Open a Branch vs. a Subsidiary in Slovenia - Updated for 2022
Open a Branch vs. a Subsidiary in SloveniaUpdated on Wednesday 02nd March 2022
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What are the options for setting up a business in Slovenia?
Foreign investors are allowed to open companies in Slovenia just like the local citizen. The options for legal entities are numerous and international companies can choose to open a branch or a subsidiary in Slovenia in order to expand their operations. These are business forms which are usually employed by foreign companies entering this market.
The choice between these two types of companies lies in the hands of the foreign investor and the scope of his/her business. Our Slovenian law firm offers complete company incorporation services that are suited for any investor. With our help you will be able to make an informed decision and incorporate the right type of company for your business, as there are certain relevant differences between the branch office and the subsidiary.
What are branches in Slovenia?
According to the Slovenian company law, a branch is not a separate legal entity, it is part of an international company and it relies completely on its mother company to operate. Thus, the most important aspect to consider when deciding to open a branch in Slovenia is to keep in mind that the liability of the branch will fall upon the mother company abroad. The parent company is accountable for the branch as the latter does not have any rights or obligations.
The video below offers a short presentation on the advantages of branch offices and subsidiaries in Slovenia:
What is the main advantage of a Slovenian branch in 2022?
Branches have one important advantage: the incorporation procedure is completed faster than in the case of other legal entities in Slovenia. Despite the fact that a branch is not a legal entity in Slovenia, it still has to be registered at the Slovenian court register. Our law firm in Slovenia can give you detailed information about the registration method and the operations that a branch is allowed to perform in Slovenia.
If you opt to register a branch office in Slovenia in 2022, you must know that the formalities for registering this entity can be completed in approximately 7 to 14 days. After the registration is completed and the entity gains legal recognition, the investors can open a corporate bank account. From a tax point of view, the branch is liable to taxation in Slovenia, but only for the income obtained in Slovenia, and this is done in accordance with the regulations of the Corporate Income Tax Act.
For instance, the branch is taxed for its income at a rate of 22%, but only for the income obtained from activities developed in Slovenia.
What is a subsidiary in Slovenia?
Unlike the branch, a subsidiary in Slovenia has legal personality and is incorporated as any other Slovenian company. A subsidiary can be a limited liability company or a public limited company. The parent company abroad and the Slovenian subsidiary will have to observe the Parent-Subsidiary Directive and our attorneys in Slovenia can give you detailed information about the rules governing subsidiaries in Slovenia.
A subsidiary will also have to observe all the applicable regulations for taxation in Slovenia. The biggest advantage of a subsidiary, and oftentimes the reason why investors choose this business form, is that the parent-subsidiary structure does not imply any risks for the parent company, as the subsidiary is a separate legal entity.
What types of businesses are regulated under the Parent – Subsidiary Directive in 2022?
The EU Parent - Subsidiary Directive was created in order to eliminate tax issues deriving from companies and their subsidiaries operating in foreing countries, by abolishing the withholding taxes on dividends between these entities, as well as by avoiding the double taxation of the parent company. A wide category of companies can qualify under the regulations of this Directive, as follows:
- certain types of cooperatives, which are businesses that are operated by a group of persons for their own benefit;
- mutual companies – which are generally incorporated in the insurance sector;
- certain categories of non-capital based companies and saving banks;
- the funds and associations with commercial activities;
- newer business forms, such as the European Company that can be set up at the level of EU.
Through this, the withholding tax, which is customarily imposed at a rate of 15%, can be reduced to 0%.
For detailed information related to the company incorporation procedure in Slovenia and other information on doing business here, our Slovenian law firm can offer you numerous legal services. Our attorneys can help investors with in-depth information on the tax system applicable to the business structures presented in this article.