Minister of Finance
Foreign Direct Investment (FDI) in the Slovak Republic is possible through one of the following ways:
Non-resident foreigners and the branches of non-resident enterprises are not allowed to acquire real estate, nor can they participate in the privatisation of land reserved for restitution to Slovak nationals. However, the acquisition of real estate related to direct investment is free for enterprises established under Slovak legislation.
The limitations concerning the acquisition of domestic real estate by non-residents can be overcome by establishing a domestic legal entity, or by participation as a partner or member in a legal entity. Thus, the purchase of real estate by established foreign controlled enterprises is free on a national treatment basis, because they are considered to be foreign exchange residents.
Since 1 December 1996, the Slovak Government has liberated inward direct investment, in the form of financial loans of five years or more, from the OECD member countries. Other forms of inward FDI in the country are free.
The legal and institutional framework for FDI in the Slovak Republic is characterised by a number of liberal features. These features most notably include:
The protection and promotion of investment is included within the framework of international bilateral investment treaties guaranteeing a national treatment, implementation of the most favoured treatment clause and transfer of investment earnings. Currently, the Slovak Republic does not grant any tax investors for foreign investors. However, it does offer a cheap, skilled labour force, a relatively favourable macroeconomic environment and a convenient geographical position.
The attraction of FDI, including in sectors where foreign investors have so far failed to participate on a significant scale (eg, engineering, machinery) is of great importance. The draft of the Income Tax Act included tax holidays for foreign investors. But it is yet to be adopted by Parliament. FDI would reduce the need for debt finance and contribute to the needed re-structuring of some sectors, provide necessary know how and better corporate governance.
The national treatment is applied regarding transactions in the shares of privatised enterprises and in future sales of equity shares by the National Property Fund. This includes cases of enterprises in which the State or National Property Fund will preserve its equity share.
The establishment of any bank in the territory of the Slovak Republic, including a branch of foreign bank, is subject to a banking licence. This is granted on the basis of National Treatment by the National Bank of Slovakia (NBS), in agreement with the Ministry of Finance. Licences are granted after the examination of the application in accordance with prudential criteria, including the economic soundness of the applicant's business plan. The Banking Act stipulates that 'the decision to issue a licence to establish a bank shall be passed subsequent to assessment of:
According to the amendment of the Banking Act, dated 21 February 1998, the 'economic viability' as a criterion for examination of an application for granting the banking licence was abolished. The threshold for foreign participation on the equity capital of the bank or voting rights presents ten, 20, 33 and 50 per cent.Approval is also required in cases of acquisitions by banks of legal entities, which are no longer banks when the cumulative value of all acquisitions exceed 25 per cent of the capital and the reserves of the banks, or the share to be acquired exceeds ten per cent of the equity capital of a juridical person which is not a bank. However, these provisions are non-discriminatory.
The Slovak insurance market is dominated by Slovenska poist'ovna a.s. (Slovak Insurance Company, Ltd), which is majority owned (50.5 per cent) by the NPF. The Slovak Insurance Company, Ltd is the exclusive supplier of compulsory third party motor vehicle insurance and compulsory liability insurance, bought by employers for their employees. Contracts for life assurance of persons with permanent residence in the Slovak Republic, insurance of property and of liability for damages deriving from activities of physical persons or legal entities in the territory of the Slovak Republic, may only be concluded by resident insurers (insurance companies that conduct business on Slovakian territory in accordance with the Insurance Act). The same provision applies to any insurance contracts for risks on Slovak territory and civil liability related to damages also caused on Slovak territory, even if it is not possible to cover a risk which exists in the country, unless an authorisation is granted.
However, residents can conclude insurance contracts with non-resident companies for risks located abroad and civil liability related to damages caused abroad; residents when abroad may also purchase insurance services connected to air and maritime transport, covering goods, aircraft, hull and property.
The legal form required for establishment of an insurance company is a joint stock company. Prior to submission of an application for a license for the establishment of an insurance company, the applicant has to provide security amounting to one million Slovak koruna. Intermediation activity is also subject to approval by the Insurance Supervisory Authority.The new legislation is under preparation to enable competition on the basis of national treatment in service areas that are now covered by the Slovak Insurance Company, Inc. The privatisation of the Slovak Insurance Company is planned for after 2003.
Securities dealers and brokers
Investment services are provided by banks or securities dealers. Investment services provided by banks need to be approved by the National Bank of Slovakia in co-operation with the Ministry of Finance; investment services provided by securities dealers are subject to permission being granted by the Ministry of Finance.
Portfolio management and cash management can also be provided by banks and securities dealers, but again require approval by the aforementioned bodies. Prior to granting permission, the Ministry of Finance examines personal as well as operational conditions of securities dealers.
Investment services concerning collective investment are subject to permission being granted by the Ministry of Finance.
Investment firms have to meet the following conditions:
There is a requirement for establishment in the form of a joint stock company for financial advisory services related to securities.
Foreign investors and enterprises with more than 50 per cent foreign participation are not allowed to acquire more than one-third of the fixed assets of the Stock Exchange and 25 per cent of the equity capital in the Securities Center of the Slovak Republic.
A drafted Act on Collective Investment will:
According to the Act on Auditors No.272/1996, foreign natural persons who meet the requirements for provision of auditing activity abroad and who have obtained a certificate to prove capability of auditing services under Article 9, and legal persons (domestic or foreign), 70 per cent of whose shares in equity capital or voting rights is owned by auditors registered in the list of auditors at the Chamber, can provide business activity in the Slovak Republic.
Other Acts regulating sectoral restrictions for entry of foreign investors to the Slovak Republic are: the Act on Strategic Enterprises the Act on Public Procurement the Act on Road Transport and Interstate Forwarding the Act on Civil Aviation the Act on the Professional Capability for Selected Activities in Construction the Act on Authorised Architects and Authorised Civil Engineers the Act on Audiovisuals