Tax and Legal News - February 2017

Tax and Legal News - February 2017

We bring you our regular overview of tax and legal news in the Slovak legislation.


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The Amendment of the Commercial Code

As of 1 January 2017 the Act No. 389/2015 Coll. amends the Act No. 513/1991 Coll. Commercial Code (“Commercial Code”) and brings two important novelties: a) Simple Company on Stocks (“j.s.a.” from Slovak term “Jednoduchá spoločnosť na akcie”) as a brand new sort of the business company and b) Shareholder Agreements codification.

J.s.a. merges specific features of the Limited Liability Company (“s.r.o.” from Slovak term “spoločnosť s ručením obmedzeným” like simple corporate structure and low value of the registered capital); and Joint Stock Company (“a.s.” from Slovak term “Akciová spoločnosť” like certain number of stocks and shareholders liability for the obligations of the company). As j.s.a. is mainly intended for the startup business purposes, it allows investors to step in and out of the company in a simple way.

Minimal amount of the registered capital for j.s.a. as low as EUR 1 is the lowest among all other companies (EUR 5,000 in s.r.o. and EUR 25,000 in a.s.). The registered capital should be subscribed and the stocks should be paid up prior to the incorporation of the company and therefore the incorporation upon the call on subscribing of stocks is not allowed. One or more founders may set up j.s.a. and its Articles of Association must be executed in the form of notarial deed. The company must register its stocks with the Central Securities Depository of Slovak Republic (“CDCP” from Slovak term “Centrálny depozitár cenných papierov”) since it may issue only registered stocks. Costs required for incorporation of j.s.a. may be therefore doubled compared to s.r.o.

Moreover, j.s.a. may connect almost any specific rights with its stocks, what partially breaks the legal rule to only issue types of stocks explicitly specified by law, applied to a.s. It is also possible to completely exclude specific rights connected with the stocks of j.s.a. (e.g. voting right which is not possible in a.s.), not only to restrict them.

Shareholder Agreements are newly codified by the Commercial code, whereas their three most common types are explicitly regulated for the purposes of j.s.a.: a) Tag-along, as a shareholder´s right to join the transfer of other shareholder´s stocks to the third person; b) Drag-along, as a shareholder´s right to request other shareholders to transfer their stocks to the third person; c) Shoot-out, as a shareholder´s right to request on other shareholder acquisition of its stocks for the price defined by the requesting shareholder. The Tag along and Drag along rights may be registered with the CDCP, what significantly enforces the legal status of the entitled shareholder (e.g. to claim its right also against the third person – an acquirer, not only against the obliged shareholder).

J.s.a. should compulsorily establish the General meeting and the Board of Directors while the Supervisory Board may be set up voluntarily.

J.s.a. may be dissolved also due to reasons stated in the Articles of Association or company´s bylaws, therefore not only on the basis of General meeting resolution as applied to other companies. J.s.a. may only change its legal form to a.s., while other sorts of companies may not change their legal form to j.s.a.

The § 66c of the Commercial Code regulates Shareholder Agreements generally and explicitly allows shareholders to conclude agreements governing their mutual rights and obligations arising from their share in the company (e.g. performance of voting right, profit distribution, registered capital changes etc.). Shareholders may enter into any agreement which does not contradict mandatory provisions of the Commercial Code; their content is stipulated only demonstratively. Shareholder Agreements are not part of the Collection of Deeds held by the Commercial register and so their content is not public. The discrepancy between the decision of one of the company´s bodies (e.g. resolution of the General meeting) and the content of the Shareholder Agreement does not invalidate such decision. Shareholders should therefore define the consequences of the breach in the agreements.

As for the Shareholder Agreements concluded before 31 December 2016, despite previous absence of their legal regulation, they are considered as valid and enforceable (if there is no other ground for their invalidity - such as their inconsistency with the good manners). Generally, Shareholder Agreements are usually not regulated and their explicit regulation is more an exception. The agreements concluded between the shareholders and the company itself, or members of its bodies regarding performance of voting right, remain forbidden according to § 186a of the Commercial Code (opposite to agreements on voting right concluded between shareholders).

The abovementioned Tag-along, Drag-along and Shoot-out rights represent typical content of the Shareholder Agreements and can be used with all the types of the companies, despite explicit regulation with j.s.a. only.

The new criminal law legislation

The Act No. 316/2016 Coll. on recognition and enforcement of property decisions in criminal proceedings in European Union ("the Act") became effective as of 1 January 2017. The Act brings several significant changes.

  • A new offence has been introduced into the Criminal Code - the market manipulation offence (as a result of the transposition of the Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal penalties for market abuse). The market manipulation is an intentional offence, which is committed by a person who:
    (a) states false or significantly misleading information on supply, demand or price of a financial instrument or a spot commodity contract;
    (b) causes achieving or maintaining the price of a financial instrument or related spot commodity contract at an artificial level; or
    (c) manipulates the calculation of the market reference value. 
  • The Act also amends the Act on criminal liability of legal entities (Act no. 91/2016 Coll.) and expands the catalogue of offences which the legal entity may commit, for example obstruction the execution of an official decision, credit fraud, insurance fraud, capital fraud, subsidy fraud, fraudulent bankruptcy, induced bankruptcy, harm done to a creditor, preferential treatment of a creditor, deceitful practices in public procurement and public auction.
  • The Act also regulates the procedure of enforcement of the decisions on forfeiture or confiscation of a thing or a property of an individual or a legal entity in criminal matters.

Parliament passes the bill introducing Country by Country reporting

Government bill amending and supplementing Act no. 442/2012 Coll. on international assistance and cooperation in tax administration was passed by the Parliament on 1 February 2017. The law will come into force on 1 March 2017.

The bill imposes several obligations. From timing perspective, most relevant is the notification obligation. Every Slovak entity of the MNE with annual consolidated group revenue equal to or exceeding €750 million in the previous year has to notify the relevant tax office what is its status within the deadline for submission of the corporate income tax return. For the tax period ending 31 December 2016, the notification requirement ought to be accomplished not later than 31 March 2017, if deadline for filing of the corporate income tax return was not extended.

For more information please see our previous article published in Tax and Legal News December 2016.

Changes in preparation of VAT returns with respect to the Amendment of VAT Act

Starting with January 2017 / 1st calendar quarter 2017 VAT period new form of the VAT Ledger Statement should be used where the supplier (VAT payer) will be obliged to report supply of construction works, construction or goods with its installation and assembly where the reverse-charge mechanism applies (Section A.2. of the VAT Ledger Statement).

Further, non-seated Slovak VAT payers are entitled to deduct input VAT applied by them with respect to goods or services received where they are liable to pay VAT via their Slovak VAT return and taxable persons seated outside Slovakia are entitled to file an application for VAT refund also if they supply goods or services which are subject to domestic reverse-charge mechanism.

In one sentence

The corporate income tax returns for 2016 tax period will be filed using the template valid for 2015 (No. MF/017084/2015-721). The Ministry of Finance in the Announcement No. MF/020689/2016-721 published the new guidelines for filling in the corporate income tax returns that are applicable for taxpayers with the filing deadline after 31 December 2016.

As of 1 January 2017, the threshold ratio of equity/debts for the company to be considered in crisis is raised from 4:100 to 6:100. The threshold ratio 8:100 will be applicable as of 1 January 2018.

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