What do you need to think about after starting a trade business? What obligations have to be met?
Entrepreneurship on the basis of a trade license, called a trade business, is defined by law as a continuous activity operated independently, on its own behalf, on its own responsibility, in order to obtain a profit or measurable positive social impact, if it is an economic activity of a registered social enterprise according to a special regulation, and under the conditions laid down by this Act.
VAT number assignment
The basic obligation that a self-employed person must fulfill is registration with the tax office for income tax. Registration is the obligation of everyone who acquires a trade license. The deadline by which the registration shall be made is the end of the calendar month following the month in which the entrepreneur acquired the license to do business. Such period for the self-employed person shall begin from the day of registration of the trade, unless a later date of trade commencement has been announced.
In order for a self-employed person to fulfill the obligation to register for income tax, it is necessary to bring the completed form “Application for registration, notification of changes, application for cancellation of income tax registration, value added tax and insurance tax” to the tax office of their permanent residence. The form can be found on the website of the Financial Administration of the Slovak Republic.
An alternative to the application for registration to fulfill the obligation to register for income tax can be the form for declaring a trade, in such a way that it is enough to fill in the part concerning the registration for income tax at the tax office. It is an application for the registration of a taxpayer for personal income tax. The Trade Licensing Office will then fulfill the registration obligation instead of the entrepreneur.
The tax office will register the entrepreneur within 30 days and assign them a VAT number (tax identification number).
This obligation is valid only until the end of 2021. From 01.01.2022, the tax office will register the entrepreneur ex officio itself. However, it is necessary for the entrepreneur to communicate electronically with the tax office.
Register with the health insurance company
A self-employed person is obliged to report to the health insurance company the establishment of the health insurance contribution payer (themselves) and to pay the health insurance. They can do so within eight days from the date of registration of the trade (unless a later date of trade commencement is specified). It is necessary to fill in the form “Notification of the insured payer/payer of insurance premiums”, which can be found at the branch of the health insurance company or on its website. The application can be delivered in person or electronically, if the health insurance company allows it.
Even in this case, it is possible to register with the health insurance company directly when registering the trade. When filling in the form for the registration of a trade, it is necessary to state the name of the health insurance company in the section “Notification of the trade name to the health insurance company in which the natural person is registered for compulsory health insurance”. The part of the form “Application for public compulsory health insurance” no longer needs to be filled in, as it is filled in only by those who are not insured in the Slovak Republic. As with the assignment of a VAT number, the Trade Licensing Office will then handle this obligation instead of the entrepreneur.
After registration with the health insurance company, the self-employed person receives payment data and the amount of advance payments, which the self-employed person is obliged to pay every month. In the case of a self-employed person who is also an employee or student, the health insurance company will deliver a letter to them stating that they are not a subject to the minimum assessment base. This means that they do not have to pay minimum amount advances to the health insurance company. However, it is appropriate to pay levies in a voluntary amount, as it may happen that the self-employed person incurs an arrears during the annual settlement.
Voluntary registration with the Social Insurance Company
The self-employed person is not obliged to register with the Social Insurance Company. They only register themselves if they are interested in voluntary insurance.
The obligation to pay the Social Insurance Company arises only if the income limit is exceeded (for the year 2021 it represents € 6,798). In such a case, it is necessary to pay social insurance from 1 July of the following calendar year after the establishment of the trade, eventually from 1 October if there is an extension of the deadline for filing a tax return.
If a natural person who was previously a self-employed person and was obliged to pay social insurance, withdraws and subsequently establishes a new trade by the next upcoming 30 June, or 30 September if there is an extension of the deadline for filing a tax return, such a self-employed person will be obliged to pay social insurance again.
The last situation when the obligation to pay social insurance arises is the case where the self-employed person is interested in paying voluntary sickness insurance, pension insurance and possibly also unemployment insurance. The notification of interest in such insurance must be made using the form “Registration form of a natural person” and delivering it to the Social Insurance Company located in the area of permanent residence electronically or by post/in person.
Obligations when opening an establishment
Establishments, i.e., premises in which the trade business is directly done, can be, for example, a shop, office or manufacturing facility. Premises used only for conducting a certain activity (e.g. garages, warehouses or dispensaries) or technical/technological equipment intended for the operation of a trade (e.g. mobile shops) are not considered as establishments.
When setting up an establishment, the self-employed person is obliged to report this fact to the Trade Licensing Office (and possibly also to the municipality, if this is regulated in a generally binding regulation). It is possible to use the form “Notification of change of data entered in the trade register”.
In order to put the premises into operation, it is necessary to obtain a positive decision from the regional public health office. In the case of administrative premises, non-food retail shops or other exceptions, it is sufficient to only notify the Office’s establishment. In other cases, it is necessary to fill in an application for putting the premises into operation and forward it to the regional public health office.
Another obligation to keep in mind is the business name of the establishment. In the case of an establishment providing services or selling goods to the final consumer, the particulars such as trade name and registered office of the seller or the place of business of the natural person, the name and surname of the person responsible for the operation, the opening hours and the category and class about accommodation.
In case it will be possible to pay in cash, meal vouchers or payment cards at the operation, the entrepreneur will also have to introduce the e-cash register.
VAT and bank account registration
In the beginning of business, value added tax is not very important for entrepreneurs, as registration for a VAT payer arises only after reaching a turnover of € 49,790 for a maximum of 12 previous consecutive calendar months. If the self-employed person would be interested in being a VAT payer from the very beginning of the business, can ask the tax office for VAT registration via the form “Application for registration, notification of changes, application for cancellation of income tax, value added tax and insurance tax”.
If an entrepreneur who does not yet pay VAT buys goods/services or provides a service to another EU country, and his transactions are mostly foreign, they may be obliged to register for VAT under §7 or §7a of Act no. 222/2004 Coll. on value added tax, as amended, to file tax returns or recapitulative statements for VAT. In such a case, the entrepreneur will not have the right to deduct VAT or the obligation to pay VAT on domestic transactions as a regular VAT payer.
In the course of 2021, a new VAT liability should apply to bank accounts and that VAT payers will be required to report to the tax office each of their own accounts that they will use for doing business.
As far as self-employed persons are concerned, there is no provision stating that a self-employed person must have funds they use for business activities kept in a separate bank account. However, the use of a personal account also for business purposes can lead to a breach of the bank’s terms and conditions, and the self-employed person is missing out all the benefits associated with the business account. At the same time, it is more advantageous to have a separate business account to keep clarity and to be more efficient for tax purposes.
If you are interested in setting up a trade business in Slovakia company MKMS can help you —> https://mkms.sk/en/home/