Self-employment for foreigners in Slovakia

At the outset, it is necessary to say that the Slovak Commercial Code considers a foreigner (with foreign citizenship) to be a Slovak person as well, provided they have permanent residence in the territory of the Slovak Republic. This follows from Section 21 of the Commercial Code (“For the purposes of this Act, a foreign person means a natural person with a residence or a legal person with a registered office outside the territory of the Slovak Republic. A Slovak legal person for the purposes of this Act means a legal person with a registered office in the territory of the Slovak Republic.”)

If you have obtained permanent residence in Slovakia, you are viewed from the perspective of the Commercial Code as a Slovak person, and instead of the legal form of a foreign (natural) person’s enterprise, under which you currently hold a trade license, you should conduct business as a Slovak self-employed person.

Therefore, we primarily recommend canceling the business authorization for the legal form of a foreign person’s enterprise. Effective from October 1, 2020, this authorization of a foreign person to conduct business in the territory of the Slovak Republic expires “on the date of the expiration of the trade license or an authorization other than a trade license according to special regulations for a foreign natural person, if its expiration occurs within the scope of activity that is performed and registered as the sole object of business in the Trade Register or other records established by special law…” Therefore, it is necessary to submit a notification of termination of business to the trade licensing department of the relevant district office. Given the change in legislation, the trade licensing office should no longer require deletion from the Commercial Register, also because from October 1, 2020, all natural persons were to be deleted from the Commercial Register. If you decide to do business as a tradesman, you propose to cancel the trade license as a foreign person’s enterprise as of one day (for example, October 31, 2020) and submit a notification of termination of business, and at the same time, you announce a new trade license as a Slovak self-employed person, where the date of origin can be at the earliest the day of announcement (provided all conditions are met). We recommend submitting the announcement a few days in advance and proposing your requested date (e.g., November 1, 2020) as the date of origin. In this way, you will transition smoothly from a foreign person’s enterprise to a “classic” trade license and can conduct business without interruption. Naturally, your ID number (IČO) will remain the same, as you are a natural person.

In this case, you must be careful so that the expiration of one authorization and the origin of the new one are set up smoothly (for example, expiration on October 31, 2020, and origin on November 1, 2020). Since it will still be the same entity, it is necessary to also consult your accountant to perform all necessary actions in relation to the tax office. In the past, we implemented the mentioned change for another client and received this guideline from the financial administration:

“From the perspective of applying the VAT Act, we state: If a taxable person registered according to Section 5 or Section 6 of the VAT Act ceases to meet the status of a foreign person (e.g., because they established a fixed establishment in the SR in the sense of Section 4, Paragraph 5 of the VAT Act, or there was a relocation of the registered office to the SR or a change of residence) and continues to perform activity in the country that is subject to tax, this taxable person is considered a person registered according to Section 4 of the VAT Act from the day they ceased to meet the status of a foreign person, even if they have not yet been issued a modified VAT registration certificate. This person is a tax payer from the original day when the VAT registration certificate was issued to them according to Section 5 or Section 6 of the VAT Act, but is considered a tax payer registered according to Section 4 of the VAT Act from the day they ceased to meet the status of a foreign person. Upon a change of registration, the taxable person is obliged to notify the Bratislava Tax Office of the fact that they ceased to meet the status of a foreign person within a period of 10 days from the day they ceased to meet this status.”

Establishment of a limited liability company from October 1, 2020

If you decide to do business through a limited liability company, you can establish an s.r.o. there, and once you arrange all permits and the entry into the Commercial Register for it and are assigned a Tax ID (DIČ), you can cancel the trade license as a foreign person’s enterprise. Since these are two different entities with different IČOs, you do not have to set up this transition “from one day to the next” as described in the first case.

To establish an s.r.o., you will also need a criminal record extract; however, if you have had permanent residence in Slovakia for at least 6 months, an extract from Slovakia will suffice. If you also have Slovak citizenship, the trade licensing office can request the criminal record extract for you; however, we recommend submitting a document of state citizenship to the authorities if you have not yet changed the documents from which this would follow. Effective from October 1, 2020, it will be possible to submit a motion to the Commercial Register only electronically; consent for the registered office is required with an officially verified signature of owners with more than a half majority, and from the same date, a limited liability company cannot be established even by a person who is listed as an obligor in the register of issued authorizations to perform execution. To submit a motion for the registration of an s.r.o. into the Commercial Register, you will need, in addition to the issued certificate, the deed of establishment / memorandum of association, signature specimens of the statutory body (executive/s), a declaration of the contribution manager regarding the payment of the share capital, and an affidavit related to the non-existence of arrears with tax administrators and at the Social Insurance Agency. The change in the status of a foreign natural person, in which they perform business activity in the territory of the Slovak Republic, must be notified to the trade licensing office without delay because their legal status changes. This change cannot be considered merely as a change of data in the sense of Section 49, Paragraph 1 of Act No. 455/1991 Coll. on Trade Licensing (Trade Licensing Act) as amended.

