2014 SBA Fact Sheet SLOVAKIA

EN Enterprise and Industry 2014 SBA Fact Sheet SLOVAKIA In a nutshell The Slovakian business economy is heavily dependent on SMEs as they provide 72 % of employment and 67 % of value added, well above the respective EU averages of 67 % and 58 %. Most firms are in services and retail trade but manufacturing is also an important sector: although it does not comprise very large numbers of SMEs, it contributes 25 % to employment and 22 % to the value added of the SMEs in Slovakia s business economy. The Slovakian economy was not spared from the economic crisis and suffered a 4.9 % fall in real GDP between 2008 and 2009. Yet recovery set in just a year later and thanks to growth of 3 % in the following year, Slovakia s economy managed to exceed its pre-crisis level by 2.2 % in 2011. However, this upward trend is slowing, with economic growth down to 0.8 % in 2013. At the same time, corporation tax increased from 19 % to 23 %. This had a negative impact on smaller businesses in particular, resulting in a worsening business environment. Overall, in 2103 Slovakia s SBA profile was mixed, with comparative strengths in environment, access to finance and public procurement and weaknesses in internationalisation and second chance. It is felt that SMEs would benefit if the principle of think small first were implemented more widely in decision-making, insolvency procedures were streamlined and contracts better enforced. About the SBA Fact Sheets 1 The Small Business Act for Europe (SBA) is the EU s flagship policy initiative to support small and medium-sized enterprises (SMEs). It comprises a set of policy measures organised around 10 principles ranging from entrepreneurship and responsive administration to internationalisation. To improve SBA governance, the 2011 review of the Act called for better monitoring. The SBA Fact Sheets are published annually and aim to improve understanding of recent trends and national policies affecting SMEs. Enterprise and Industry

1. SMEs in Slovakia basic figures Number of enterprises Number of employees Value added Slovakia EU 28 Slovakia EU 28 Slovakia EU 28 Number Proportion Proportion Number Proportion Proportion Billion Proportion Proportion Micro 375 780 95.8% 92.4% 537 760 37.6% 29.1% 10 29.8% 21.6% Small 13 810 3.5% 6.4% 263 387 18.4% 20.6% 7 19.1% 18.2% Medium-sized 2 213 0.6% 1.0% 230 254 16.1% 17.2% 6 15.8% 18.3% SMEs 391 803 99.9% 99.8% 1 031 401 72.2% 66.9% 23 64.6% 58.1% Large 465 0.1% 0.2% 397 534 27.8% 33.1% 12 35.4% 41.9% Total 392 268 100.0% 100.0% 1 428 935 100.0% 100.0% 35 100.0% 100.0% These are estimates for 2013 produced by DIW Econ, based on 2008 11 figures from the Structural Business Statistics Database (Eurostat). The data cover the 'business economy', which includes industry, construction, trade, and services (NACE Rev. 2 sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such as education and health. The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries. The disadvantage is that for some countries the data may be different from those published by national authorities. The Slovakian business economy is heavily dependent on SMEs, as they provide 72 % of employment and 67 % of value added, well above the respective EU averages of 67 % and 58 %. In general, micro firms are more common than in the EU as a whole and account for a higher than average proportion of firms, employment and value added. January 2014. This reflects an improvement in business confidence in the construction and industry sectors as well as among consumers. The signs of recovery visible in GDP growth are also reflected in the business economy in the increase in value added generated by SMEs and large firms between 2010 and 2013. As in other EU countries, most SMEs can be found in services and trade. Manufacturing is also an important sector for SMEs: although it does not comprise very large numbers of SMEs, it nevertheless contributes 25 % to employment and 22 % to the value added of the SMEs in Slovakia s business economy. The Slovakian economy was not spared from the economic crisis and suffered a 4.9 % fall in real GDP between 2008 and 2009. Yet recovery set in just one year later, when GDP increased by a real 4.4 %. Thanks to growth of 3 % in the following year, Slovakia s economy managed to exceed its pre-crisis level by 2.2 % in 2011. However, this upward trend is now slowing. Economic growth was down to 0.8 % in 2013, the lowest rate for more than a decade if 2009 2 is excluded. At the same time, corporation tax increased from 19 % to 23 %. This had a negative impact on smaller businesses in particular, resulting in a worsening business environment in Slovakia. 3 The latest survey by the Business Alliance of Slovakia shows that the business environment climate worsened in 2013, but that the trend was less marked in the third quarter than in previous quarters 4. The Economic Sentiment Indicator (ESI) 5 also points to a return to a better economic climate in Slovakia in Not only the business economy but also specific sectors show significant growth in output. One outstanding example is Slovakia s transportation and storage sector, which recorded an increase in value added of about 90 % between 2010 and 2013. Large volumes of foreign direct investment in the logistics sector are a possible explanation. This would be similar to the situation a decade ago, when huge investments in the automotive sector generated extraordinary output growth. 6 But not every sector is characterised by outstanding performance. In the real estate sector, SMEs and large companies had contrasting fortunes between 2010 and 2013. While SME employment and value added fell by 5 % and 33 %, respectively, large firms experienced an increase in both employment and value added (by 39 % and 13 % respectively). The most relevant reason is the bursting of the real estate bubble. Prices of flats and houses increased dramatically until the 2008-09 crisis, but after the bubble burst they fell rapidly and thousands of properties could not be sold. As a result, many companies, especially SMEs, had difficulty paying back their loans and went bankrupt. This is true for 2014 SBA Fact Sheet Slovakia 2

