Advertising and marketing
1. How to send newsletters and other promotional material from February 2022
Advertising, the promotion of goods and services, as well as of the business entities themselves, is among the basic business strategies of most entrepreneurs. Under the legislation in force so far, however, approaching individuals with promotional material was considerably restricted. A new measure, which takes effect on 1 February 2022, opens up new opportunities for all traders to attract their target group with an offer of their products.
The new legislation has removed the term „calling“ from the wording in force so far, and therefore from February 2022 it will be possible to contact individuals by calling (not by a so-called automatic dialler) without such contact being classified as unsolicited communication. An essential factor for the lawfulness of the phone calls will be whether the addressee is not entered in the new Robinson list. In addition, the contact persons of commercial companies and self-employed persons (SZČO) have been removed from statutory protection where their contact is published. The rules on the possibility of contacting existing customers with the same or similar goods to those they have already purchased, and new customers who have demonstrably consented to such communication in advance, continue to apply.
Employment relations, employees and employers
2. Minimum wage and annual leave entitlement in 2022
Given the fact that no agreement was reached between the representatives of employers and employees by 15 July 2021, from the new year 2022 the amount of the minimum wage changes according to the rules laid down by law, i.e. as 57% of the average monthly nominal wage of an employee in the economy of the Slovak Republic for the calendar year two years preceding the calendar year for which the amount of the monthly minimum wage is determined.
In 2022, therefore, the monthly minimum wage of an employee working full time amounts to EUR 646, which is EUR 23 more than in 2021. The minimum hourly wage is EUR 3.713. When determining an employee's minimum wage, it is also necessary to determine the degree of work difficulty. This is done using a calculation based on the coefficients defined in the Labour Code.
One of the approved changes to the Labour Code is also an amendment to the wording of the definition of annual leave.
Within the Labour Code, the provision regulating the annual leave entitlement of an employee who permanently cares for a child is being made more precise. A novelty in the legislation is that an employee who begins or ceases to permanently care for a child during the calendar year is entitled to the increase in the leave entitlement to five weeks only on a pro rata basis. The pro rata amount is determined as the ratio of the number of days of permanent childcare in the relevant calendar year to the number of days in the calendar year.
3. Meal allowance in 2022
The legislative changes of 2022 will also affect the meal allowance and its taxation. Let us look together at which areas these changes concern.
It is generally known that, in accordance with the Labour Code, an employer is obliged to provide employees with meals. An employee who performs work for more than four hours a day is entitled to a meal allowance; the employer may provide it in its own or another catering facility, or in the form of a meal allowance contribution. The changes in 2022 concern primarily the taxation of these contributions.
In 2022, the maximum amount of the tax-deductible expense for the meal allowance is EUR 2.81. It is not, however, prohibited for an employer to provide an employee with a higher contribution than the stated amount (whether in the form of a voluntary contribution or from the social fund). The change compared with 2021 is the taxation of the meal contribution above EUR 2.81. This means that if (without the social fund) an employer contributes to meals above EUR 2.81, it is exempt from income tax only up to the amount of EUR 2.81. Everything above the EUR 2.81 threshold is taxed and at the same time contributions are also paid from this difference, since this amount is considered taxable income of the employee and a non-deductible expense of their employer. It should be emphasised that the above applies to all forms of meal provision that we listed above.
In practice this means that the preferential provision of meal vouchers ends. In the previous year, the entire value of a meal voucher was exempt from tax.
Let us stay with meal vouchers for a moment longer. For 2022, the minimum value of a meal voucher was set at EUR 3.83, of which the employer can include 55% in tax-deductible expenses, i.e. EUR 2.11.
Is the meal allowance for self-employed persons (SZČO) also changing? Yes, in that from the new year taxpayers with income from business or from other self-employed activity will no longer have to prove the amount of the meal allowance with a receipt when claiming demonstrable tax expenses. On the one hand this looks like an advantage and relief from bureaucracy, but without proving it with a receipt, self-employed persons (SZČO) will be able to include in tax-deductible expenses for a worked day only the amount of EUR 2.81 (i.e. only 55% of the value of the meal allowance for a business trip in the range of 5 to 12 hours). Compared with the previous year, the difference per worked day is as much as EUR 2.29. Although the administrative burden decreases, this results in the payment of higher income tax.
