Category: Slovakia

Governments across CEE, including Slovakia, have introduced or are discussing various measures to mitigate potential adverse consequences of the coronavirus situation. This short overview summarizes measures taken in Slovakia with respect to corporate housekeeping matters. The measures are envisaged to be temporary valid until about a month after the end of the crisis.

The below measures aimed at direct business support and maintaining employment have become effective on the date of their publication in the Collection of Laws of the Slovak Republic:

Contribution of 80 per cent of employee’s salary: Companies that had to close their premises and operation will be paid 80 per cent of each employee’s salary. The maximum amount of the contribution per one employer is EUR 200.000 per month. The highest possible contribution per one employee amounts to EUR 1100 per month. Applications for payment of the contribution can be submitted from 6 April, the contributions will be paid from 15 April.

Contributions for entrepreneurs and self-employed with drop in revenues: Employers whose premises have not had to be mandatorily closed but that have recorded revenue shortfalls of at least 20 per cent will be compensated by the state depending on the actual drop in revenues. The revenues will be compared to the same period the previous year. Applications for payment of the contribution can be submitted from 6 April, the contributions will be paid from 15 April.

Employees in quarantine: Employees in quarantine sick leave will be paid sickness benefit by the Social Insurance Office (Sociálna poisťovňa) in the amount of 55 per cent of their daily contribution basis already from the first day of the respective period. The employers will therefore no longer pay the wage compensation for the first 10 days of sick leave. Employees who are at home with their children will be compensated by the state until the school facilities are re-opened.

Postponement of employer contributions for March: The deadline for the payment of contributions for March 2020 for employers and self-employed whose revenues have dropped by more than 40 per cent is postponed until 31 July 2020. The government might later adopt also postponement for further months.

Provision of monthly bank guarantees: The Ministry of Finance can provide small-scale employers financial aid in the form of a guarantee for a credit granted by a bank or of the payment of interest on loans granted by a bank.

Apart from the above adopted measures, the following measures intended to minimize partly the administrative burden for entrepreneurs in respect of tax duties have also been brought in:

Tax Returns and Payments: The original filing deadline for annual income tax returns has been extended until the end of the calendar month following the end of the pandemic period. The respective extension applies also to the payment of the balance of tax.

Financial Statements: Financial statements have to be filed together with the annual income tax return. The extension described above therefore applies also to financial statements, annual reports and auditor’s reports, and their filing with the financial statement register.

Suspension of tax inspections and tax procedures: During the pandemic period, the deadline for tax inspections or tax procedures that commenced before the pandemics will be suspended upon taxpayer’s request.

Deferral of income tax advance payment: The tax administrator will not charge the taxpayers default interest provided they pay the tax advance – that have fallen due during the pandemic period – not later than until the end of the calendar month following the end of pandemic period.

The overview below describes selected proposed legislative measures, the adoption of which in Slovakia is expected in the next few days:

Entrepreneurs should be able to include loss carryforward since 2014 (including). This applies to companies which have not included the loss carryforward yet.

Coalition considers the introduction of rent control as regards closed premises and of rent compensation: Using legislative means, the government wants to force landlords leasing retail premises to decrease the rent during the quarantine period by 30 to 40 per cent; the proposed wording of this measure has not been published yet. 

By Martin Tupek, Senior Associate, Noerr

On December 11, 2019, CEE Legal Matters reported that Stanek Vetrak & Partneri had advised the Czech Republic’s Franco Real Estate on its acquisition of Vseobecna Uverova Banka’s real estate portfolio. We spoke with Vladimir Polacky, Project Manager for the Slovak Republic at Franco Real Estate, about the deal.

CEELM: To give our readers a bit of context, can you describe Franco Real Estate and its operations?

Vladimir: Franco Real Estates, s.r.o., is part of the Franco de Poisd’eau & Cie holding, which covers more than 30 companies, including manufacturing companies in the fields of engineering, healthcare and industrial technologies, gastronomy, and accommodation services. Franco Real Estates is an international dynamic company offering rental and sale of own real estate in the Czech Republic, Slovakia, and Austria. Our portfolio includes real estate with a total area exceeding 500,000 square meters. Some of them are located at very lucrative addresses in Prague or Bratislava, or in Austrian mountain resorts. In the long term, we are looking for suitable investment opportunities for the further development of the company.

CEELM: What was the main attractiveness point for you in terms of the portfolio?

Vladimir: With this transaction, Franco Real Estates acquired a portfolio of properties for rent and other uses, thereby strengthening its position on the market in the Slovak Republic. A very attractive feature was the fact that the bank’s branches were based mostly in lucrative buildings with high attendance and traffic from people, therefore thanks to the location and position of the real estate there are several business opportunities we can pursue.

