Category: Slovakia

In recent weeks, the Slovak Parliament has approved two laws that could substantially increase labour costs for employers in Slovakia. One amendment to the Minimum Wage Act raises the automatic determination rate of the minimum wage, while another introduces a new contribution to cover sports activities for employees’ children.

Neither amendment has yet been signed by the president. However, given the current political situation in Slovakia, it is unlikely that he will veto these amendments.

Changes to the Minimum Wage Act

On 24 October 2024, the Slovak Parliament approved an amendment to Act No. 663/2007 Coll., on the Minimum Wage. According to this act, the minimum monthly wage is usually set through negotiation between employee and employer representatives. If an agreement is not reached by 15 July, it is consulted at the Economic and Social Council of the Slovak Republic by 31 August. If no agreement is reached even in this Council, the minimum wage is determined automatically.

Currently, if no agreement is reached, the minimum monthly wage for the next calendar year is set at 57 % of the average monthly wage in Slovakia from two years prior. Under the newly approved amendment, the rate for automatic increases will rise to 60 % of this average wage. This means that the minimum wage in Slovakia could reach EUR 1,000 per month by 2027.

The amendment also introduces a requirement for the Ministry of Labour, Social Affairs and Family to evaluate, at least once every four years, whether the criteria for setting the minimum wage ensure an adequate standard of living, reduce poverty, promote social cohesion and address wage disparities, including the gender pay gap. This evaluation should consider the purchasing power of the minimum wage, wage levels and distribution, wage growth rates, and the long-term level and trend of national productivity. A reference benchmark will be set at 50 % of the average nominal monthly wage in Slovakia for the relevant calendar year.

These new rules will first apply to setting the minimum wage for 2026.

Contribution for children’s sports activities

Despite strong opposition from employers, the Slovak Parliament approved an amendment to Act No. 311/2011 Coll., the Labour Code. Under this amendment, employers with more than 49 employees will be required, upon request, to provide a contribution for the sports activities of employees’ children. This contribution covers 55 % of eligible expenses, up to a maximum of EUR 275 per calendar year for all the employee’s children.

For employees working part-time, the maximum amount of the contribution will be proportionately reduced. Employers with fewer than 50 employees will have the option, but not the obligation, to provide this contribution.

For the purposes of the law, the number of employees is calculated based on the average number of employees over the previous calendar year.

This amendment will take effect on 1 January 2025.

By Peter Devinsky, Counsel, Schoenherr

The National Council of the Slovak Republic has recently approved significant changes to the Value Added Tax (VAT) rates, which will come into effect as of January 1, 2025. Here are the key updates:

Change to VAT Tax rates:

• Base VAT rate: The base VAT rate will increase from 20% to 23%.
• Lowest VAT rate: The lowest VAT rate will be reduced from 10% to 5%. This rate will apply especially to:
• basic food such as vegetables, fruits, meat, bread, milk, sweet water fish
• pharmaceuticals and medicine
• books
• restaurant and accommodation services
• entrance to sports events and fitness centers
• Third VAT rate: A new VAT rate of 19% will be introduced, applicable especially to:
• electricity
• food for human consumption not subject to lowest VAT rate
• water, including mineral waters and sweetened waters
• salt
• non-alcoholic drinks served in restaurants and bars

Simplified Invoice from Electronic Cash Register (e-kasa):

• The threshold for issuing a simplified invoice from an electronic cash register (e-kasa) will be lowered from EUR1,000 to EUR400.
• For purchases exceeding this value, a full invoice must be issued to the customer, including complete identification and the VAT number of the customer, as well as per unit price.

These changes are part of the government’s efforts to consolidate revenue in 2025.

By Michaela Stessl, Partner, and Radislav Bibel, Senior Tax Lawyer, DLA Piper

From 1 April 2025, Slovakia will introduce a new financial transactions tax (daň z finančných transakcií) as part of the government´s consolidation package. This is not an early April fools’ day joke.

The financial transactions tax will apply to outgoing bank payments, including invoice payments, cash withdrawals, card payments, and recharged expenses related to financial transactions.

Some payments, such as those concerning tax, social security or transfers between the user’s own bank accounts in the same bank will be exempt from the tax. The tax is designed to be a levy on debits from bank accounts, meaning that whenever a payment is made from an account, the tax will be charged. Received payments won’t be taxed.

Who will have to pay the tax?

The tax will primarily affect Slovak businesses and self-employed individuals. Specifically, the taxpayers will be:

• legal entities
• self-employed individuals (entrepreneurs)
• branches of foreign entities

Private individuals won’t have to pay the tax.

