Category: Slovenia

The new Trade Secrets Act will enter into force on 20 April, introducing further clarity to Slovenian legislation with a renewed definition of business secrets. The new Act comprehensively regulates business secrets, as it uniformly defines the concept of a business secret – which was, until now, regulated in several sector-specific acts. In the event of potential violations of business secrets, the Act also provides for different protective measures and judicial proceedings.

Why renewing business secrets?

The adoption of the Act is due to the implementation of Directive 2016/943 on the protection of undisclosed know-how and business information – trade secrets, against their unlawful acquisition, use and disclosure. Business secrecy was previously defined in Slovenian legislation in several acts – the Companies Act, Public Information Access Act, the Employment Relationships Act and the Prevention of Restriction of Competition Act, while different acts contained procedural provisions related to its protection.

The concept of trade secrets has been defined differently throughout the European Union, which gave rise to uncertainty and unpredictability. Therefore, the European Commission decided to unify this important field that effects the day-to-day conduct of business. The aim of the Directive is to establish a standard framework of the minimum standards for the protection of trade secrets, thus increasing the efficiency of legal protection, while simplifying it at the same time.

The main solutions of the new legislation

The Act redefines the concept of a trade secret, the basis of which was previously defined by the Companies Act and, as such, was often subject to interpretation in court proceedings. The concept of a trade secret incorporates new undisclosed know-how and business information. The following elements of a trade secret must be simultaneously met:

• A trade secret is a secret that is not widely known or easily accessible to persons from spheres who typically deal with this type of information;
• It has a market value;
• A person who has legal control over this information has to act in a manner to preserve it as a secret in the current circumstances. This condition will in principle be met, if the company adopts a resolution on the determination of a trade secret and informs the relevant persons thereof.

The Act distinguishes between legal and unlawful acquisition, use or disclosure of trade secrets. In the context of judicial protection, the holder of a trade secret may submit against the infringer clearly provided claims, as well as claim compensation for damages. An interim injunction is available for the immediate rectification of the violation.

Importantly, the obligation to keep a trade secret confidential is explicitly ensured also within judicial proceedings. The Act also provides for cases in which legal protection may be denied to the holder of a trade secret, in order to protect the third person’s legitimate interest. This regulates the activity of persons who disclose the disputed practices of companies and other organizations (i.e. whistle-blowers).

What should companies do?

As a first step, companies will need to adopt appropriate internal acts or to amend existing ones in such manner that will ensure the widest protection of their trade secrets.

It is worth considering which data should be protected as a trade secret and to whom such information should be disclosed. The old wisdom of “less is more” should be kept in mind. It will only become clear over time, and through the use of this Act in judicial proceedings, whether the legislator succeeded in achieving the desired simplification of the protection of trade secrets.

By Igor Anglovski, Partner / Independent attorney at law in cooperation with Karanovic & Partners

If you are a company conducting business in the automotive industry with intentions of expanding on the European market, where do you look? The answer may be the Central European country of Slovenia.

Slovenia has, over its relatively short existence, established itself as a country where several companies produce and manufacture high-quality products for the automotive industry. According to the “Invest in Slovenia” website, Slovenia has highly qualified people working in the auto industry, with over 14,000 direct positions in some 270 automotive companies. Slovenia has nearly 12,000 students in secondary schools for automotive and mechanical engineering, some 3,300 students enrolled in undergraduate courses in mechanical engineering, and more than 2,000 registered researchers. Slovenian companies have achieved compliance with EU green and safety requirements and international supply industry leaders. German carmakers Audi, BMW, Daimler, and VW, as well as MAN and Ford in Germany, account for some 40% of car component exports from Slovenia, followed by France, Italy, Austria, the UK, and the USA. Slovenian companies are suppliers to the assembly lines of Renault, PSA, Brosse, Lombardini, Landini, Fiat, and Magna Steyr. Slovenia has innovation centers, institutes for materials and technologies, and knowledge academies which help Slovenian companies to evaluate the technical feasibility of new ideas and technologies. It is also worth noting that Hidria (a company involved in the supply and development of a variety of subsystems and components) constructed its third R&D facility in Slovenia, co-financed by the European Regional Development Fund. 