4. Act on support in times of reduced work
From 1 March 2022, on the basis of the Act on support in times of reduced work (the Act), it will be possible to apply for the provision of financial support for an employer. As the explanatory memorandum to the Act states, the subject of the Act is the provision of support in times of reduced work to an employer, in accordance with the concept of introducing a reduced-work regime, so-called "kurzarbeit".
The term kurzarbeit has been used quite frequently lately, in particular in connection with the coronavirus pandemic. The Act is therefore to regulate the provision of support to an employer in times of reduced work. The support is to serve to partially cover the employer's costs of the employee's wage compensation during the period of an external factor as a result of which the employer's activity has been restricted.
An external factor is a factor of a temporary nature that the employer could neither influence nor prevent. This includes, for example, a state of emergency.
Example: An employer has 12 employees whom it employs under a permanent employment relationship. As a result of an external factor, namely a state of emergency declared in connection with the coronavirus pandemic, the employer cannot assign work to five of its employees to the extent of 10 hours per week. The employer has therefore met the conditions for entitlement to support in accordance with the Act.
The support will be paid to employers by the head office or the relevant office of labour, social affairs and family. In order for support to be provided to an employer, it must file an application. The application is filed by electronic means and must be signed with the employer's qualified electronic signature.
The above example, however, does not include all the conditions that an employer must meet in order to become an entity eligible for the payment of support under the Act. The Act lays down several conditions that an employer must meet. For more information on whether you meet all the conditions for the provision of support, do not hesitate to contact us.
The support is provided to the employer for the employee's wage compensation for each hour of an obstacle to work on the employer's side in the amount of 60% of the employee's hourly earnings. The Act also sets the maximum possible amount of support provided. The maximum extent of the support is 60% of 1/174 of twice the average wage in Slovakia for the calendar year two calendar years preceding the calendar year in which the support is provided.
Support can, however, be provided only for the job of an employee who has worked for the employer for at least one month, is not serving a notice period and has used up their leave for the previous calendar year and used up the positive balance of their working-time account.
The support will be paid to the employer monthly, but only for a maximum duration of no more than 6 months in total over 24 consecutive months, unless the Government of the Slovak Republic decides on a longer period of providing support.
The employer is obliged to retain the job for which the support is provided for at least 2 months after the end of the month for which the support was provided. The employer does not have this obligation if the employment relationship with the employee ends for reasons on the employee's side.
Finance, taxes and accounting
5. Super-deduction of investment expenses
With the approval of the amendment to the Tax Procedure Code, the Income Tax Act was also changed at the same time. In connection with this, a new, temporary instrument is introduced from the new year, the purpose of which is to support higher-value-added investments linked to Industry 4.0, in the form of an additional deduction of investment expenses or costs from the tax base reduced by the deduction of the tax loss. This new instrument is contained in § 30e and will also be supplemented by Annex No. 3 to the Income Tax Act.
What is Industry 4.0?
This term denotes the process of optimising production procedures using the most modern knowledge with the aim of increasing production. The basic definition of the term is contained in the amendment to the Income Tax Act in § 30e para. 5. Under the provision, an investment means an investment in a production system and a logistics system consisting of equipment, machines, additional devices, automation technology and communication technology, including a computer program (software) for controlling the production process and the logistics process, capable of exchanging, processing and archiving digitised data in real time in order to provide information for identifying and optimising the production process and the logistics process, being an investment in
- tangible assets listed in Annex No. 3, including technical improvements carried out on those assets in the tax period of their inclusion in use or in the business assets, acquired by purchase or created through the taxpayer's own activity, which were not depreciated before their acquisition,
- other assets under § 22 para. 6 letter e), where it concerns a technical improvement of tangible assets listed in Annex No. 3,
- a computer program (software) acquired by purchase or created through the taxpayer's own activity, which was not depreciated before its acquisition, including technical improvements carried out on those assets.
Who will be able to claim the super-deduction?
The super-deduction of expenses will be able to be claimed both by legal entities and by natural persons with income under § 6 para. 1 and 2 of the Income Tax Act, i.e. with income from business and self-employed activity. The aim of introducing this instrument is to support taxpayers who decide to invest in higher-value-added assets and who reinvest in total at least 700% or 1400% of the average value of investments, whereby it must be an amount of at least EUR 1 million.The amount of the deduction will depend on the extent of reinvestment of the average value of investments during the period of the investment plan, expressed as a percentage and in an absolute amount in euros. The new Annex No. 3 to the Income Tax Act will also define the assets from which such a deduction can be claimed.