What’s the tax base?

The tax base will be the total amount of each individual financial transaction or recharged expense. For example, if a business makes a payment of EUR1,000, the tax will be calculated from this amount. 

How will payers file the tax?

Taxpayers will have to conduct their financial transactions through designated “transaction accounts,” ie a business bank account. Self-employed individuals have to make sure they have these accounts set up by 31 March 2025. The tax will be automatically deducted by financial institutions and remitted to the Slovak tax authorities.

Taxpayers can’t avoid paying the tax by using foreign bank accounts or accounts held by third parties. Transactions done abroad using foreign bank accounts or using third parties, as well as the tax, must be reported by the taxpayer themselves. The tax period is a calendar month.

What are the tax rates?

The tax rates are:

• 0.40% on outgoing payments, with a maximum cap of EUR40 per transaction
• 0.80% on cash withdrawals, no maximum cap
• EUR2 annually on card payments
• 0.40% on recharged expenses, no maximum cap

Conclusion

The introduction of the financial transactions tax marks a significant change in Slovakia’s tax landscape. Businesses and self-employed individuals should prepare for this new tax by setting up the necessary transaction accounts and understanding the implications for their financial operations.

By Radislav Bibel, Senior Tax Lawyer, DLA Piper

Taylor Wessing has advised FLE on its investment and acquisition of a 620-hectare forest in Eastern Slovakia. Bohunicky & Co reportedly advised the undisclosed sellers.

The parties did not disclose the purchase price.

FLE, part of the LFPI Group, is an investor focusing on real estate in Europe and is headquartered in Vienna. LFPI Group is an independent, multi-strategy alternative asset manager in Europe, the United States, and Asia.

The Taylor Wessing team included Counsels Peter Malovec and Radoslava Lichnovska, Senior Associate Jana Palcikova, and Associate Veronika Capekova.

Former PwC CEE Head of Legal Business Solutions Hugh Owen has joined Kinstellar as Partner.

According to Kinstellar, Owen has “advised on numerous high-profile corporate and commercial transactions across 20+ countries in the CEE and SEE regions, spanning sectors such as telecommunications, media & technology, banking, insurance, energy, real estate, healthcare, infrastructure, recycling & waste, and industrial & chemicals.”

Before the move, Owen spent almost three years with PwC Legal, which he joined in 2021 (as reported by CEE Legal Matters on September 2, 2021).  In 2022, Owen was appointed to the role of Head of Legal at PwC Central and Eastern Europe (as reported by CEE Legal Matters on July 26, 2022). He was previously a Partner with Allen & Overy, having joined the firm in 1994. He was the Head of the SEE Desk and, since early 2016, head of the Ukraine Desk. He set up A&O’s Slovak office in 2000 and established A&O’s associated office in Romania in 2008. At the end of 2018, Owen established his own consulting firm, called Go2Law (as reported by CEE Legal Matters on July 28, 2017).

Kinstellar has advised Mitiska European Real Estate Partners 3 on the acquisition of a 50% ownership interest in OP Centrum Retail 2 from OPC Group. AK KB and Rybanova & Partners advised OPC Group.

Mitiska European Real Estate Partners 3 is a fund owned by Mitiska REIM, a specialist investor in European convenience real estate. 

OPC Group is a development company active mainly in Slovakia but also operating in other EU countries.

According to Kinstellar, “the target of the transaction, OP Centrum Retail 2, is currently developing a retail park in Liptovsky Mikulas in northern Slovakia.“

The Kinstellar team in Bratislava included Partner Roman Oleksik, Counsel Dominika Bajzathova, Managing Associate Dasa Labasova, Associate Michaela Strakova, and Junior Associate Martin Danco.

The AK KB team was led by Managing Partner Katarina Barinova.

The Rybanova & Partners team was led by Managing Partner Radoslava Rybanova.

Ruzicka and Partners has announced the expansion of its circle of Equity Partners with the addition of Peter Ruzicka and Peter Bartos.

Bartos joined Ruzicka and Partners in 2013 as a Senior Associate. He became a Counsel in 2021 and made Partner in 2022. Earlier, he spent five and a half years with Julius Janosik. Earlier still he worked for Janco and Partners between 2007 and 2008. According to the firm, his primary areas of focus are infrastructure projects, public procurement, state aid, and European Union funds law. 

Ruzicka has been with Ruzicka and Partners for more than 15 years. In 2023, he became a Counsel. According to Ruzicka and Partners, his primary areas of focus are business law, commercial law, civil liability law, as well as corporate and real estate law. 

