The success of a business idea is influenced by many factors, including the environment itself, where we decide to realize our business goals. People’s culture, habits and way of life have a lot of influence. All these socio-demographic factors are difficult to measure and evaluated subjectively, without numerical indicators that could more tangibly dictate the lifestyle of people in a certain region. However, legal frameworks, tax burdens and incentives and other state regulations that shape the way of doing business in a certain country are unambiguously measurable.
About Slovenia
Slovenia is a transit country that belongs to the area of Central Europe. Due to its history as part of the Yugoslav state, there are still strong links between the Balkan countries, which provide business opportunities and connections for companies along the Adriatic Sea. Slovenia also has excellent connections with other Central European countries, since as an already well-established EU member state, it actively participates and visibly participates in the formulation of (Central) European policy.
Slovenia became independent in 1991 when it seceded from the Federal Republic of Yugoslavia. The next major milestone occurred in 2004 when it entered the European Union, and in 2007, the nation of 2 million people changed its official currency, the Tolar, to the Euro.
The Slovenian economy is generally stable and safe for the development of business ideas and their implementation. Greater instability could be detected in 2009 when GDP decreased by 7.8 percentage points, but in 2014 it rose again above the pre-crisis level. The COVID-19 pandemic also had a strong impact on the economy, but at the same time, it brought some new business opportunities and success stories. The economy recovered quickly, even if the year 2021 was still partly marked by the pandemic and the following measures to contain the virus.
Why Should You Invest In The Slovenian Economy?
What are the qualities of the Slovenian economy that you consider when choosing an investor to support and, as a result, invest in the Slovenian economic space?
– Qualified workforce
The Slovenian workforce is, on average, well-educated, as education is often associated with good employability of people. The state also regularly distributes subsidies for hiring less employable personnel; elderly, young or those who have been trained for a different profession.
– Close to foreign markets
Due to its location, Slovenia attracts many investors who want to build a network of customers both in Southeast Europe and Central Europe. With a supportive business environment in Slovenia, such a plan is easier to reach potential investors.
– Infrastructure
Slovenia boasts a modern infrastructure that enables individuals to quickly transfer goods and materials from one point to another. Due to the small size of the country, distances are relatively short.
– Foreign investments in Slovenia
In Slovenia, there are no restrictions on foreign investors entering the Slovenian market. Investments are allowed to both foreign legal entities and natural persons unless otherwise stipulated by the Foreign Exchange Act and relevant international agreements.
Slovenia treats companies equally at home and abroad.
Establishing A Company In Slovenia
Within the framework of Slovenian legislation, it is possible to establish several different legal organizational forms of companies:
Within the framework of a partnership, it is possible to establish a limited partnership, general and silent partnership. As a corporation, a joint-stock company, a limited liability company and a limited partnership by shares are possible. The establishment of an sole proprietorsis also possible.
The process of establishing a company is not complicated. Among other things, the legislation also allows for the establishment of offshore companies or branches.
Registration Process For Establishing A Company
Company registration usually takes up to 3 weeks and follows the following steps:
- Confirmation of the articles of association and appointment of the manager by a Slovenian notary
- Opening a bank account at the selected local bank
- Settlement of the founding capital
- Registration in the court register
- Company registration at the Statistical and Tax Office
Here are some documents that are absolutely necessary for company registration in the case of a founder of a legal entity:
- Certificate of registration of the founder’s company in Slovenian,
- A copy of the identity document of the designated manager or representative
- Verification of the manager’s signature by a notary
- The authorization of the founder of the company, issued to the person who signs the founding document of the new company.
- Official contract of incorporation.
However, if the company is founded by a natural person, i.e. an individual, the latter must provide a copy of the identity document, a signature verification of the manager and an official contract of the establishment.
Employment Of Foreign Workers
All foreigners who have a work permit or another equivalent permit according to an international agreement can work in Slovenia without restrictions.
The work permit is issued by the state at the request of the employer. This enables foreigners to be employed by the applicant’s employer. Work permits are issued for a maximum of one year, otherwise, a worker can obtain a permit for an indefinite period when he has permanent residence in Slovenia.
Taxes
A taxable person is any legal entity that reports profit from operations in Slovenia, where the company’s registered office is also located.
Profits from abroad are not subject to tax if they have been settled with foreign corporate tax in the amount of at least 12.5%. Otherwise, the corporate profit tax is 19%.
The tax base is the profit shown during the tax period, reduced by any subsidies and reliefs. From 2020, the reduction of the tax base due to the use of tax losses and tax relief for research and development is recognized in the amount of 63% of the tax base. Otherwise, certain tax incentives change and upgrade over the years and cover different areas of taxes. With this, employers are encouraged to various proactive activities that help society; for example, the inclusion of disabled people in various employment spectrums, as well as the inclusion of employees in pension and disability insurance, support for donations to humanitarian and other organizations, and the like.
In the past, Slovenia also signed a double taxation document with most European countries as well as countries of a global standard.
Personal income is taxed progressively, the amount of the tax rate depends on the tax base. We have several tax brackets, and the level of income determines which bracket we belong to.
Capital, interest and dividends are also taxed. Taxation of capital, and real estate, depends on the period of time when we own the real estate. The longer the time period, the lower the tax rate. Bank interest is taxed at a 25% tax rate if it exceeds the threshold of €1,000.
The most common tax is a value-added tax. With this, all goods and services in Slovenia are taxed. The normal VAT tax rate is 22%, while the 9.5% and 5% tax rates also remain. With a 9.5% tax, food, public transport, groceries, seedlings, hotel accommodation, medicines and medical equipment and others are taxed, while a 5% tax rate is applied to books, and newspapers. Medical care, social care, education, sports and similar activities are taxed at a 0% tax rate.
Accounting and Reporting
All companies in Slovenia are obliged to report annual financial statements according to Slovenian accounting standards. Companies listed on the organized securities market in the EU must prepare consolidated financial statements in accordance with international financial reporting standards. Some companies are also required to be audited, especially large and medium-sized companies.
The size of the company is determined by taking into account 2 of the 3 criteria for determining the size of the company:
A large company has over 250 employees, revenues from operations exceed €40,000,000 or the book value of assets is higher than €20,000,000. Meanwhile, the qualification criteria for a medium-sized company are as follows: employees between 50 and 250 employees, revenues from operations in the range of €8,000,000 – €40,000,000 and assets in accounting documents between €4,000,000 and €20,000,000.
Establishing a company in Slovenia can be a big obstacle for some to expand their business to foreign markets. Undoubtedly, this small Central European country is attractive to many investors who would like to expand their business to the Balkans as well as Central Europe. In all of this, it is important for the investor to have a reliable and trustworthy advisor with him, who knows how to broaden horizons and help with possible employment of workers, obtaining funds or possible tax issues.
All this can also be obtained at Unija Consulting, where a team of experts advises and helps with the entire business.