Should a taxpayer wish to claim this super-deduction, they will have to draw up an investment plan for four tax periods. Drawing up such a plan is relatively demanding, so we recommend turning to experts.
Who cannot claim the super-deduction?
The super-deduction of investment expenses or costs cannot be claimed by a newly established taxpayer who was established, or obtained a permit or authorisation for business, during the 3 tax periods that should be taken into account when calculating the average value of investments. Nor can a taxpayer use the deduction for assets for which full or partial support was provided from public finances, for assets whose depreciation is included in full or in part in the deduction of research and development expenses or costs under § 30c of the Income Tax Act, and the like.
From the new year, the financial directorate will be obliged to publish taxpayers who claim the super-deduction in the public list of tax entities on the financial administration portal, within three months following the expiry of the deadline for filing the tax return.
Where a taxpayer in the relevant tax period does not report a sufficient tax base to claim the super-deduction of investment expenses or costs, reports a tax loss, does not have a sufficient tax base after the deduction of the tax loss, does not have a sufficient tax base after the deduction of the tax loss and the deduction of research and development expenses or costs, the entitlement to the deduction of investment expenses or costs in the relevant tax period lapses and the taxpayer cannot carry it over to the following tax period. The amendment to the Income Tax Act also defines the situations in which a taxpayer cannot claim the deduction of investment expenses or costs in the relevant tax period, or where, if they claimed it and during the period of the set investment plan one of the situations defined by law occurs (e.g. dissolution with liquidation, dissolution without liquidation, declaration of bankruptcy, sale of the business), they must file a supplementary tax return for each tax period in which they claimed the deduction.
6. Digitalisation of accounting
The changes did not bypass the Accounting Act either, which will significantly simplify bookkeeping for entrepreneurs and make it possible to do away with a large volume of archived documents. The amendment, effective from 1 January 2021, brings several positive changes.
The amendment will, for example, simplify converting accounting documents from paper to electronic form. It will allow documents to be scanned without the need to use the so-called guaranteed conversion, in order to simplify and streamline the digitalisation of documents.
A positive change also comes in the archiving of accounting - entrepreneurs will no longer have to keep documents in paper form; archiving will also be permissible electronically by storing the documentation on a data carrier, which may be, for example, an optical disc, USB, memory card, hard drives, cloud, and the like. The obligation remains important to ensure that, in the event of an inspection, the accounting records can be made accessible from the electronic data carrier into a form that is readable by the human eye.
7. New obligations for VAT payers
The amendment to the Tax Procedure Code indirectly also amended the Value Added Tax Act and introduced several changes.
For VAT payers, the new regulation means that they are obliged to notify the financial administration of the numbers of all their own bank accounts that they use for receiving and sending payments for the supply of goods and services that are subject to value added tax. VAT payers are obliged to notify the account numbers without delay from the day the account is set up, or without delay once the taxable person was registered as a VAT payer. Taxpayers as at 15 November 2021 had until 30 November 2021 to make the notification. The account numbers are notified via an electronic form – when filling it in, care must be taken, as an incorrect entry of the data exposes payers to a fine of up to EUR 10,000.
The registered accounts will also be used when refunding an excess deduction - from 1 January 2022 the tax office will refund an excess deduction or part of it only to a registered bank account of the payer published in the list of bank accounts by the tax administrator.
The amendment removes bureaucracy; from 1 January 2022 VAT registration cards were also abolished. Under the new rules, tax offices will therefore send only the registration decision.
At the same time, the institution of liability of a VAT payer – the customer – for tax that the supplier did not pay is being extended, where the customer knew or could have known that it would not be paid. Liability for the tax is also possible where the consideration for the goods and services is paid to a supplier not published in the list of bank accounts.
8. Rounding of cash payments from 1 July 2022
The aim of the amendment, which changes the Prices Act, is the introduction of rounding of the value of purchases so as to significantly limit the circulation of one- and two-cent coins, using principles similar to those used when 10- and 20-heller coins were abolished in the past.
The Ministry of Finance states that the rounding will be carried out in a mathematical way that is neutral and fair to both sides, that is, both the trader and the buyer.
Furthermore, the finance ministry considers the positives of this step to be the simplification of dispensing coins, the lightening of wallets, and the reduction of entrepreneurs’ costs for bank fees for depositing or processing 1- and 2-cent coins, and there is also a positive effect on the environment through reducing the use of packaging material and the number of transports of these coins.
