What should Italian investors know when considering expansion into Slovakia? This is the topic discussed by Tommaso Mancini – Head of International Commercial Law at Bacciardi Partners – alongside Peter Berník – Managing Partner at Berník & Partners, a Slovak Business Law Firm. The discussion highlights the strategic advantages that make Slovakia attractive to Italian businesses and provides valuable advice on key legal topics, from the process of company formation to legal practices, and recent developments in the real estate sector.
Many Italian companies have subsidiaries and manufacturing units in Slovakia. Why is Slovakia so attractive to Italian investors?
I think Slovakia has become a choice for many investors due to its strategic location, predictable legal environment (partially resulting from its EU membership), attractive taxation, Eurozone membership, well-developed infrastructure, and especially its highly skilled and reliable workforce. Additionally, a significant Italian community already exists in the country.
Based on your experience, what should Italian investors be careful about when it comes to establishing a company in Slovakia?
Firstly, it’s essential to choose the optimal form of presence in Slovakia, either entering the market as a branch of a foreign entity or establishing a new legal entity. In the latter case, the limited liability company “s.r.o.” (equivalent of Italian S.r.l.) will work, unless there’s a preference for a larger number of shareholders or stock market listing ambitions.
I would also advise to pay attention on the responsibilities of company directors, especially in times of financial instability. For this purpose, seeking professional advice tailored to specific business needs is highly recommended.
How is the legal system in Slovakia? I mean, by way of example, how long a debt collection case may take? And how much would it cost?
Recently, the accessibility and speed of legal procedures for businesses have improved. Slovak courts typically issue both national and European payment orders within 2-3 weeks. Disputes that can’t be settled through simplified procedures usually reach a 1st instance judgment within 12-18 months. The second instance tends to conclude within 9-12 months. However, courts in the capital city may act slower due to higher caseloads.
Regarding costs, there’s a 3% court fee on the principal amount if the claim is filed electronically. Legal representation fees depend on agreements with lawyers, but courts use a default scheme to determine the winning party’s compensation. The “Loser Pays” principle generally applies, meaning the successful party can recover 100% of their dispute-related costs, provided the fees agreed upon with their lawyer are not above this default scheme. Enforcement of a final verdict is a quick procedure, provided there are assets to claim, and it is only connected with insignificant costs.
Regarding employment in Slovakia, how would you briefly describe Slovak employment law?
Like in other European countries, Slovak employment law primarily protects employees, seen as the vulnerable party in employment relationships. Slovak law can be notably employee-friendly, sometimes posing challenges for businesses, such as dismissing underperforming staff without legal risks. Furthermore, there are strict formal requirements for legal actions, making it e.g. quite easy to successfully challenge a termination by an employer in court, which may lead to generous compensations for the employees. Also, the position of trade unions is historically strong, so their participation in the processes, sometimes very crucial, has to be taken into account.
What’s the current state of digitalisation in justice, public administration, and related areas?
Over the past years, the digital services of public authorities have improved so that they now work quite effectively. Communication between legal entities and the government in areas such as taxation, civil, and administrative proceedings has become mandatory. For individuals, however, there’s still an alternative to traditional paper-based filings. The digital court file works well for new cases, but digitalizing old files will take time. The registration procedure in the commercial register, which is officially available online for free, has been operating exclusively on a digital basis for several years and has excellent responsiveness (the deadline for registration is just 2 business days). By way of example, the data from the real estate register is also available online for free through a user-friendly interface.
What are the latest legal developments in the real estate market?
In recent years, real estate development in Slovakia has experienced a significant boom, supported mainly by favorable mortgage credit conditions. However, the onset of the economic crisis reduced the volume of real estate projects in the country. A crucial development is the approval of a new “Building Act” which is entered into force on April 1, 2024. It aims to address most of the known issues which have been complicating the construction permitting process. It is designed to be modern and systematic, simplifying the overall process, particularly by streamlining individual procedures, reducing the number of actions, shortening deadlines, and introducing electronic approval processes. The new Building Act was a necessity, and we believe it will be effectively implemented in practice.
Our Services
If you are an investors and would like to expand your business in Slovakia, the Department of International Commercial Law of Bacciardi Partners can assist you with strategic advice for the establishment of your foreign company.
We invite you to contact us directly at +39 0721 371139 or via email at segreteria@bacciardistudiolegale.it for more information.