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Open a Branch vs. a Subsidiary in Slovenia

Open a Branch vs. a Subsidiary 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 2024? 

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 registerOur 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 2024, 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 with the corporate income tax, which, up until the beginning of 2024, used to be charged at a rate of 19%.

It must be noted that a novelty of the Slovenian tax system introduced in 2024 is that the corporate income tax has been temporarily increased to a standard rate of 22%, for the period of 2024-2028. The decision to increase the corporate tax has been established under the Act on Reconstruction, Development and Provision of Financial Resources, which was published in the Official Gazette on 22 December 2023.

Foreign companies can operate in a new territory through a permanent establishment (PE), which can be a subsidiary, branch, or other types of business entities. Under the legislation that applies in 2024, the definition of a PE has been changed for construction companies, which are now considered PE after 6 months of activities, instead of 12, as it is customarily in general.

Investors who want to register a branch office or a subsidiary in 2024 must know that the same tax on corporate income applies to both structures. The obligation to pay income tax is imposed regardless if the company has its headquarters in Slovenia or elsewhere. 

This is required as long as the company obtains taxable income from activities in Slovenia. Any company is legally required to submit tax reports for the previous financial year no later than the end of the 1st quarter of the new financial year. 

For instance, for the previous year, companies have to prepare their income tax reports by 31 March 2024, according to the Slovenian Business Point, a portal created by the Slovenian institutions

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

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 2024? 

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. 

Our team of lawyers can help investors relocate here for the purpose of starting a branch office or a subsidiary or any other type of business venture. Our services do not include only business advice and representation, as our team is qualified in the steps foreigners must comply with before arriving here. 

Thus, you can rely on us for top quality services on immigration to Slovenia

You can find here information on short-term relocation, but also on long-term or permanent relocation. If you plan to permanently relocate here, please know that you will also have the right to Slovenian citizenship, once you initiate the procedure and only if you meet the necessary legal requirements. This is possible only after living for minimum 10 years in the country. 

You will first have to wait 5 years until you can be entitled to permanent residency in Slovenia and then you will have to live here as a permanent resident for 5 years (10 years, overall). 

This is the most common way to citizenship as a foreigner who is not related to a Slovenian national and this is the only legal route for businessmen as well, as the Slovenian law does not offer a shorter route based on investments.