The success of a business idea is influenced by many factors. One of these factors, among others, is the environment in which you would like to realize your business aspirations. Culture, people, their habits and way of life also have a great influence. All these socio-demographic factors are extremely difficult to measure, as they are assessed 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 in Central Europe. It was a part of former Yugoslavia, the fact that still reflects in strong connections with other former YU members, which certainly provide business opportunities and connections for companies throughout the entire Balkan region. Slovenia also has excellent connections with other countries of Central Europe, since as an established EU member state it visibly participates in the formulation of (Central) European policy.
Slovenia became independent in 1991 when it seceded from the Federal Republic of Yugoslavia. Slovenia’s next major milestone took place in 2004, when it joined the European Union, and in 2007, the nation of two 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 2021 was still partly marked by the pandemic and measures to contain the virus.
Why should you invest in the Slovenian economy?
What are the qualities of the Slovenian economy that weigh and convince an investor to support an investment in the Slovenian economic space?
Qualified workforce
The Slovenian workforce is on average well educated, and education is often associated with people’s employability. The state also regularly grants subsidies for hiring less employable personnel; the elderly, the young or those with differential professions.
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 achieve for 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 domestic and foreign companies equally.
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 is 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
Some of the required documents that are absolutely necessary for company registration in the case where the founder is a legal entity are:
- Certificate of registration of the founding company in Slovenia,
- A copy of the identity document of the designated manager or representative
- Notarized signature of the manager
- 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, they must provide a copy of the identity document, a signature verification of the manager and an official contract of incorporation.
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 (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. This encourages employers to engage in various proactive activities that help society, such as the inclusion of disabled people in various employment spectrums, the inclusion of employees in pension and disability insurance, support for donations to humanitarian and other organizations, ect.
In the past, together with most European and other world countries, Slovenia also signed the double taxation document.
Personal income is taxed progressively, the amount of the tax rate depends on the tax base. We have several tax brackets, and the amount 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. This tax applies to all goods and services in Slovenia. The general VAT tax rate is 22%, but we also have reduced tax rates of 9.5% and 5%. With a 9.5% tax, food, public transport, groceries, seedlings, hotel accommodation, medicines and medical equipment and others are taxed, while 5% is taxed on 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 two of the three 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. The qualification criteria for a medium-sized company are: between 50 and 250 employees, revenues from operations are between €8,000,000 – €40,000,000 and assets in the 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 on their side, someone who knows how to broaden horizons and help with possible employment of workers, obtaining funds or possible tax issues.
The experts at Unija Consulting can help you with the entire process of setting up a company in Slovenia, Croatia, Bosnia & Hercegovina, Serbia, Montenegro and North Macedonia . Contact us at nina.orehek@unija.com and we will be happy to discuss your options with you.