This means that if a citizen of the Republic of Serbia performs business activity in the SR based on entry in the Commercial Register and obtains permanent residence or Slovak citizenship here, they are obliged to notify the trade licensing office of the termination of business in the regime of a foreign natural person and announce a trade license in the regime of a Slovak natural person.

From October 1, 2020, based on the amendment to Act No. 513/1991 Coll. Commercial Code as amended, commercial registers will gradually delete foreign natural persons from the Commercial Register, with the trade license being preserved for these entrepreneurs in the scope of the data registered in the Commercial Register.

However, the trade licensing office will not automatically cancel the trade license. Even if it were to learn about the acquisition of permanent residence or citizenship, in practice, it invites the entrepreneur to harmonize the data with the legal order. According to our information, however, the trade licensing office is not connected to another register from which it could determine the acquisition of permanent residence.

The trade licensing office will notify the tax administrator directly of the termination of business and the simultaneous origin of a new authorization; therefore, the taxpayer has no notification obligation toward the tax office in this regard and their DIČ does not change (they use the same one).

However, in this case, until the end of the 2020 tax period, the taxpayer is obliged to keep double-entry bookkeeping, as they had this obligation as a foreign person’s enterprise registered in the Commercial Register of the SR, and they are obliged to keep said bookkeeping during the entire 2020 tax period (it is possible to change the kind/type of bookkeeping only from a new tax period, i.e., from January 1, 2021).

They will file the income tax return for the year 2020 only after the end of the entire 2020 tax period, i.e., after the end of the year 2020 by the end of March 2021.

As of October 1, 2020, the Commercial Register should no longer register you. A form for this no longer even exists, as those were also changed as of this date.

The Act on the Residence of Foreigners states that when renewing a residence permit for the purpose of business, it is necessary for the foreigner to also demonstrate profit after tax. If a foreigner conducted business for part of the assessed period as a sole trader and part as an executive of an s.r.o., they must demonstrate business profit in both cases. The law distinguishes whether it is a sole trader or an executive of a commercial company and also establishes the calculation if the foreigner did not conduct business in one form for the entire assessed period.

If it concerns a foreigner who conducts business as a natural person (foreign person’s enterprise), the following applies: “A third-country national is obliged to demonstrate, for the application for renewal of temporary residence according to Section 22, Paragraph 1, Letter a), taxed income from this business for the previous tax period in the amount of at least twenty times the subsistence minimum; if they did not conduct business for the entire previous tax period, they are obliged to demonstrate taxed income in the amount of twice the subsistence minimum for each month of residence in the previous tax period. If the third-country national was not yet authorized to conduct business in the previous tax period, they are obliged to demonstrate financial security of the business activity in the amount of ten times the subsistence minimum with a certificate of account balance according to Section 32, Paragraph 7.”

If it concerns a foreigner who conducts business as an executive of a commercial company, the following applies: “A third-country national is obliged to demonstrate, for the application for renewal of temporary residence according to Section 22, Paragraph 1, Letter b), profit after tax of the commercial company or cooperative on whose behalf they act for the previous tax period in the amount of at least sixty times the subsistence minimum, or if it is a third-country national whose business plan was assessed by the Ministry of Economy of the Slovak Republic as an innovative project, in the amount of at least twenty times the subsistence minimum; if they did not conduct business for the entire previous tax period, they are obliged to demonstrate profit after tax in the amount of five times the subsistence minimum for each month of residence in the previous tax period.”

Business profit during the renewal of residence is demonstrated by a certificate from the tax office, naturally after filing the tax return.

If a foreigner were an executive of multiple commercial companies, it is sufficient that at least one commercial company or cooperative on whose behalf they act fulfills the condition for the amount of profit after tax.

The law also addresses the case where a foreigner was granted residence but has not yet begun their business activity. In such a case, if they were not yet authorized to act on behalf of a commercial company or cooperative in the previous tax period, they are obliged to demonstrate financial security of the business activity in the amount of thirty times the subsistence minimum for the application for renewal of temporary residence by submitting a certificate of account balance.

In conclusion, we point out that a condition for the renewal of residence is also the fact that the foreigner has no debts in relation to public institutions (Social Insurance Agency, health insurance company, tax and customs office).

If a foreigner becomes an executive of another commercial company, they must notify the foreign police of this fact. Likewise, the termination of a trade license must also be notified to the foreign police. Notifications in written form are sufficient.

A citizen of the European Union is entitled to operate a trade in the SR under the same conditions as citizens of the SR. The business authorization arises from the day of the trade notification.

To notify a trade, it is necessary to provide:

• an extract from the criminal record (from the home country or a Slovak one if they have a registered residence in the SR for at least 6 months, or eventually from another country where they had a permitted residence for at least 6 months continuously during the last 5 years)

• a document confirming the authorization to use the real estate that is the place of business

At the same time, we point out that in the case of a stay in the territory of the SR longer than 3 months, an EU citizen is obliged to apply for the registration of the residence of an EU citizen. The application must be submitted in person at the department of the foreign police.