At the same time, however, traders will continue to be obliged to accept 1- and 2-cent coins for cash payments. These will remain a generally accepted legal tender in Slovakia for as long and to the extent that they remain legal tender under the legislation of the European Union.
In order to create additional time to set up the software of cash registers, the amendment to the act takes effect, instead of the originally planned 1 January 2022, only on 1 July 2022.
9. Amendment to the Act on Metrology and its impact on entrepreneurs
From March 2022, changes to the Act on Metrology take effect, which are carried out in order to introduce market plurality, by which the position of entities carrying out the verification of specified measuring instruments is put on an equal footing as part of creating favourable conditions for the business environment and reducing the bureaucratic burden on the business environment.
The most significant change can be considered to be the conditions for imposing fines by the Slovak Metrology Inspectorate. Under the new rules, an inspector of the Slovak Metrology Inspectorate will have the option of imposing an on-the-spot fine for several breaches of the Act on Metrology, not only for a single breach as was the case until now. The Office for Standards, Metrology and Testing (ÚNMS) assesses this step positively, because it will achieve an improvement in application practice. The ÚNMS states that „this change will have a positive effect on the business environment, since by paying the on-the-spot fine an entrepreneur will be able to avoid administrative proceedings and the imposition of a higher fine. In the case of administrative proceedings, we also had in mind reducing costs for the business environment, and where the supervised person meets the conditions defined by law, the Act on Metrology will allow the amount of the imposed fine to be reduced by one third within the framework of metrological supervision.“
The changes to the Act on Metrology will at the same time considerably reduce the administrative burden on entrepreneurs through the informatisation and digitalisation of public administration. Under the Act against Bureaucracy, the ÚNMS SR is considered a public authority which, in its official activity, is obliged and authorised to obtain and use data recorded in the information systems of public administration. The ÚNMS will no longer require entrepreneurs to send documents of competence in the field of metrology directly, but will obtain them directly from the Slovak Institute of Metrology, which issues them. At the same time, the obligation to submit a copy of the founding charter or the deed of establishment with an application for authorisation or a registration application was removed.
10. Relief for authors of artistic works
On 24 November 2021, the National Council of the Slovak Republic approved an amendment to the Act on Artistic Funds, which extends a change already approved in the past. That change is relief for authors of literary, musical or visual works who, in connection with the Covid-19 pandemic, are not obliged to remit 2% of their remuneration to the relevant artistic funds.
Under the Act on Artistic Funds, authors of artistic works are obliged to remit contributions of 2% to the funds depending on the nature of their activity under § 1 of the act in question. This provision refers to three funds, namely the literary fund, the music fund and the fund of visual arts.
It must, however, be noted that this obligation arises for authors only where the remuneration is paid to them in the capacity of a self-employed person. Where an author received remuneration on the basis of an employment contract, this obligation would not apply to them.
As we already noted above, the relief from the 2% deduction from authors’ remuneration applied in the past as well, specifically from 21 May 2020, when an amendment to the act in question, approved by parliament, took effect. The aim of this amendment was mainly to provide financial assistance to authors and artists on account of the Covid-19 pandemic. In practice this means that the financial assistance will, for now, last in total from 21 May 2020 to 31 December 2022, and during this period authors and artists will be paid remuneration in full, i.e. without the 2% deduction for contributions to the artistic funds.
If, however, authors or artists decided, despite this relief, that they want to remit the 2% to the funds, they may do so and voluntarily remit a contribution of 2% of the remuneration at their own expense, and provided the voluntary contribution is remitted to the funds by 31 March 2023, it will be considered a tax-deductible expense.
Special rules, however, apply to the heirs of copyright. If they achieve a total gross annual income for 2022 from royalties of more than EUR 1,660, they remit to the funds a contribution of 1% of the total gross income from royalties for 2022 by 31 March 2023, and where this total gross income of theirs for 2022 exceeds EUR 3,319 per year, they remit a contribution of 3% of the total annual gross income from royalties for 2022 by 31 March 2023.
In cooperation with the tax and accounting experts from the company Wellbens, we have prepared for you this selection of changes for entrepreneurs that could affect you in 2022. Thank you for reading this far, and should you have any questions, do not hesitate to contact us; we will be glad to arrange a tailor-made consultation for you.