Thinking about tax havens we usually imagine exotic locations, tropical seas, fairytale landscapes, palm trees, catamarans. - Meanwhile, in order to find countries with business-friendly tax regulations, you do not need to travel far, because they are closer than you might think. Slovakia is an excellent example," says Jakub Chabin, tax advisor for the WFY Group and explains what you can gain by registering with our southern neighbour.

It is not only the annual increase in social and health insurance contributions and the higher minimum wage for employees that have led more and more Polish entrepreneurs to consider Slovakia as a place of business registration. What are the benefits for our southern neighbor and does it really pay to move your business there?

Tax paradise

First of all, the attention of entrepreneurs is drawn to the fact that Slovakia has a lower VAT rate (20%). There is also a higher turnover limit exempting from VAT registration. - This is almost EUR 50,000 in relation to PLN 150,000 in force in Poland. This is especially important for people who, due to the specificity of their business, do not pay to become a VAT-payer. Also, personal income tax rates are lower. In Slovakia they amount to 19 and 25%, which in comparison with our 18% and 32% is attractive - says Jakub Chabin, tax advisor from WFY Group. - On the other hand, contrary to the Polish tax system, Slovakia has introduced a so-called annual minimum tax, which the company has to pay even if it shows a loss. It amounts to EUR 480 for non-VAT companies, EUR 960 for VAT taxpayers and EUR 2,880 for entities with a turnover of more than EUR 500,000.

Slovaks also have a more liberal approach to what may be a tax deductible cost than our legislator. There is a much broader catalogue of expenditures considered as tax deductible costs. - As a result, although the CIT rate in Slovakia is higher than ours and amounts to 22 per cent in relation to 19 per cent, in the end it does not mean that the company will pay a higher tax there. The real burden on the company in our neighbour's country will be lower than in Poland due to the entrepreneur's ability to deduct a larger amount of costs - explains the WFY Group expert.

Transport is heading south.

Automotive enthusiasts should pay special attention to Slovakia. This is because there is no tax on means of transport or excise duty on cars in this country, which makes them cheaper. - Especially in the case of prestigious and therefore expensive models, the benefit can be significant. In addition, all VAT can be deducted when buying a car. Although in Poland there is a possibility to deduct 100% VAT on the purchase of a passenger car for business purposes, it is connected with the necessity to meet strict requirements - keeping records of the vehicle's mileage or using the car exclusively for business purposes. So you have to forget about using your vehicle after work, for example to go shopping in a supermarket or go away for a weekend," explains Jakub Chabin from WFY Group. In Slovakia there are no such restrictions and the function of the company car can be freely combined with private use. All this makes the companies from the logistics and transport sectors look at this location with particular interest and more and more often they set up their headquarters there.

Contributions and debts

Due to more favourable insurance rates in Slovakia, labour costs are also lower. This issue is important for businessmen when hiring more staff. In addition, members of the management board of companies, including single-person limited liability companies, shall not be subject to such contributions. - In Poland, the sole shareholder of a limited liability company is treated as an entrepreneur and must pay contributions to the Social Insurance Institution (ZUS). The Slovak solution is therefore very beneficial for those who do not want to have partners, but at the same time want to avoid personal responsibility for their business activity - explains Jakub Chabin.

Responsibility of the Management Board

In Poland, members of the management board of limited liability companies bear personal, though subsidiary, responsibility for the entity's debts both to the tax authorities and under civil law. According to the Slovak law, the situation of persons managing such companies is much more favourable. In principle, they are not liable for debts at all, and in the case of tax arrears they must be shown that they deliberately failed to pay their taxes on time. - In Poland, the liability of members of the Management Board covers tax arrears on account of liabilities whose payment terms expired while they were serving as members of the Management Board and arrears arising on account of taking up such positions. Unfortunately, there are cases in practice when a new member of the management board takes up this function, for example, one day before the tax payment deadline and although he had no real influence on the tax payment by the company, the tax office enforces the arrears of his private assets - adds Jakub Chabin from WFY Group.

It would seem that there is no better place, and in addition located closer than Slovakia, where it is worth to move or start your adventure with business. It should be remembered, however, that setting up a company in this country should be adjusted to the needs, type or size of business activity, just like any other solutions and tax optimizations. Before we decide to do so, let's analyze everything with a tax advisor or lawyer who will be able to show us both the advantages and disadvantages of such a decision.