CEELM: Can you provide us with some insight as to where the bulk of the legal work took place? Was that in the bidding process or in finalizing the transaction after the bid was won?

Vladimir: With regard to the legal work, we were advised throughout the whole process, from the start of the transaction in the bidding process until the very end through the closing steps. We must admit that the legal work and services provided to us were complex covering all parts of the whole process.

CEELM: Did Stanek Vetrak & Partneri advise you throughout the bidding exercise as well or only after you had won the bid? What were the main components of their input in making this deal happen?

Vladimir: As is mentioned above, we were provided legal services through the whole transaction starting in the bidding process. We were provided with complex services including a wide scope of actions, from assistance in the bidding process, difficult contract work and negotiation, environmental analysis, to procedures before the cadastre authority, lien rights, preemptive rights, lease of the real estate, and other closing steps. In particular, the contract work was quite difficult, as you have 67 assets that you have to sell 67 separate contracts, and you have one contract that synchronizes it all and requires everything to happen at the same time, with all individual subordinate contracts having to be done flawlessly and on time. We couldn’t afford to risk one of the transfers endangering the entire transaction.

CEELM: Why did you choose to work with this firm in particular?

Vladimir: We cooperated with SVAP once on a different real-estate transaction, in particular with the partner of the law firm, Peter Vetrak. We were intrigued by their work, practicality, personal approach, and their ability to see the transaction from the client’s point of view, i.e., from a business point of view, making our mutual cooperation simple and enjoyable and, at the end of the day, resulting in a smooth operation of the transaction to our liking. Thus it was easy for us to decide that we wanted to enter the transaction with VUB.

“The newly elected Government led by Igor Matovic is constructed of parties who used strong anti-corruption rhetoric in their campaign, so we will be expecting a lot of reform,” says Andrej Leontiev, Partner at Taylor Wessing in Bratislava.

“The Government has promised improvements in the Rule of Law and anti-corruption and major reform of the judiciary, all of which are very welcome,” Leontiev says. The prospect of judicial reform is not a new one in Slovakia, he reports, and was attempted by previous Governments. “In the previous scenario, the Constitutional Court stopped the proposed background inspections of judges. Now, the new Government will try to carry on with the work, while the partially newly elected Constitutional Court will get an opportunity to overturn or amend its previous precedents. This might turn out to have a very interesting resolution to it.”

Leontiev reports that the Government has proposed heavy investment in construction, promising 25,000 new flats (which he describes as “an very optimistic number”) in the next four years. “The proposition is obviously impossible, but the idea itself is great,” he says. “If even a quarter that number actually gets made, that is still good work.”

Another notable proposal involves more transparency and less politics in the selection of the next General Prosecutor, scheduled for summer of this year. “This would be achieved by broadened nomination rights, public hearings, background checks, and multiple other tools that involve the public,” Leontiev says. “Considering that this person is supposed to be the main authority in hunting down criminals, it is reasonable to presume that the public wishes to know who he is and asks for more transparency.”

“The major problem the new Government is facing seems to be the presence of some ideologically conservative members of parliament,” says Leontiev. “This means that it will be rather difficult for the Government to get the homogenous support of its own MPs when it gets to laws regarding certain ethical questions like euthanasia, abortion, and same-sex marriage. In truth, bills aimed at achieving conservative goals must be expected. Of course, the main party will try to avoid these discussions, but it’s the opposition’s job to exploit it, hence we expect bitter discussions in this field as well.”

In general, Leontiev reports that the economy in Slovakia is doing “pretty well,” as the country has, recently, experienced better-than-EU-average GDP growth. However, the recent pandemic outbreak has slowed various industries. “The automotive sector,” he says, “which always worked well in Slovakia, is starting to feel the toughness of the situation on its skin. Manufacturers are being forced to send people home, and even close down factories – especially as most of the goods used in production are imported from China.” According to him, “the Slovakian economy is rather dependent on the automotive sector, and this might lead to a recession.”

Slovakia acted fast on implementing severe quarantine measures and substantially slowed down the spread of the pandemic.“However, the measures had a economic tag on them,” reports Leontiev. “A EUR 1 billion per month economic stimulus package was announced recently.” The measures include partial compensation of employment costs for closed businesses, individual employment subsidies for businesses that suffered decline in turnover, provision of state guarantees to banks enabling low interest loans, postponement of payments of tax prepayments and social and health contribution, and allowing the crediting of past losses on recent profits.