SME trends in Slovakia 13 large firms as well but they were, at least partly, supported by the government 7. Slovakia s business demography has developed very unevenly since 2008, with a rapid recovery immediately after the crisis, followed by a slowdown and, recently, another increase. After falling in 2012, when 40 527 new SMEs were established, the number of start-ups increased again in 2013 8. The increase is due to entrepreneurs rushing to set up limited liability companies before a change in the law 9 took effect at the end of 2013. The new law requires anyone establishing a limited company to deposit basic capital of at least EUR 5 000 in a bank account 10. In October 2013 twice as many limited companies as in the previous months were set up. 11. The National Bank of Slovakia s macroeconomic forecasts for the domestic economy in 2014 are fairly positive 12. Economic growth is projected to be 2.2 % this year and 3.1 % in 2015, after 0.9 % in 2013. Employment is seen growing only modestly, however, as higher production is expected to come from greater efficiency and an increase in employees working hours. 2014 SBA Fact Sheet Slovakia 3

2. Slovakia s SBA profile 14 Overall, Slovakia s SBA profile in 2013 was mixed, with comparative strengths in environment, access to finance and public procurement but weaknesses in internationalisation and second chance. In 2013 the National Agency for SME support (NADSME) elaborated the SMEs strategy which was, however, not approved by the government but only integrated into the economic development strategy. Consequently, the strategy for implementing the SBA was not adopted either. However, the government working group on SBA implementation, which involves all relevant ministries, was set up in August 2013 and started work in October 2013. The main bodies responsible for the implementation of the SBA in Slovakia are the Ministry of Economy and the National Agency for Development of Small and Medium Enterprises (NADSME), which is also the body responsible for monitoring implementation of the SBA. The national Smart Specialisation Strategy was developed and adopted in 2013. The strategy gives only partial consideration to the role of SMEs, however. The Operational Plan for Research and Innovation, which will implement operative mechanisms and tools for allocating spending from the EU Structural Funds, should be strengthened in future. Progress in implementing SBA policy was modest but more significant than in the previous years. The main SBA principles addressed in 2013 were access to finance and responsive administration. To a lesser extent action was also taken on entrepreneurship and environment. Overall, business stakeholders report that government policies and measures undertaken in 2013 in the context of the Europe 2020 strategy were only partially in line with the expectations of the SME sector. The stakeholders consider that the main future policy priorities should be the following: - Adopting the SME development strategy and creating a comprehensive support system for the SME sector; - Further improving access to finance through equity, loans and guarantees targeted to the development and expansion phases of start-ups. Revolving financial instruments should be prioritised; - Providing comprehensive support for the export activities of Slovak SMEs, both within the EU single market and in non-eu countries; - Further improving e-government and e- administration; - Ensuring SMEs have better access to the qualified labour force; - Offering more effective training of entrepreneurs as well as consulting services and management training in all sectors of innovation to increase the competitiveness of Slovak SMEs. 2014 SBA Fact Sheet Slovakia 4

