if it is necessary in connection with the granting of a residence permit in the Slovak Republic. The applicant may apply for a visa at the respective Embassy or Consulate of the Slovak Republic which may grant a national visa only upon the prior statement by the Slovak Ministry of Interior (unless otherwise agreed between the Ministry of Interior and the Ministry of Foreign and European Affairs). In general, a national visa can be granted for a period longer than three months, but it may not exceed one year. In connection with granting a residence permit in the Slovak Republic, a national visa can be granted for ninety days.

4.1.2. Work Permits and Employing Foreigners

The principles of free movement of labour apply to all EU, EEA and Swiss nationals working in the Slovak Republic, as well as to their family members. Employees from these countries do not require work permits, provided they have a travel document or an identity card. On the other hand, non-EU and non-EEA (and non-Swiss) nationals and their family members are subject to specific requirements, and they may enter the Slovak labour market under several regimes (combination of specific conditions), namely, before they start working in the Slovak Republic such third-country nationals must:

a) obtain a work permit and a temporary residence permit for employment purposes;

b) be granted a "blue card" of the European Union (please see below);

c) obtain temporary residence for employment purposes based on a confirmation of a vacancy in the Slovak Republic;

d) obtain a work permit and a temporary residence permit for the purposes of family reunion;

e) obtain a work permit and a temporary residence permit as a citizen of a third country who has been assigned the status of long-term resident of the EU, unless otherwise stipulated by law; or

f) fulfill conditions under section 23a of the Slovak Act on Employment Services (such a condition is for example that a third-country national (i) has been granted asylum, (ii) is an asylum applicant entitled to enter the labour market under a special regulation, (iii) obtained a temporary residence permit for the purposes of studies, and he/she does not perform work on average for more than ten hours a week, or twenty hours a week if he or she is a university student, in total (with respect to all employers), (iv) is an employee posted by an employer seating in the EU in connection with services provided by that employer, (v) obtained permanent residence in Slovakia, etc.). Section 23a of the Act on Employment Services provides for more than twenty other regimes under which it is not necessary to obtain confirmation of free vacancy or work permit.

An employee under points a) to e) above may only be hired in an employment relationship based on an employment contract (i.e. not hired in an alternative labour-law relationship, such as one based on an agreement on work performed outside the employment relationship), and they cannot be temporarily assigned to another employer.

A work permit may be generally granted for a maximum period of two years, or for a maximum of five years if it results from relevant international treaty binding for the Slovak republic or if mutuality is guaranteed. A work permit is renewable. However, in relation to certain regimes of third-country nationals' stay in Slovakia (such as seasonal work, family reunion purposes, status of a long-term resident of the EU) the maximum period for a work permit is shorter. There is no legal entitlement to being granted a work permit. In addition, a work permit cannot be granted to asylum applicants or to a person who does not meet any of the statutory conditions for a work permit.

At present, employing non-EU, non-EEA (non-Swiss) nationals is subject to certain limits. A work permit may only be granted based on a written application of a third-country national, an employer or a person/entity to which such national is to be posted to perform work, if it is not possible to employ a Slovak or an EU national, and a Slovak Republic registered employer must advertise the available position with the local Office for Labour, Social Affairs and Family

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19 4.1.3. Blue Card

The Slovak Republic also recognizes a 'blue card' – a permit for long-term residence in the Slovak Republic for employment purposes under special circumstances. The blue card combines a residence permit and a work permit in one document. The validity of a blue card is for three years or for a period of employment extended by 90 days. It is possible to extend its validity under certain circumstances for up to additional three years or additional period of employment extended by 90 days. Non-EU and non-EEA nationals having these cards do not need a work permit. The blue card is intended to be issued only for highly qualified positions.

4.2. Employment Relationship Regulations

The primary legal regulation of employment relationships is contained in the Slovak Labour Code10. The Slovak Labour Code lays down the minimum requirements of employee protection with respect to the terms and conditions of employment. More favorable arrangements can be provided for in collective bargaining agreements and in the employee's individual employment contract.

