|Daniel Futej||Daniel Grigel|
Under the new rules, a limited liability company may not be incorporated by a person who has tax arrears exceeding €170 ($217). Tax arrears means any amount owed on any type of tax which has become overdue (income tax, value added tax, excise tax or local tax). This change is intended to prevent natural and legal persons from incorporating limited liability companies when those persons have incurred that tax obligation and have failed to pay the tax owed by the time they are attempting to incorporate a limited liability company. All persons intending to incorporate a limited liability company will first have to prove they have no tax arrears by requesting the tax authority's written consent to the registration of a limited liability company in the Commercial Registry. Provided there are no tax arrears, the tax authority will provide consent within three business days of lodging the request.
The amendment to the Commercial Code has also introduced a requirement for the tax authority's consent for transfer of majority ownership interest in a limited liability company to another member of that company or to a third party outside that company. In this case it is the company that has the duty to request the consent of the tax authority and it must request that consent for both the member whose majority ownership interest is to be transferred and for the person who will acquire it. The procedure is the same as with incorporating a company – if the transferor and transferee have no tax arrears, the tax authority will grant consent within three business days of the company's request.
A key interpretation rule here is that a majority ownership interest is an ownership interest which confers at least half of all votes to the member. This means that the consent of the tax authority indicating that neither the transferor nor the transferee have tax arrears is required even if just 50% ownership interest is being transferred. There are situations where the prior consent of the tax authority is not required, such as a transfer of majority ownership interest when a company is dissolved without liquidation or where the person acquiring the majority interest or the person transferring it is a foreign person. According to the Commercial Code, a foreign person is any natural person whose place of residence is outside the Slovak Republic, or any legal person domiciled outside the Slovak Republic. For all intents and purposes then, a Slovak national residing abroad is considered a foreign person who is not subject to the prior consent of the tax authority and, in contrast, for the purposes of the Commercial Code a foreign national resident in Slovakia is considered a Slovak natural person and in that person's case the company must request the consent of the tax authority for transfer of a majority ownership interest.
The amendment also introduces a significant change regarding the effects of a transfer of a majority ownership interest – in contrast with existing legislation, the effects are now delayed until registration in the Commercial Registry. Therefore, the new majority member of the limited liability company will not be able to participate or vote in the general meeting, or adopt decisions while acting in the capacity of the general meeting, until the day of registration in the Commercial Registry.
Effective from October 1 2012, voluntary VAT registration is more stringent for a defined group of applicants: they must now provide security by depositing funds into the tax authority's account or by providing a bank guarantee. This applies to applicants (a natural person, or director or member of a legal person) who participate or have in the past participated as director or member of companies which, at the time of registration, had VAT arrears of €1,000 or more or had their registration revoked for the causes laid down in the Act on VAT. The security will be required only if the applicant (natural person or company) is only gearing up to carry on delivery of goods or services, for instance in the case of a newly-incorporated company; this is intended to prevent possible misuse of voluntary registration.
In the aforementioned cases, the tax office will determine the amount of security by a decision it will issue after the VAT registration application has been submitted. The amendment lays down a minimum security amount of €1,000 and a maximum security amount of €500,000; the tax administration, in cooperation with the finance ministry, is still working out the detailed criteria on which the tax authority will determine the precise amount of security. The tax authority will apply the maximum amount of security if it has reason to believe that the VAT registration will be misused to obtain wrongful benefits, such as unauthorised refunds of excess value added tax. This will be primarily in cases where the applicant participated or participates in VAT arrears nearing the maximum limit – if the amount owed on VAT is or was €500,000 or more. By contrast, the tax authority will designate the security at the minimum amount in the case of, for instance, a newly-incorporated entity that does not or did not have VAT arrears and there are no doubts that this entity will carry on taxable activities in the future.
Failure to provide the security is cause for rejection of a VAT application for voluntary registration. If the tax authority does not use the security to cover the tax arrears of the registered person, it must return the security within 30 days of the end of a 12-month period from the time the security was provided.
Dr Daniel Futej and Dr Daniel Grigel