Slovakia s SBA performance: status quo and development between 2008 and 14 15 Think small first principle The think small first principle aims to ensure that SME concerns are integrated into mainstream EU and national legislation and policies. Policy makers at all levels are expected to consult with small businesses and keep their needs and limitations in mind during all phases of legislative and policy processes. The think small first principle (Najprv mysli v malom) is not yet systematically applied in Slovakia. However, the government has adopted a decree requiring the Minister of Economy to establish the system of assessing the impact of forthcoming legislative and administrative initiatives for small and medium enterprises (SME test) when drafting new legislation by the end of 2014. An update of the common methodology to assess the effects of proposed regulations is also in preparation (jednotná metodika posudzovania vybraných vplyvov. The SBA working group focuses on preparing and implementing key measures and policies in support of SMEs, discussing tasks and EU recommendations, and preparing measures to ensure the sustainable growth of SMEs and increase regional employment. In 2013 several measures were taken to reduce administrative burdens on SMEs. For example, the amendment to the Accounting Act allows micro-firms to prepare their statement of finances in short form (about eight pages) instead of a standard statement of finances. The summary notes will need to contain the minimum amount of data required by EU legislation. Moreover, an amendment has been adopted related to the public notice on adjusting certain health and safety at work requirements, to ensure that they are feasible for small businesses and do not burden employers. 2014 SBA Fact Sheet Slovakia 5

Entrepreneurship Early stage entrepreneurial activity (%); 2013; Slovakia: 9.5; EU avg: 8 Early stage entrepreneurial activity for female population (%); 2013; Slovakia: 7; EU avg: 6 Established business ownership rate (%); 2013; Slovakia: 5.4; EU avg: 6.4 Opportunity-driven entrepreneurial activity (%); 2013; Slovakia: 40.2; EU avg: 47 Entrepreneurial intentions (percentage of adults who intend to start a business within 3 years); 2013; Slovakia: 16.4; EU avg: 13.5 Degree to which school education helped develop an entrepreneurial attitude; 2012; Slovakia: 49; EU avg: 50 Entrepreneurship as a desirable career choice (%); 2013; Slovakia: 49.2; EU avg: 56.9 High status given to successful entrepreneurship (%); 2013; Slovakia: 58.5; EU avg: 65.5 Media attention given to entrepreneurship (%); 2013; Slovakia: 51.7; EU avg: 49 Slovakia s overall performance in this policy area is in line with the EU average, with individual indicators in 2013 displaying a somewhat mixed performance. While early-stage entrepreneurial activity is above average for both men and women, the proportion of established businesses (i.e. firms that have been operating and paying salaries for more than 3-1/2 years) is smaller, which suggests a lower survival rate. At the same time, entrepreneurial intentions are slightly above average, as 16 % of Slovakians aimed to start a new business in the near future. Slovakia is more or less in line with the EU average when it comes to entrepreneurial culture, social attitudes towards entrepreneurship and the degree to which school education is considered helpful in fostering an entrepreneurial attitude.. On the policy front, the government launched an important initiative to promote vocational training a sign of its intention to take action to improve competencies and enhance the potential of the labour force. The national programme for vocational education and training has been developed by the Ministry of Education, Science, Research and Sport in response to the high rate of youth unemployment. It will be carried out in cooperation with companies and Austrian experts. Another relevant policy intervention is the preparation of the National Act to support SMEs. This is the first legislative step to target SMEs specifically in Slovakia s 21-year history. The National Agency for SMEs is also promoting entrepreneurship among women by organising a competition for female entrepreneurs. 2014 SBA Fact Sheet Slovakia 6