Collective bargaining agreements can be concluded either (a) at the company level, between an employer and trade union active at the employer or (b) at a higher, usually industrial, level, between a union or organization of employers and the respective major trade union(s) active in the field concerned. Under certain conditions, higher-level collective bargaining agreements can be extended to other employers without the need of their consent, even if they are not signatories to the higher-level collective bargaining agreements.

Employment (pracovný pomer) is established and governed by a written employment contract. The employment contract must have a written form, though if no written contract is concluded, the employee would still be protected by the Slovak Labour Code. The Slovak Labour Code stipulates the minimum particulars of an employment contract, though it is usually recommended to address other terms and conditions of employment in the employment contract as well.

4.2.1. Bonuses

Contractual and discretionary bonuses are common. The Slovak Labour Code does not contain any particular regulation on bonuses (other than the implied application of the general principle of non- discrimination), which in principle leaves employers free to govern their own bonus schemes.

4.2.2. Liability

Employer's Liability

Subject to the existence of a liberation reason, the employer is liable for:

(a) damage sustained by the employee due to the employer breaching its obligations or willfully acting contrary to good moral conduct (in Slovak: dobré mravy) in relation to the employee's performance of his/her working duties or in direct connection therewith;

(b) work injury (impairment of health or death of an employee) sustained by the employee in relation to his/her performance of working duties or in direct connection therewith, and

(c) damage to an employee's property left with the employer in relation to the employee performing his/her working duties or in direct connection therewith.

The employer is insured against damage under (b) above under the mandatory insurance scheme operated by the Social Insurance Company. With respect to damage to the employee's property, the employer must compensate the actual damage.

Employee's Liability

An employee is liable for damage caused when breaching his/her obligations in relation to performing working duties or in direct connection therewith and for damage caused by willfully acting contrary to good moral conduct. The employer must prove the employee's fault. A special regime applies to liability for valuables entrusted to the employee under an agreement on strict liability.

An employee's liability for damages caused as a result of willful misconduct is unlimited. On the other hand, an employee can be held liable for damages caused as a result of his/her negligence only up to four times his/her average monthly salary.

10 Act No. 311/2001 Coll., the Labour Code, as amended

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20 4.2.3. Employee Representation

Slovak law recognizes the following forms of employee representation: (a) trade unions; (b) work councils;

and (c) employee trustee, but creating them is not mandatory (i.e. not required by law)11. Employee representatives participate in the formation of working conditions by:

(a) co-decision making – the employer can take certain actions only upon reaching agreement with the employee representatives (e.g. dismissing trade union officials, adopting a Work Order (in Slovak:

pracovný poriadok);

(b) consultation – employee representatives must be consulted on certain matters; the consultation must have the aim of reaching an agreement, though if no agreement is reached the employer is not prevented from carrying out the suggested action;

(c) having a right to information – employers must provide employee representatives with information stipulated by the Slovak Labour Code;

(d) oversight of the employer.

4.2.4. Trade Unions

Trade unions are relative easy to establish. A trade union must notify the employer about the start of its activities at that employer, and it must submit to the employer the list of its members. Trade unions have an exclusive right to collective bargaining and supervising the employer in matters of health and safety.

4.2.5. Work Councils and Work Trustee

Work councils represent all employees of an employer employing at least fifty employees. Work council members are elected by employees of the employer. An employee trustee may be active at an employer with between three and fifty employees. An employee trustee has the same rights and obligations as a work council.

4.2.6. Employment Termination

Employment can be terminated only by the means (e.g. mutual agreement, termination notice) and for the reasons stipulated by the Slovak Labour Code. As a general rule, each notice of termination or immediate employment termination of the employer must first be consulted with the employee representatives, if any.

An employee may give notice of termination to the employer for any reason whatsoever (or without stating a reason). The employer may terminate employment by notice only for the reasons set forth in the Slovak Labour Code. This includes so-called organizational reasons, often used when restructuring the employer's activities. Termination by notice is very formal process, strictly regulated by the Slovak Labour Code, and any incompliance may result in invalidity of the notice.

Claims of invalidity of a termination notice must be brought within two months from the date of the disputed employment termination. If the employee is successful with his/her claim the employment is deemed to have continued provided that the employee requests the employer to be further employed (as applicable).

