Slovakia during Covid-19

By VGD Slovakia | www.sk.vgd.eu/sk

A few months ago, I wrote an article for the quarterly magazine of Nexia International, the international network of accountants, of which VGD Slovakia is a member, about how Slovakia was an ideal place for investing: part of the eurozone, within the Schengen zone, strong focus on automotive and conveniently located in the heart of Europe. How fast the world can change! Today maybe only the last factor is of interest, now that we see that globalisation as we know it has ended with the Covid-19 pandemic and many companies will be considering bringing essential parts of their supply chains back closer to home.

Then a second question will arise, and that is how the government is willing to support local businesses when they are faced with a crisis beyond their control. I’m not so sure that Slovakia will then stand the test compared to some of its peers.

Yes, Slovakia has one of the lowest casualty rates and number of people diagnosed with Covid-19 in Europe. That is thanks to the fact that it reacted rapidly and closed the first schools on 6th March, only 2 days after the first infected patients were confirmed. The country went into a soft lock-down as from 14th March.

However, although the government reacted rapidly to combat the spreading of the pandemic in Slovakia, it has been slow in presenting supporting measures for the entrepreneurs and the businesses that were hit hard by the decisions of the government. The truth is that a change of government right in the middle of the crisis slowed the process. But even then when the support measures were approved and published, it was clear that these were ill-prepared, resulting in unclear situations and adjustments almost by the hour. Only now, at the end of April we are seeing some structure in the support measures. We can only hope now that the pay-out of the relief measures will pick up speed, because in the past 2 weeks this has been very slow and only minor amounts have reached the affected entrepreneurs.

Listing here all the support measures and the many conditions that you have to adhere to in order to qualify for them, would take up too much space. I’m sure that you will all find your way to the various websites and Covid-19 resource hubs that have sprung up to deal with that. So let me state just the headlines:

HR during Covid-19

• The labour code was amended to allow for home office, to announce the working time schedule only 2 days ahead and 7 days for taking vacation.

• The possibility was created for companies without any employee representation to decrease the salaries of employees to 80% in the event of an impediment to work at the employer.

• The use of OCR – nursing for children, was made easier and extended in certain cases to children up to 16, as most schools were closed.

• If your turnover decreased by 40% or more, you may defer payment of social security and health insurance contributions until 31st July 2020

• Those who had to close their business in April based on a decision of a state authority for at least 15 calendar days, are not obliged to pay their social insurance contributions for April 2020.

• Deadlines for filing a tax return and annual tax settlement 2019 have been postponed until the end of the calendar month following the end of the pandemic period.

Drawing funds from the Labour Office

Probably the most anticipated support measures, are the possibility to draw funds from the Labour Office. Currently there are 4 measures available:

basis of a decision of the Public Health Office

• Measure No. 2 – self-employed who had to close their operations on the basis of a decision of the Public Health Office

• Measure No. 3 – Employers affected by the emergency situation

• Measure No. 4 – Self-employed people who are not insured for sickness and health contributions and have no other income at the time of the declaration of the emergency situation.

Each measure has several conditions and procedures to follow in the application process and the amounts being paid out differ.

Under Measure No.1, the contribution is 80% of the employee’s average earnings, up to a maximum of EUR 1 100. If wage compensation is less than EUR 1 100, the contribution is most equal to the wage compensation paid.

Of most interest among entrepreneurs is measure No. 3, because in Slovakia only a limited number of businesses were forced to close their operations, but still a lot of companies are faced with many effects of the crisis. Measure No.3 is further divided into 3A and 3B, and it is important to note that once a company decides for one of the two alternatives, they cannot subsequently change their minds. The basic difference are:

• under 3A

• the employer cannot assign work, i.e. the employees are at home under the so-called barriers to work

• the maximum amount of the contribution is EUR 880

• there is no need for documentation of a decrease in the turnover

• limited only to employees who are at home

• whereas under 3B

• The employer may assign work to employees (also partially, but minimum of 50% of their working time)

• The maximum amount of the contribution is EUR 540, • The amount depends on the decrease in the turnover

(ranging from at least 20% to more than 80%)

• It is applicable to all employees who performed work or were at home due to impediments to work at the employer.

It is important to note that various conditions apply, such as the prohibition on ending the employment relationship within 2 months following the month for which the contribution is provided and the fact that the company may not have been a company in difficulty as at 31-12-2019 (meaning in short that their own equity should be at least half of their registered capital).

Taxation

In short, the deadlines for filing and paying corporate income tax have been postponed until after the pandemic. Advances for income tax need not be paid if your turnover has decreased by at least 40% compared to the same period of the previous month. All tax inspections and tax proceedings as well as

tax executions may be postponed. However, all VAT related payments are due and cannot be postponed.

Financial support

In order to mitigate the negative consequences of the pandemic and to support the continuation of operations at SMEs, the Ministry of Finance may provide financial aid. This financial aid will be provided through institutions such as the Export-Import bank of the Slovak Republic and the Slovak Guarantee and Development Bank. The financial aid will be provided in the form of guarantees for loans granted by a bank, or the payment of interest on a loan provided by a bank, i.e. interest bonuses.

SMEs may also individually request their bank to postpone loan repayments for a maximum of 9 months from the due date of the next outstanding repayment of the loan. Banks may not treat such a request as a negative record in the credit register.

We have noticed that several banks are preparing individual bank loan products to help their clients to mitigate the negative consequence of coronavirus.

In conclusion: the following months will prove whether Slovakia is able to handle the economic crisis as a result of the Covid-19 pandemic as well as it handled the pandemic itself (only 22 deaths at the time of writing this article). However, the support measures seem to be too little, too late so far and it will depend a lot on the strength of the individual entrepreneurs as to whether they overcome this situation.

Disclaimer: This overview of support measures were actual at the time of writing the article. In the meantime they may have changed. Please seek professional advice before taking any decisions.