Second chance Time to resolve insolvency (in years); 2014; Slovakia: 4; EU avg: 2 Cost of resolving insolvency (cost of recovering debt as percentage of the debtor's estate); 2014; Slovakia: 18; EU avg: 10.29 Degree of support for a second chance (%); 2012; Slovakia: 78; EU avg: 82 Fear of failure rate (%); 2013; Slovakia: 33.2; EU avg: 39.8 Slovakia s performance in this policy area is very far below the EU average and has not improved in recent years. The low score is due mainly to the very lengthy and costly procedures that need to be completed by firms going through bankruptcy. On top of this, there is lower than average support for honest entrepreneurs who have failed and are looking for a second start in business. Somewhat paradoxically, given these unfavourable framework conditions, the fear of failure among entrepreneurs, at 33 %, is well below the EU average (40 %). No new significant policy initiatives were implemented in this area in 2013. 2014 SBA Fact Sheet Slovakia 7

Responsive administration Time to start a business (in calendar days); 2013; Slovakia: 10; EU avg: 4.2 Cost of starting a business (in euros); 2013; Slovakia: 249; EU avg: 318 Paid-in minimum capital (percentage of income per capita); 2014; Slovakia: 19.3; EU avg: 10.42 Time required to transfer property (in calendar days); 2014; Slovakia: 16.5; EU avg: 27.7 Cost required to transfer property (percentage of property value); 2014; Slovakia: 0; EU avg: 4.7 Number of tax payments per year; 2014; Slovakia: 20; EU avg: 12.54 Time it takes to pay taxes (hours per year); 2014; Slovakia: 207; EU avg: 192.57 Cost of enforcing contracts (percentage of claim); 2014; Slovakia: 30; EU avg: 21.49 Fast-changing legislation and policies are a problem for doing business (percentage of respondents who agree); 2013; Slovakia: 83; EU avg: 70 The complexity of administrative procedures is a problem for doing business (percentage of respondents who agree); 2013; Slovakia: 74; EU avg: 63 SMEs interacting online with public authorities (%); 2013; Slovakia: 92.19; EU avg: 87.58 Licenses and permit systems (1=lowest level of complexity, 26=highest level of complexity); 2011; Slovakia: 14; EU avg: 15.77 Burden of government regulations (1=burdensome, 7=not burdensome); 2013; Slovakia: 2.5; EU avg: 3.2 Slovakia trails the EU average in responsive administration. Start-up procedures are relatively favourable, but not all policy changes show up yet in the statistics. For example, the time needed to start a business was recently reduced to only two days, in line with the targets imposed by the Small Business Act for Europe. However, a new law 16 adopted in 2013 requires a paid-in minimum capital of at least EUR 5 000 to establish a company, which could be a significant deterrent for people looking to become entrepreneurs. Procedures for transferring property are comparatively easy in Slovakia, but improvements are needed when it comes to the burdens involved in paying taxes and enforcing contracts in courts of law. The fact that there is room for improvement in cutting down bureaucracy is confirmed by the results of a business survey carried out in 2013: over three quarters of Slovakian entrepreneurs said the complexity of administrative procedures and the lack of stability and predictability in the legal framework were an obstacle to doing business. Some progress has been made on the policy front. Attention has been given to introducing easier procedures for microenterprises to prepare their annual statements, simplifying the requirements for income tax returns, making it simpler and faster to inscribe and register a new company and get a business licence, simplifying communication with the Social Insurance Agency and reducing administrative burdens for temporary employment agencies. With e- government gradually expanding, efforts have been made to boost e-services, for example by enabling online communication with the tax office and electronic access to insurance for SMEs. Health and safety regulation and the associated accounting system have been simplified as well. A VAT amendment introduced in 2014 enables declarations of invoices received and issued to be cross-checked exclusively through VAT returns 2014 SBA Fact Sheet Slovakia 8