In this case the employer must offer the employee his/her original work position or a position determined in accordance with the Slovak Labour Code. At the same time the employer must compensate the employee his/her salary for the period beginning when he/she received the employer's notification of termination until he/she as returned to work at the employer (or the date of termination as determined by a court), currently capped at thirty-six (36) months. However, the employer may request the court to reasonably decrease or not to award compensation exceeding twelve months (if relevant).

Notice Periods

The actual length of the notice period depends on the duration of the employment and/or the reason of termination of employment. Currently, the notice period is between one and three months (depending on the reason for termination and the length of the employee's employment). The notice period commences on the first day of the calendar month following the month in which the termination notice was delivered to the employer, and ends on the last day of the relevant calendar month.

Severance Payments

An employee is entitled to severance payment if the employment relationship terminates by an agreement on termination of employment on grounds specified by the Slovak Labour Code, particularly for organizational reasons. The employee is also entitled to severance payment if his/her employment is

11 In general, creation of these bodies is in the hands of the employees.

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21 terminated by notice due to the same reasons. Depending on the length of the employee's employment,

the minimum severance payments range from one to four average monthly earnings of the employee for termination by employer's notice, or from one to five average monthly earnings of the employee for termination by mutual termination agreement.

If termination (by agreement or notice by the employer) is for health reasons resulting from an occupational disease or work injury, the employee is entitled to a severance payment of at least ten times his/her average monthly earnings.

The severance payment may be increased or linked to other situations by virtue of a collective agreement, internal regulation or in an individual employment contract.

Protected Employees

The Slovak Labour Code protects certain categories of employees (e.g. pregnant female workers, workers on maternity or parental leave, etc.) against unilateral termination of their employment by the employer due to reasons stipulated by the Slovak Labour Code. Specific protection applies also to members of employees' representatives during the term of their function.

Collective Dismissals

In general, a collective dismissal is considered a termination of employment by the employer or its part due to reasons not attributable to the employee, provided that the employment is terminated within a period of thirty days:

(a) with at least ten employees by an employer employing more than 20 but less than 100 employees;

(b) with at least 10% of all employees at an employer employing at least 100 but less than 300 employees;

(c) with at least 30 employees at an employer employing at least 300 employees or more.

In addition to the general obligations applicable to employment termination, in cases of collective dismissals the employer must meet certain information duties towards the employee representatives (and if non-existent directly towards the involved employees) and consult them on matters stipulated by the Slovak Labour Code. Consultation itself is sufficient to meet the employer's legal obligations – an agreement does not necessarily need to be reached. Furthermore, during the process of collective dismissal the employer also has certain notification duties towards the Office for Labour, Social Affairs and Family.

Failure to comply with the obligations regarding collective dismissals may result in the employee's entitlement to a payment from the employer in the amount of at least two times the average monthly earning of the employee.

4.2.7. Terms of Employment

The following table contains an overview of selected terms of employment.

Probation period It must be agreed in writing in the employment contract.

Duration: up to three (3) months or six (6) months for top management.

Working hours A working week consists of a maximum of forty working hours with certain exceptions (this limit is shortened for certain categories of employees, such as juveniles, shift-workers, and workers working with chemical carcinogens).

Employees' weekly average working time, including overtime work, cannot in general exceed forty-eight hours.

Overtime work The employer may demand on average a maximum of eight hours of overtime work per week, but no more than 150 hours per year.

Total overtime work (both required by the employer and performed with the employee's consent) may not exceed on average eight hours per week and 400 hours per year.

Minimum statutory salary (applicable for an employee with weekly working time of 40 hours)

Monthly: EUR 405 Hourly: EUR 2.328

The minimum salary of a particular employee would depend on the degree of work difficulty of the employee's work position.

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22 Compensation The employer must pay the employee the following minimum compensation (in

addition to the salary):

 25% of the employee's average earnings (35% of average earnings for hazardous work) for overtime work, unless the employee accepts unpaid leave instead;

 50% of the employee's average earnings for work during public holidays, unless the employee accepts unpaid leave instead;

 20% of the minimum statutory salary/per hour of night work.

For certain categories of employees specified by the Labour Code (e.g. top management), the compensation may be already included in the agreed salary, for overtime up to a maximum 150 hours per year or for work on public holidays.