While investment in Slovenia may in some aspects be more expensive than in other Eastern European countries, some investors have already decided to acquire medium-sized and smaller Slovenian manufacturers. For instance, in 2016 Kety Group S.A., one of the leading European suppliers of high-quality advanced aluminum products, acquired AHA Emmi Ltd (now Aluminum Kety Emmi Ltd). Emmi is a modern Slovenian aluminum company that is involved with the automotive industry, manufacturing and supplying car body parts, which utilize aluminum’s light weight to achieve reduced fuel consumption. Another example is the 2015 acquisition by the US-based Weiler Abrasives Group of Swatycomet Ltd (now Weiler Abrasives Ltd), a Slovenian company developing high quality artificial abrasives and technical fabrics regularly used in the automotive industry for brushing car chassis castings. This was a strategic acquisition, with the Weiler Group looking to expand to European markets, as part of their plan to become a global leader on the abrasives market. There are also other acquisitions that have taken place (e.g., the acquisition of the company Cimos by the Italian company Palladia Finanziarie), as well as potential acquisitions which we can assume are taking place based on publicly available information (e.g., TAB, which produces batteries and accumulators).

At the same time, Slovenian legislation promotes and encourages foreign investments through the Investment Promotion Act that was adopted and enacted in 2018, offering investors investment incentives in the form of subsidies, loans, and guarantees, and, by way of ensuring the purchase of real estate by a self-governing local community, at a price below market value. This, in turn, aids Slovenia’s attempts to become an attractive destination for so-called “greenfield” investors. For these kinds of investments, Slovenia could become even more popular, as it offers a pool of highly knowledgeable individuals able to provide specific know-how and skills, coupled with an environment that actively supports foreign investors. According to data from the Slovenian SPIRIT Public Agency and UNTCAD, such foreign companies grow faster than their average Slovenian counterparts.

Given all this, it is worth noting the investment of Magna Steyr AG, which raised some legal questions (the assessment of which extends beyond the scope of this article), but which is nonetheless an example of a “greenfield” investment in Slovenia. Magna Steyr – part of the Magna Group, a leading global and EU automotive supplier – decided to build a car body paint shop in Slovenia’s Hoce-Slivnica municipality. According to the report of the that municipality, Magna received a total of EUR 18.61 million of state subsidies as an investment incentive under the previously-mentioned Investment Promotion Act.

In conclusion, Slovenia can be one of the preferred destinations for investors in the automotive manufacturing market, whether they choose to acquire one of the country’s medium-sized or smaller companies or make a “greenfield” investment. While it is true, for the time being, that Slovenia’s full potential in attracting foreign investors is not yet realized, some are already reaping the benefits of investing in Slovenia, with newcomers expected in the future.

By Igor Angelovski, Partner/Independent Attorney at Law in cooperation with Karanovic & Partners

This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Needless to say, business in the European Union is going through some turbulent times. How this is affecting the CEE region and how business in the region will adapt to this never-ending uncertainty is the million-dollar question that everyone is asking at the beginning of 2019.

A quick look at the daily news reveals that the EU is currently consumed by Brexit. It is clear that business will be considerably affected by the expected delay of Brexit caused by politics. British companies have already responded to this political uncertainty. According to the Institute of Directors, 16% of British companies have either activated relocation plans or are planning to do so, and another 13% are considering relocation. 

But Brexit is hardly the only problem in Europe. For instance, Italy, a neighboring country to the CEE region, fell into recession in the final three months of 2018 for the first time since 2013. While this may have been expected and foreseen by financial analysts, it will still have an important impact on CEE, as Italy is one of the biggest trade partners of the region.

These two situations in the EU – combined with an unexpected slowdown in Germany, EU’s biggest economy – could bring significant uncertainty into CEE as well. 

Still, and despite this negativity, I believe that we need to use this unique opportunity to our advantage. As a sub-region of CEE with a population of more than 20 million, the Adriatic part of the CEE region has the knowledge and experience to offer a safe haven for relocation-seeking companies. Such clients often need tailor-made services rather than traditional ones. Consultants therefore need to adapt to attract businesses into this region, because they will not come without proper incentives. The needs of modern clients often go beyond the limits of the territory and the laws of one country and only a consultant with in-depth knowledge, expertise, and experience throughout the region will have the possibility to prosper and do business.

As managing partner of one of the biggest law firms in the Adriatic region, I am conscious of the importance of always staying one step ahead of the others. Law firms are already aware of globalization and have been dealing with it for quite some time now. But in this particularly unstable situation that the EU finds itself in at the beginning of 2019, which is set to continue for quite some time, law firms will have to have a unique ability to offer clients something new to attract their interest to work in the region. While individual countries are too small to make a greater impact, a partnership of all Adriatic countries can compete among other bigger countries or regions in the EU to attract relocating businesses. Clients entering our region demand one point of entry to this market of 20 million people, and they are seeking centralized legal advice which can only be provided by the most successful and progressive law firms in the region. Such law firms need to have local experts as well as the infrastructure and possibility to offer a platform for European and worldwide exchange of legal skill, opinions, experience, and knowledge, but still tailor-made for each client. Services offered by law firms need to be technically and digitally supported, setting standards that are higher than the ones clients are accustomed to at home. The digitalization of services gives firms a competitive edge and is one of the prime focuses of law firms attracting relocating businesses into the Adriatic region.