submitted electronically. It also introduces a new VAT specification for the transfer of buildings. The government has established an inter-ministerial working group on implementing the SBA that gathers officials from a number of the ministries concerned. The Ministries of Finance, Interior and Justice have adopted a measure that eases the administrative burden by dropping the obligation to submit income tax declarations to the company register. In 2014 the Ministry of Finance in collaboration with the Ministry of Interior adopted a measure shortening the time it takes to inscribe a company in the business register from five days to two and the time needed to issue a business licence from five days to three. State aid and public procurement Percentage SMEs account for in the total value of public contracts awarded (%); 2013; Slovakia: 25; EU avg: 29 Percentage of businesses participating in public tenders (%); 2013; Slovakia: 43; EU avg: 37 Average delay in payments from public authorities (in days); 2013; Slovakia: 27; EU avg: 28.05 Percentage of businesses submitting proposals in a public electronic tender system (e-procurement) (%); 2013; Slovakia: 22.14; EU avg: 12.85 Slovakia s performance in this policy area is slightly better than the EU average. Despite SMEs receiving a lower share of the value of public procurement contracts 25 %, compared with 29 % in the EU a higher than average proportion of them participated in public procurement procedures. This indicates that small firms have a low degree of success in winning public contracts. Slovakia does better than the EU as a whole in implementing a public electronic tender system, which is used more widely by businesses. On the policy side, the scarcity of new actions in this field reflects the difficulties small businesses face to access public procurement procedures and state aids. In 2014 the Ministry of Education, Science, Research and Sport adopted a measure amending the Act on incentives for research and development, under which entrepreneurs (including SMEs doing their own research) could qualify for state incentives for further R&D. The Ministry of Justice has implemented the EU Directive on combating late payments in commercial transactions, which sets out the rights of creditors and the obligations of debtors. The Directive is a legal procedure for businesses, especially small and medium-sized enterprises and public administrations in Slovakia and in the EU. 2014 SBA Fact Sheet Slovakia 9

Access to finance Rejected loan applications and unacceptable loan offers (percentage of loan applications by SMEs); 2013; Slovakia: 22; EU avg: 14.4 Access to public financial support including guarantees (percentage of respondents that indicated a deterioration); 2013; Slovakia: 12.6; EU avg: 17.3 Willingness of banks to provide a loan (percentage of respondents that indicated a deterioration); 2013; Slovakia: 9.6; EU avg: 24.6 Cost of borrowing for small loans relative to large loans (%); 2013; Slovakia: 45.1; EU avg: 23.82 Total amount of time it takes to get paid (days); 2013; Slovakia: 42.67; EU avg: 50.76 Bad debt loss (percentage of total turnover); 2013; Slovakia: 3.9; EU avg: 3.83 Strength of legal rights index (0-10); 2014; Slovakia: 8; EU avg: 6.82 Slovakia s performance in this policy area is mixed but, overall, slightly above the EU average. Recent data on loans show that credit conditions improved in 2013, with only a minority of Slovakian entrepreneurs still reporting a reduction in banks willingness to provide credit and in the availability of public financial support, including guarantees. At the same time, however, 22 % of Slovakian SMEs still had their loan applications refused by banks or had to reject the offers they received because they found the conditions unacceptable. This is confirmed by the indicator which shows a big gap between corporate interest rates and those offered to small businesses, whose business plans are considered significantly more risky by banks. On the policy front, important progress has been made. Indeed, stakeholders confirm that most of the government s policy action in 2013 concentrated on improving access to finance. Most of the measures launched in this area addressed the need to increase companies potential access to finance and contribute to their competitiveness. The National Agency for SMEs has set up the Innovation and Technology Fund. This financing programme is supporting high-growth enterprises. The Fund s mission is to provide a form of risk capital to support entrepreneurial initiatives and thus steer the economy towards greater entrepreneurship, employment and innovation. It was created in response to the emerging demand for risk capital to support entrepreneurs with ideas. 2014 SBA Fact Sheet Slovakia 10