Holiday allowance Minimum of four weeks per year.

Employees, who reach at least 33years of age in the respective calendar year, are entitled to a minimum paid holiday of five weeks.

Maternity leave  34 weeks;

 37 weeks for single females; and

 43 for multiple births

Maternity leave can begin as early as the eighth week before the expected date of childbirth; however, employees generally start their maternity leave at the beginning of the sixth week before the expected date of childbirth.

Parental leave Parental leave must be granted to female or male employees upon request, and the leave may last up to child's third birthday (or sixth birthday if the child's health requires long-term special care). Parental leave is granted for the period requested by the employee.

Maternity/parental benefits

During maternity/parental leave, the employee is entitled to maternity/parental benefits (providing that the employee meets the relevant requirements of the social insurance law). These are paid by the Social Insurance Company (for maternity leave) and the Office for Labour, Social Affairs and Family (for parental leave).

4.2.8. Alternatives to the Employment Relationship

In addition to the employment contract, work can also be performed under other contractual arrangements recognized by the Slovak Labour Code. These alternative forms of employment should not be used instead of employment relationships based on an employment contract; thus, their use is limited, particularly in the extent of work which can be performed under them. On the other hand, these alternative forms of employment provide the employer with greater flexibility, particularly with respect to their termination.

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23 Section 5.

Competition

5.1. Merger Control

Certain acquisitions (amounting to a concentration – see definition below) cannot generally be implemented by the parties before being first approved by the relevant competition authority (known as a 'stand-still obligation'). Merger control in the Slovak Republic is governed by the Act on Protection of Competition12.

5.1.1. Concentration

The Slovak Competition Act defines a concentration as an economic combination of undertakings through the process of a merger or amalgamation of two or more previously independent undertakings, or an acquisition of direct or indirect control by one or more undertakings over another undertaking (or its parts) or undertakings (or their parts).

A concentration also arises upon the establishment of a joint venture controlled by two or more undertakings, which permanently carries out the functions of an independent economic entity (known as a full-function joint venture).

The Slovak Competition Act specifies the situations which are not considered to be a concentration, for instance, a temporary acquisition of control by banks, insurance companies or other financial institutions under conditions stated by law on the basis of a temporary acquisition of securities for the purpose of their further sale.

5.1.2. Thresholds

Only concentrations achieving the turnover figures specified below are subject to an approval by the Antimonopoly Office of the Slovak Republic (the "Slovak Antimonopoly Office"):

EITHER

(a) The combined turnover13 of the undertakings concerned in the Slovak Republic is at least EUR 46 million and at least two of the undertakings concerned achieved in the Slovak Republic a turnover of EUR 14 million each;

OR

(b) Total turnover achieved in the Slovak Republic:

(i) for a merger, is at least EUR 14 million achieved by one of the undertakings concerned and at the same time the worldwide turnover achieved by another of the undertakings concerned is at least EUR 46 million;

(ii) for an acquisition of control, is at least EUR 14 million achieved by at least one of the targets (i.e.

an undertaking concerned over which (or part of which) control is acquired) and at the same time the worldwide turnover achieved by any other of the undertakings concerned is at least EUR 46 million;

(iii) for the establishment of a JV, is at least EUR 14 million achieved by at least one of the undertakings concerned creating the JV and at the same time the worldwide turnover achieved by another of the undertakings concerned is at least EUR 46 million;

(provided, however, that the given concentration does not have an EU dimension in which case it must be notified to the European Commission).

5.1.3. Proceedings

If the above-mentioned turnover thresholds are met the undertaking(s) concerned must file a notification of concentration to the Slovak Antimonopoly Office, unless the concentration is subject to approval by the European Commission.

In simple transactions (the Slovak Antimonopoly Office has full discretion to assess whether a particular transaction could be treated as a simple transaction) the Slovak Antimonopoly Office has to issue a decision within twenty-five business days (Phase 1). In these cases, the Slovak Antimonopoly Office does

12 Act No. 136/2001 Coll. on Protection of Competition, as amended

13 Turnover means a turnover achieved in an accounting period preceding a concentration.

Figure

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References

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