It is not a question of how to do it, but rather of who will do it best. This region has been defined by decades of crisis and now has a unique opportunity to add value to the innovations fostered in these past times. Only those law firms in the region which collaborate proactively, connected with excellent professionalism, can execute fresh ideas in the corporate projects of firms looking to relocate into CEE. Law firms must be able to leave the comfort zone of national jurisdictions and deal with the complexity of the cross-border advising, remaining at the same very high level as they were while working within their own countries. Our law firm rose to the occasion by establishing the Adriatic Legal Network to deal with the ever-changing situation in the EU and in the region.

By Uros Cop, Managing Partner, Law Firm Miro Senica and Attorneys, Ltd.

This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As in almost all other jurisdictions, in Slovenia there are no cryptocurrency-specific tax laws. In order to shed light on the tax treatment of the cryptocurrency in Slovenia, in June 2018 the Financial Administration of the Republic of Slovenia (FURS) issued the extended and updated Guidelines on Tax Treatment of Cryptocurrencies in Slovenia (the “Guidelines”).

Slovenia’s tax treatment of private individuals is regulated by the Personal Income Tax Act (ZDoh-2). According to the Guidelines, individuals are taxed significantly differently by FURS depending on whether they obtained income within or outside the scope of their business activities.

If an individual obtains income from trading or mining of cryptocurrencies in the scope of permanent, independent, and individual business activity, the income is considered “personal business income” under ZDoh-2. The tax base is determined as the difference between revenue and costs and is subject to progressive tax rate of up to 50%. Under certain conditions, personal business income may be determined on the basis of lump-sum costs accounting for 80% of the income and subject to a 20% tax rate. 

Capital gains obtained by disposing movable property outside of the permanent business activity are exempt from taxation under Article 32 of ZDoh-2. As FURS considers cryptocurrencies to be movable property, any gains obtained by trading cryptocurrencies are free from taxation, provided that they were obtained outside the scope of permanent business activity. 

Mining and similar confirming of cryptocurrency transactions is considered “other income” under Article 105 of ZDoh-2, provided that the income was obtained outside the scope of permanent business activity. The tax base is the entire value of cryptocurrencies obtained by mining, calculated according to the price at the time of acquiring. Costs incurred by mining are not deducted from the tax base. The resulting gain is subject to a progressive tax rate of up to 50% and an advance flat tax rate of 25% for residents. 

Gratuitous obtaining of cryptographic tokens by individuals from the issuer during an initial coin offering is subject to different types of tax regimes depending on the nature of the transaction. If tokens are gratuitously distributed to a holder of more than 25% of the business share in the issuer, the flat tax rate is 25%. If tokens are received in relation to employment or other contractual relationship for performing services, the income is subject to a progressive tax rate of up to 50% and an advance flat tax rate of 25% for residents. Social contributions must also be paid. All other cases are subject to a progressive tax rate of up to 50% and an advance flat tax rate of 25% for residents under Article 105 of ZDoh-2. The tax base is calculated according to either the white paper price or the market price, depending on whether the token is already publicly traded. 

The tax base for corporate tax is the surplus of revenue over expenses as laid down by the Corporate Income Tax Act (ZDDPO-2). Therefore, all cryptocurrency-related activities which create revenue for a company are subject to corporate tax if a surplus over recognized expenses exists. The corporate income tax rate is 19%. 

The service of exchanging fiat currencies into cryptocurrencies and vice-versa is exempt from the value-added tax (VAT) under Article 44(4d) of the Value-Added Tax Act (ZDDV-1). Provision of electronic wallet services is considered a close relation to the exchange of cryptocurrencies and is therefore also subject to this exemption. On the other hand, providing services in connection to peer-to-peer trading, such as online platforms for combining buyers and sellers, is subject to VAT at a 22% rate, as it is not sufficiently linked to the exchange itself. If utility cryptographic tokens are used for the payment of services, they are considered means of payment, and such transactions are subject to VAT.

According to FURS, mining of cryptocurrencies is not subject to VAT, as there are no specific customers, the miners are only rewarded on a voluntary basis, and their remuneration is not guaranteed. Accordingly, a company does not have the right to deduct the purchase of mining hardware and software from VAT. 

While the current application of tax laws appears quite favorable for individuals trading in their private sphere, it is possible that the regime will be subject to change, as cryptocurrencies are a relative novelty and FURS is actively learning on the subject, whereas standards of international practice will likely impact the future treatment of cryptocurrencies by FURS.

By Uros Cop, Managing Partner, and Zan Klobasa, Legal Clerk, Miro Senica & Attorneys

This Article was originally published in Issue 5.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.