Single market SMEs with intra-eu exports of goods (percentage of SMEs in industry); 2011; Slovakia: 8.25; EU avg: 13.89 SMEs with intra-eu imports of goods (percentage of SMEs in industry); 2011; Slovakia: 14.45; EU avg: 17.47 Public contracts secured abroad by SMEs (percentage of total value of public contracts); 2013; Slovakia: 1.7; EU avg: 2.6 Number of single market directives not yet transposed; 2013; Slovakia: 5; EU avg: 8.69 Average transposition delay for overdue directives (in months); 2013; Slovakia: 3.7; EU avg: 8 Number of pending infringement proceedings; 2013; Slovakia: 22; EU avg: 30 Slovakia s performance in this policy area is on a par with the European average, but the individual indicators diverge. Manufacturing SMEs are slightly less likely than their European counterparts to trade goods with other EU countries. (These statistics give only part of the picture since they do not cover trade in services.) national transposition is presumed not to comply with the original directive or with internal market rules. No new significant policy initiatives were implemented in this area in 2013. However, Slovakia performs well when it comes to transposing EU law into national legislation. It has fewer directives outstanding, shorter transposition delays and fewer infringement procedures where 2014 SBA Fact Sheet Slovakia 11

Skills & innovation Percentage of SMEs introducing product or process innovations; 2010; Slovakia: 26.02; EU avg: 38.44 Percentage of SMEs introducing marketing or organisational innovations ; 2010; Slovakia: 27.25; EU avg: 40.3 Percentage of SMEs innovating in-house; 2010; Slovakia: 21.84; EU avg: 31.83 Percentage of innovative SMEs collaborating with others; 2010; Slovakia: 8.29; EU avg: 11.69 Sales of new-to-market and new-to-firm innovations (percentage of turnover); 2010; Slovakia: 23.35; EU avg: 14.37 Percentage of SMEs selling online; 2013; Slovakia: 16.95; EU avg: 13.87 Percentage of SMEs purchasing online; 2013; Slovakia: 18.99; EU avg: 26.31 Turnover from e-commerce; 2013; Slovakia: 17.89; EU avg: 13.98 Percentage of all enterprises that train their employees; 2010; Slovakia: 69; EU avg: 66 Slovakia has an average score but mixed performance in this policy area. The latest data show that SMEs in Slovakia are less likely than their European peers to introduce innovations in their products, processes, organisations or marketing. They are also less likely to carry out research and development in-house or collaborate with other SMEs. However, the SMEs that do innovate are clearly more successful at cashing in on it and making their innovations a consistent part of their revenue streams. been developed to address high youth unemployment, seems to be a good starting point. Finally, the Ministry of Economy together with the Ministry of Education has adopted a measure supporting clusters and introducing an innovation vouchers scheme. It provides EUR 250 000 for selected Slovakian clusters and EUR 200 000 for vouchers. On the policy front, it is widely felt that strong and effective action in this area is critical as the competitiveness of Slovak SMEs is weaker than in other EU countries. The new national programme for vocational education and training, which has also 2014 SBA Fact Sheet Slovakia 12

