From 1 January 2018, amendments to the Slovak Commercial Code entered into force in order to improve the business environment, and among other things, to stop fraudulent practices related to reorganisations. The amendments introduced new obligations and constraints regarding mergers, fusions and demergers.
The amendments to the Slovak Commercial Code effective from 1 January 2018 have strengthened the legal and administrative requirements for carrying out mergers, fusions and demergers of commercial companies. In particular, the new obligation to submit a draft contract for a merger or demerger project to the tax authorities – no later than 60 days before the date on which these transactions are to be approved by the company bodies – may complicate transformations of companies.
Mergers, fusions and demergers in Slovakia at market value
In 2018, in-kind contributions, mergers, fusions and demergers of commercial companies may only be performed for tax purposes in most cases at fair (market) value, which means the difference between the accounting value and the market value is subject to tax.
The historical price method (tax neutral) may only be applied for mergers, fusions and demergers of commercial companies, in-kind contributions or cross-border transactions if certain conditions are met:
- for in-kind contributions of individual assets, applicable only on shares and commercial papers,
- for in-kind contributions of an enterprise or a part of thereof, only if the recipient is registered in another Member State of the European Union / member state of European Economic Area, the assets, enterprise or a part of thereof remains functionally connected with the permanent establishment of the foreign recipient located in Slovakia, and the Member State of the recipient accepts the historical prices,
- for mergers, fusions and demergers of commercial enterprises, only if the taxpayer dissolved without liquidation is registered in Slovakia, the legal successor is registered in another Member State of the European Union and at the same time the assets and liabilities of the taxpayer dissolved without liquidation are connected with the permanent establishment of the legal successor in Slovakia and the Member State of the foreign recipient accepts the historical prices.
Directors and shareholders of Slovak businesses should be aware of these key changes to the Commercial Code because they may complicate reorganisations.
If you would like to know more about the conditions of mergers, fusions and demergers in Slovakia, please visit the homepage of Mandat Consulting, k.s., the exclusive partner of WTS Global in Slovakia!