“From a mid-term perspective, the Government will have to work on cleaning up the mess in the judiciary and police, especially on trying to break the ties between the politicians and their sponsor and judges and law enforcement units, but at the same time counter the consequences of the crisis,” concludes Leontiev, describing it all as “a Herculean job.” According to him, “the prosecution for the killing of journalist Jan Kuciak and his fiancé has finally moved forward, as the accused, businessman Marian Kocner, is being put on trial for allegedly ordering the murder. This trial has had the public outraged, and we hope for a happy ending to it. All in all, it is clear that big challenges are ahead of us in the upcoming period.”

Kinstellar has advised Austrian company European City Estates on its acquisition of the Rosum office complex in Bratislava from Penta Real Estate, which was advised by Skubla & Partneri.

ECE European City Estates is a group of companies owned by the Austrian Humer Private Foundation. ECE’s long-term investment strategy focuses on prime properties and historical buildings in European city centers.

Rosum consists of 22,000 square meters of office premises currently leased to News and Media Holding, Teva Pharmaceuticals, Covestro, Nestle, and GGE, among others, as well as 1,230 square meters of retail space.

Last year, Kinstellar advised ECE on the acquisition of the BCT 2 Office Complex in Kosice, Slovakia, also from Penta Real Estate. (as previously reported by CEE Legal Matters on May 3, 2019).

Kinstellar’s team in Bratislava was managed by Partner Viliam Mysicka and Managing Associate Vladimír Policka and included Senior Associate Martin Kosa.

Skubla & Partneri’s team included Partners Marian Sulik and Erika Galgociova and Associate Erik Mateasik.

According to Glatzova & Co. Partner Veronika Pazmanyova, “surprisingly, just three days before the February 29 election the Slovak parliament approved a 13th pension wage and rejected the Istanbul Treaty.” According to her, “despite this clear political corruption, the ruling party, SMER, was not able to secure victory and were beaten by the anticorruption Ordinary People party led by Igor Matovic, who will presumably be the new Slovak Prime Minister.” Matovic received 25% of the votes, despite having only around 5% support in the autumn polls, Pazmanyova reports.

“SMER has been linked to multiple scandals for last couple of years,” Pazmanyova says, “which generated a massive response in civic society and, in 2018 and 2019, led to the biggest country-wide demonstrations in Slovakia’s modern history of Slovakia.” According to her, “this ultimately forced the Prime Minister Robert Fico and the Minister of Interior Robert Kalinak to step down.” Led by current Prime Minister Peter Pellegrini, and despite winning the last five elections, SMER placed second, with 18.29% of the vote, “and will now be forced to parliamentary opposition.”

“The change of the government will be refreshing and much needed,“ Pazmanyova says. “The trust in institutions, justice, and police must be restored.” She attributes the high turnout for the election – 65.8%, the highest in nearly two decades – to the increased interest of Slovakians in public affairs following the February 2018 murder of journalist Jan Kuciak and his fiancé, which sparked the massive protests.

Pazmanyova is encouraged by the rise of democratic civic society in Slovakia. “This brings me hope,” she says. “In order for society to work, people must engage on the local level and may not be ignorant to any form of injustice. After all, we form the society we want to live in.”

In the meantime, she says, the prosecution for those responsible for Kuciak’s murder is moving forward. “To prove guilt, the prosecution has used modern technological evidence, supported by huge amount of metadata including geolocation, encrypted Threema communication, and views of Facebook profiles of the victims prior to the murder. From a lawyer’s perspective this is quite interesting, as it widens the techniques traditionally used by the police and may surprise unsuspecting offenders.”

Turning to business, Pazmanyova says that “2019 was a great year for our clients, leading to nice M&A deals for us, including several notable transactions in the telecommunications sector.” There is a significant amount of both institutional and individual investment, she reports, meaning that there is “a lot of money in the market.” She adds that “2019 saw the rise of the local entrepreneurs, as many local projects were in the center of attention. Many owners sold their businesses, and reinvested the money both locally and abroad.”

Kinstellar has advised Hungary-based financial group OTP Bank on the sale of its 99.44% stake in its Slovak operations to Belgium’s KBC Group.

The transaction — which Kinstellar describes as historically one of the few deals involving the sale of a fully-functioning Slovak bank — remains subject to regulatory approval in Slovakia and Belgium.

The Kinstellar team was led by Budapest-based Partner Gabor Gelencser, working with Budapest-based Barnabas Sagi and, in Bratislava, Managing Associate Tomas Melisek, Senior Associates Dominika Bajzathova, Dasa Labasova, and Norbert Stilla, and Junior Associates Livia Miklencicova, Matus Kocisek, Erik Neupaver, and Stefan Sedlak.