“A company is not made up of buildings or capital, but above all – of people,” commented Managing Partner Jaroslav Ruzicka. “It is therefore extremely important that these people are able to find space in the firm for self-fulfillment and personal development, both expert and professional. I am therefore delighted to welcome colleagues who started with us years ago in junior positions to our equity partnership.”

Dentons has advised JTRE Sports & Entertainment on its acquisition of HC Slovan Bratislava from Elena Hruba, Pavel Hofstaedter, and Eduard Janosik. Gunar Legal & Partners and BDO Legal advised the sellers.

JTRE Sports & Entertainment is part of the JTRE real estate development group.

According to Dentons, HC Slovan Bratislava is Slovakia’s most successful ice hockey club with a legacy dating back more than a century. As part of the deal, JTRE Sports & Entertainment “has acquired the company HC Slovan Bratislava, a.s. – which owns the professional men’s A team, the women’s team, and the Under 20 and Under 18 teams – as well as the association HC Slovan Bratislava – Mladez, which includes youth teams from the preparatory school to the junior category, and Slovan Marketing, the marketing arm of the club.”

The Dentons team included Partner Juraj Gyarfas, Senior Associate Drahomir Siroky, and Associate Erik Kozurik.

The BDO Legal Partner Martin Kocan and Senior Associate Tomas Szabo.

A&O Shearman has announced the passing of its Slovakia Partner and Head of Dispute Resolution Practice for Central and Eastern Europe, Martin Magal.

An A&O Shearman spokesperson said: “It is with great sadness that we confirm that our dear friend and colleague Martin Magal died in a tragic accident on Saturday, September 21. He was an exemplary Partner and mentor to all those who had the privilege of working with him, but first and foremost he was a devoted family man. He brought tremendous leadership and passion to his job and will be greatly missed. Our thoughts and deepest sympathies are with Martin’s family, particularly with his partner and four children, during this terrible time.”

In 2022, the Slovak Parliament passed two long-awaited laws, an Act No 201/2022 on construction (hereinafter the “Construction Act”) and an Act No 200/2022 on spatial planning (hereinafter the “Spatial Planning Act”). I wrote about the adoption of these laws and their content in my last article published in CEE Legal Matters. Both laws, which together were intended to bring long-anticipated systemic changes to spatial-planning and building permit procedures in Slovakia, were supposed to take effect on 1 April 2024; however, this never happened.

Instead, the new Slovak government’s policy statement included a commitment to review both the Construction Act and the Spatial Planning Act and to postpone their effectiveness in order to allow time for any shortcomings to be addressed. 

This commitment resulted in the following:

• The adoption of Act No 46/2024 amending Act No 50/1976 on spatial planning and building regulations (the Building Act) and amending certain other laws, which was published in the Collection of Laws on 14 March 2024 (hereinafter the “Amendment”). Among other things, the Amendment postponed the effective date of the Construction Act by one year, until 1 April 2025. 

• The drafting of a bill that, if approved, would both replace the Building Act (hereinafter the “1976 Building Act”) with a new law (hereinafter the “New Building Act”) and also replace the Construction Act, most likely before it takes effect. As regards the justification for replacing the Construction Act, the Slovak Ministry of Transport says the law envisages procedures for which institutions are still unprepared, meaning it would be unenforceable by its effective date (1 April 2025).

Below, we provide an overview of the Amendment’s most significant changes, applicable in Slovakia at least until 1 April 2025, and a brief overview of the changes that will result from the New Building Act: 

A: The Amendment

1. The Spatial Planning Act is in effect from 1 April 2024

Most parts of the Spatial Planning Act took effect on 1 April 2024. This law governs the creation of spatial plans or the declaration of construction bans.

2. The 1976 Building Act, including its most recent amendments, remains in effect until the effective date of the Construction Act or New Building Act

Building permit procedures will continue pursuant to the 1976 Building Act as amended by the Amendment. The 1976 Building Act no longer regulates the creation of spatial plans, which, along with the drafting of spatial planning documentation, is now (since 1 April 2024) governed by new provisions of the Spatial Planning Act.

3. Single integrated procedure

A number of interconnected and interdependent decisions or approvals are now consolidated into a single construction procedure for a main building, which may consist of multiple buildings or a set of buildings forming a functional unit. In such cases, the main building is identified, and any ancillary structures are included in the single construction procedure. Separate procedures for ancillary structures (e.g., roads or water structures related to the main building) will be replaced by an opinion issued by the authority responsible for the ancillary structures.

