Foreign person

What it means

Under Slovak law, a foreign person is an individual resident outside Slovakia or a legal entity seated outside Slovakia. The term is used mainly in the Commercial Code when regulating business activity and in tax rules when determining obligations towards the Slovak tax authority.

A foreign person may do business in Slovakia on the same terms and to the same extent as a Slovak person unless the law provides otherwise. The right to do business usually arises when its enterprise or branch office is entered in the commercial register.

For individuals from outside the EU, residence rules also apply. Business activity of foreign nationals from third countries requires a residence permit, whereas EU citizens can do business on practically the same terms as Slovak citizens.

How it works in practice

A foreign company can operate in Slovakia through a branch office, which is not a separate legal entity, or through its own subsidiary, such as an s.r.o. The choice affects liability, bookkeeping, taxation and how partners and banks perceive the business.

When setting up a company with a foreign shareholder or registering a branch, the foreign person's details are verified separately. Requirements include, for example, an extract from its home country register, certified translations of documents and authenticated signatures or an apostille.

For tax purposes, a foreign person is usually a tax non-resident taxed in Slovakia only on Slovak-source income. If it operates through a permanent establishment, however, the profits of that establishment are taxed. For VAT it may need to register even without a seat in Slovakia.

What to watch out for

A foreign person from a third country may in some cases need a tax representative or an agent for service of documents. Without one, official documents may go undelivered, deadlines may run and penalties may arise.

When dealing with a foreign person, it is worth verifying its existence, authorisation to do business and tax status, for example through the EU VAT number validation system. This makes correct invoicing easier and reduces the risk of fraud or of a VAT exemption being denied.