Slovakia's investment climate

Thanks to its geographic location in the center of Europe, the euro, a thriving startup ecosystem, a competitive tax system, and a cost-effective and skilled workforce, doing business in Slovakia is becoming increasingly attractive. The country offers enormous potential and opportunities for both experienced and new investors.

The influx of high-value-added investments and large-scale investment from various countries are among the many factors that confirm Slovakia's attractiveness.

Why Slovakia

Slovakia offers a competitive business environment, including a number of distinctive features that distinguish it from other Central and Eastern European countries and present a unique proposition for investors.

• Convenient Location

Slovakia boasts not only a strategic location in the geographic center of Europe, but, above all, excellent road and rail connections to key European sales and supply markets. Within a 2,000 km radius of the Slovak border, there are 740 million potential customers. Slovakia's GMT+1 time zone, which allows for collaboration with clients worldwide, is also an advantage, especially for shared service centers.

• Security and Stability

According to the insurance company Credit Insurance Group Credendo, Slovakia is one of the safest and most politically stable countries in Europe. It has the lowest risk level among EU member states, particularly in the following categories: risk of political violence, risk of expropriation, currency convertibility, and risk of transfer restrictions.

• Eurozone Membership

Slovakia, as one of the few countries in the region, has been a member of the eurozone since 2009. The introduction of the euro as the official currency means lower transaction costs for investors, reduced risk of currency volatility, and increased economic and financial stability.

• A Skilled and Available Workforce

The workforce in the Slovak Republic is characterized by high qualifications, loyalty to employers, and excellent language skills. Furthermore, labor costs remain relatively low compared to other Western European countries.

• Labor Productivity

According to OECD data, Slovakia has one of the highest labor productivity rates in the region. This allows investors to achieve higher production rates with the same labor costs compared to other Central and Eastern European countries.

• Innovative Technologies

Slovakia is a regional leader not only in the number of industrial robots installed per worker (International Federation of Robotics) but also in the ability of the workforce to adapt to new technologies (World Economic Forum). Statistics confirm the high potential for technology-intensive industrial projects and technology hubs.

• Economic Openness

Slovakia has long been one of the most open economies in the world. When comparing countries by the ratio of goods exports to GDP, Slovakia is among the most open EU member states (Eurostat).

• Developed infrastructure

Several major EU transport corridors pass through Slovakia. Combined with a developed and constantly expanding road and rail infrastructure, it has the potential to become one of the most important logistics hubs in Europe.

• Investment Incentives

In Slovakia, investors can take advantage of an attractive regional investment incentive program, a preferential tax regime for research and development, and other government support mechanisms.

Investment Legislation

As an EU Member State, Slovakia complies with the European System of National and Regional Accounts (ENRA 2010), the most recent internationally compatible EU accounting system, and International Financial Reporting Standards (IFRS-EU).

Slovakia falls under the jurisdiction of the European Court of Justice (ECJ) and is obliged to comply with all EU laws and standards, as well as the WTO Trade Facilitation Agreement (TFA). The national regulatory system applies to areas not regulated by EU regulatory mechanisms. Slovakia is a member of the WTO, and the government notifies the WTO Committee on Technical Barriers to Trade of changes to technical regulations.

Bilateral Investment and Tax Treaties

Slovakia has signed 64 bilateral investment treaties (35 of which remain in force) and an additional 82 treaties with investment provisions (61 of which also remain in force). Some of these are a legacy of the former Czechoslovakia, while others entered into force after independence in 1993.

Restrictions on Foreign Control, Private Ownership, and Enterprise Formation Rights.

Foreign and domestic private enterprises have the right to establish and own commercial enterprises and engage in all types of profit-making activities in Slovakia. The government treats foreign companies established in Slovakia the same as domestic ones. Enterprises may enter into direct contracts with foreign companies. Private enterprises are free to establish, acquire, and dispose of interests in businesses, but must settle all Slovak liabilities to liquidated companies before transferring any remaining funds out of Slovakia.

In 2023, a comprehensive foreign investment screening mechanism (Act No. 497/2022 Coll.) entered into force. Under this mechanism, the Slovak government may review transactions in which a foreign investor acquires "effective control" over a Slovak legal entity. The thresholds for effective control depend on whether the transaction is classified as a "critical foreign investment" or a regular "foreign investment." For non-critical investments, the effective control threshold is 25% of the share capital or voting rights. For "critical investments" (as defined by Government Regulation No. 61/2023 Coll.), the effective control threshold is reduced to 10% of the share capital or voting rights.

Under the FDI screening mechanism, the government may, upon recommendation of the Ministry of Economy, ultimately prohibit a foreign investment if it is determined to pose a risk to security or public order in Slovakia or the EU. The government may also require compliance with a specific set of mitigating conditions for approving a foreign investment. While critical foreign investments must undergo prior review before being allowed to proceed, non-critical investments may also be reviewed retroactively for two years after completion.

The review mechanism does not apply to greenfield investments and, with the exception of investments in "critical infrastructure," does not apply to investments from other EU Member States considered to pose a low risk to national security.

ICID Convention and the New York Convention

Slovakia is a contracting state of the International Centre for Settlement of International Disputes (ICISD) and the Commercial Arbitration Tribunal of the World Bank (established under the 1966 Washington Convention).

The country is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Ministry of Finance administers bilateral investment treaties and manages and represents Slovakia in international arbitration.

Investment contracts with foreign investors in Slovakia are regulated by the relevant ministries depending on the sector, in most cases by the Ministry of Economy.

Investment Incentives for Doing Business in Slovakia

Regional investment incentives may be granted to small and medium-sized enterprises, large companies, and new or existing investors doing business in Slovakia. Other support mechanisms include research and development (R&D) tax deductions or preferential tax regimes.

In general, investment incentives can support four categories of projects:

• Industrial production
• Technology centers
• Shared service centers
• Tourism

Each category has specific conditions that must be met to receive investment incentives. In general, incentives are provided in the following form:

• Income tax incentive
• Subsidy for the acquisition of tangible and intangible assets
• Contribution to job creation
• Transfer or exchange of real estate at a price below the total value of the asset.

In addition, certain corporate income tax incentives may also be granted under the Research and Development Incentives Act.

The granting of incentives is subject to approval by the Ministry of Economy or the Ministry of Finance, as applicable.

If a taxpayer does not claim corporate income tax incentives under the Research and Development Incentives Act, a special regime for research and development expenses may be claimed under certain conditions.

Additional R&D tax deductions allow companies located in Slovakia to deduct an additional 100% of R&D expenses from their corporate income tax base. There are no industry restrictions, but the project must meet the definition of R&D established in accounting practice.

In addition, special economic zones (SEZs) in Slovakia, such as Košice and Žilina, offer benefits such as tax incentives, reduced administrative burdens, and improved infrastructure. For example, companies investing in the Košice SEZ can receive up to 35% of their investment costs in state aid.

The provision of state aid is regulated, in particular, by European Union law, which also sets the basic legal framework for Slovak authorities.