4. Combining spatial planning and construction procedures

The Amendment extends the categories of buildings for which spatial planning procedures may be combined with construction procedures (to include, for example, simple buildings or buildings whose disposition is determined by a spatial plan). This is conditional upon  issuance of a binding opinion of the spatial planning authority. The binding opinion, as a legal instrument assessing the compliance of the proposed building with the binding part of the spatial planning documentation, is regulated by the Spatial Planning Act as part of the original major construction reform. 

5. Presumption of approval

Previously, a municipality could in practice take years to issue its binding opinion on a building permit. Now, the municipality has 60 or 90 days to issue its opinion, depending on the nature of the building. If the municipality does not respond within this period, it will be presumed to have granted approval—meaning the proposed building will be deemed compliant with the binding part of the spatial planning documentation.

6. Unauthorized buildings

The Amendment provides for the following regimes for unauthorized buildings: 

6.1 Buildings constructed before 1 October 1976

These are deemed compliant with the legislation in effect as of 1 April 2024. 

6.2 Buildings constructed between 1 October 1976 and 31 December 1989

These are deemed compliant with the law in effect as of 1 April 2024 if the following two conditions are met:

6.2.1 The building has been continuously used for its intended purpose.

6.2.2 The owner of the building is also the owner of the land on which it stands, or has another right to the land.

6.3 Buildings constructed without a building permit or notification, or used without an occupancy permit between 1 January 1990 and 31 March 2024.

If the builder meets specified conditions, the building office will issue a decision on the building’s usability which will have the effect of an occupancy permit. The conditions include mainly the following:

6.3.1 The building has been in continuous use without defects.

6.3.2 The building is satisfactory in terms of its technical condition and equipment.

6.3.3 The building’s condition does not endanger life.

6.3.4 The builder owns or has another legal right to the land on which the building stands.

6.3.5 The building complies with the spatial plan (only the functional use of the land is assessed, not the disposition of buildings) and interests protected under other laws.

6.3.6 The building is not located under power lines, over a gas pipeline, within the protective zone of power lines or a gas pipeline, or in a floodplain or landslide zone.

6.3.7 The building is not an advertising structure, nor is the building subject to proceedings for its removal.

B:  The bill for the New Building Act

The inter-ministerial consultation procedure for the bill for New Building Act has concluded, and the draft law will soon be submitted to the Slovak Parliament. The key changes and provisions contained in the bill are as follows:

• Strengthening the position of land and building owners

The bill strengthens the rights of land and building owners in respect of the construction process.

• Restoration of the original role of state building administration authorities

The bill re-establishes these authorities as purely technical state authorities focused solely on construction-related matters. They are divested of other responsibilities, which currently include overseeing non-technical issues (such as assessing usefulness, user relationships, neighborhood disputes, and movable property issues).

• Simplification of the construction preparation process

The bill scraps the current two-tier decision-making system (spatial planning and building permit decisions). Instead, it introduces a single procedure—the construction intent procedure—  through which the building office will grant approval for the proposed construction activity.

• Building office responsibilities remain assigned to municipalities

The bill maintains the current system where municipalities exercise building office responsibilities as a delegation of state administration in the area of building law. Furthermore, it allows municipalities to establish building office districts, similar to the existing joint municipal offices.

• Special procedure for unauthorized buildings

The bill establishes a procedure for unauthorized buildings erected before the effective date of the New Building Act. Such buildings must either be retrospectively approved within a specified timeframe or will face removal.

• Clear definition of infringements and administrative offenses

The bill refines the list of infringements and administrative offences and expands the category of sanctionable persons involved in construction to include, for example, contractors and construction supervisors.

• Abandonment of the planned digitalization of construction approval procedures

The bill abandons the planned digitalization of construction approval procedures.

• Establishment of a minimum population requirement for building office districts

The new law introduces a rule requiring building office districts to serve a minimum number of inhabitants, effectively leading to the dissolution of small building offices.

• Exclusion of public participation in public construction projects

Members of the public will no longer have the right to comment on construction projects or plans affecting public spaces and the environment. In the case, for example, of urban park construction or revitalization, local residents will have no opportunity to provide input into or influence what is being built in the public space beneath their windows. Moreover, they may not even be informed of such developments in a timely manner. This change aims to streamline construction proceedings but has sparked concerns, particularly regarding the exclusion of public input in urban development and potential environmental impacts.

By Lucia Kolenicova, Senior Associate, Majernik & Mihalikova, PONTES