12.12.2016
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Seven things about legal aspects of doing business in Slovenia

Due to Slovenia being an EU member country, its legal system is heavily influenced by the EU law. Historically, it belongs to a group of continental legal systems, where the law mostly originates in codifications. In the past years, many changes have been made to the legislation to make it more business friendly and to cope with the consequences of financial crisis. However, as in case of any country, doing business in Slovenia has its peculiarities.

Foreign entities are free to incorporate a company in Slovenia

Setting up a limited liability company in Slovenia is rather straightforward. A minimum founding capital amounts to 7.500,00 EUR in cash or non-cash contributions. Incorporation of a standard limited liability company can be executed at a one stop shop. For non-typical limited liability companies with peculiar shareholders’ agreement, local lawyer and notary must be engaged and all tasks can be done by way of power of attorney. A joint stock company may also be incorporated and a minimum founding capital amounts to 25.000,00 EUR in cash or non-cash contributions. There are no restrictions for foreign investors.

Slovenia is signatory of many important international agreements and conventions

Since Slovenia is a small country and consequently a small economy, it is vital that doing business cross border is made more efficient. Slovenia has signed many important conventions, which help businesses achieve their goals faster and with less costs. Slovenia has signed The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) which enables recognition and enforcement of foreign arbitral awards. Slovenia has also signed the ICSID Convention (International Centre for Settlement of Investment Disputes), which facilitates arbitration of investment disputes between Contracting States and nationals of other Contracting States. Slovenia has also signed FATCA.

Slovenia is export and import friendly
Ljubljana, Slovenia

Ljubljana, Slovenia (Photo credit: Wikipedia)

Slovenia’s economy is highly dependent on international trade and it represents an important part of Slovenia’s GDP. Trade between Slovenia and other EU member states is based on free movement of goods. Within the EU, trade is carried out without customs control, duties or any quantitative restrictions. In trading with non-EU states, EU’s foreign trade and customs policy is applied. In such case TARIC applies as both an integrated EU tariff and a manual with all regulations and measures to be applied on importing and exporting goods from the EU.

Slovenia offers incentives for foreign direct investments

In its effort to create a stimulating business environment, several fiscal and financial incentives are offered. All companies have a possibility of reducing their corporate income tax base by investments in plants, equipment and R&D. Co-financing is offered for investment projects as a special incentive to foreign owned companies for their first capital entry to Slovenia subject to the project and all jobs remaining in Slovenia for at least 5 years. The state also funds development support programs for disadvantaged regions.

Legal implications of Brexit for Slovenia

It is still not exactly known what would the legal implications of Brexit be on the EU and its member states. In terms of legal implications, it is most likely that Brexit will have the same effect on all EU states. In the last years, there has been several contracts concluded by Slovene companies under English law, in particular some bigger credit facilities. It is not yet clear what would the English law be like without the EU law and that presents a high degree of legal risks to entities, who have entered such contracts. In terms of economic implications, it is our opinion that it will mostly have indirect effects on Slovenia and will probably affect the economic growth in the main trading partners of our state. Slovenia’s export to United Kingdom amounts to around €540 million, whereas imports from the United Kingdom stand at €356 million.

Insolvency legislations offer numerous solutions to distressed companies

Due to the financial crisis starting in 2008, many Slovenian companies have found themselves in financial difficulties and became insolvent or near insolvent, even though their core business might still present healthy ground for future business. To provide regulatory framework, suitable for the new market conditions, the Insolvency Act was extensively amendment seven times in the last eight years. The goal was to achieve greater efficiency and multiple options to approach solving distressed companies. Numerous amendments present a certain degree of legal uncertainty, but amendments were mainly adding new options and solutions and introducing improvements over existing ones. Today Insolvency Act provides framework for solving the distressed companies and enables investors to participate in these procedures.

Non-EU citizens are in principle not permitted to directly own real estate in Slovenia

EU citizens may freely and without restriction purchase real estate on the territory of Slovenia with no restrictions. It applies the same to the citizens of OECD countries or EFTA member states (Australia, Canada, Iceland, Chile, Israel, Japan, Liechtenstein, Mexico, Norway, New Zealand, Switzerland, Turkey, South Korea and the USA). There is a special regime in place for the citizens of Albania, Macedonia, Montenegro and Serbia, who reciprocity does not need to be proved.

Other foreign nationals in principle cannot obtain the title to real property located within the territory of the Republic of Slovenia. Such nationals may resort to other solutions to owning real estate in Slovenia, ie. by way of registering a company in Slovenia.

Foreign legal entities established in Slovenia benefit from a national treatment regime regarding the acquisition and ownership of real estate. Foreign companies incorporated in Slovenia have the same purchase rights as Slovenian enterprises, regardless of the amount of foreign-owned share capital.

Sunny day high in the Bohinj Mountains.

Sunny day high in the Bohinj Mountains. (Photo credit: Wikipedia)