Environment Percentage of SMEs that have taken resource-efficiency measures; 2013; Slovakia: 95; EU avg: 95 Percentage of SMEs that have benefited from public support measures for their resource-efficiency actions; 2013; Slovakia: 64; EU avg: 35 Percentage of SMEs that offer green products or services; 2013; Slovakia: 32; EU avg: 26 Percentage of SMEs with a turnover share of more than 50% generated by green products or services; 2013; Slovakia: 18; EU avg: 22 Percentage of SMEs that have benefited from public support measures for their production of green products; 2013; Slovakia: 27; EU avg: 26 The environmental performance of Slovakian SMEs is better than the EU average. They are as likely as their EU peers to take steps to be more environmentally friendly, and somewhat more inclined to specialise in green products and services. On the policy front, some quite important measures have been introduced that might have an impact on small businesses in particular. One aims to ensure that the EUR 2.5 billion Cohesion Policy Programme is fully used to support eco-friendly products and processes in SMEs. The Office for Network Industries has adopted decrees regulating prices for electricity and gas supplies to small businesses. These are in accordance with the third liberalisation package for the EU internal market for electricity and gas. The government has also adopted provisions that allow the implementation of the EU Regulation on the Ecolabel. These include an incentive for companies registered under the EMAS scheme, by lowering their Ecolabel application fees by 30% for applicants registered in EMAS and by 15% in the case of an ISO 140001 certificate. 2014 SBA Fact Sheet Slovakia 13

Internationalisation SMEs with extra-eu exports of goods (percentage of SMEs in industry); 2011; Slovakia: 1.57; EU avg: 9.68 SMEs with extra-eu imports of goods (percentage of SMEs in industry); 2011; Slovakia: 2.12; EU avg: 8.18 Cost required to import (in USD); 2014; Slovakia: 1480; EU avg: 1069.89 Time required to import (in days); 2014; Slovakia: 16; EU avg: 10.71 Number of documents required to import; 2014; Slovakia: 6; EU avg: 4.68 Cost required to export (in USD); 2014; Slovakia: 1500; EU avg: 1034.64 Time required to export (in days); 2014; Slovakia: 17; EU avg: 11.82 Number of documents required to export; 2014; Slovakia: 7; EU avg: 4.25 Overall, Slovakia s performance in this policy area is well below the EU average. The framework conditions for trading are more cumbersome than in other EU countries, with bureaucratic, lengthy and costly customs procedures. Manufacturing SMEs have only marginal trade in goods with countries outside the EU (the statistics do not cover trade in services). On the policy side, efforts undertaken in 2013 to help increase SMEs exports include the creation of a public portal for launching export activities and promoting investments in other countries, the creation of a manual on international public procurement and the production of economic spotlights on foreign countries. In addition, the Misia14 project was launched in 2013 to help Slovak SMEs increase exports. 17 This project is run by SARIO (Slovak Investment and Trade development Agency). The aim of this project is to identify the burdens for SMEs when trying to export and subsequently to increase the number of exporting SMEs and their export sales. For the first phase of the project, entrepreneurs were asked to express their views on the problems with exporting through an online questionnaire. Based on the evaluation of the responses, packages of tailored services for beginners and advanced exporters will be created. Despite these measures, however, the institutional framework for promoting trade still does not meet the needs of SMEs or of companies in general. Furtherreaching measures are needed to support foreign trade and exports and to strengthen Slovakia s competitiveness within the EU. 2014 SBA Fact Sheet Slovakia 14

3. Good practice Below is an example of an interesting policy practice from Slovakia to show what governments can do to support SMEs: VAT Amending Act The VAT Amending Act, which came into force on 31 December 2013, is significant as it introduces exclusively electronic communication for VAT matters and helps to reduce VAT dodging. The Act (No 360/2013) regulates communication by VAT payers exclusively through electronic means and introduces the duty of providing cross-checking control of VAT declarations by the tax office of the Slovak Republic. This means the control of all suppliers and purchasers (the input and output control and the control of all invoices) In order to reduce VAT dodging. In particular, the Act requires VAT payers to submit VAT ledgers so-called Inland Recapitulative Statements which should include details of supplies of goods and services subject to VAT in Slovakia and of acquisitions of goods and services where input VAT deduction is claimed. The VAT ledgers should be submitted electronically (before the 25th of the month following the reporting month) together with the VAT return. The Act also lightens the administrative burden in a number of areas: registration charges, the need to provide financial guarantees for risky business partners and in case of transfer of the business, VAT deduction specifications where buildings are transferred, and the definition of a VAT declaration for companies that are members of an association. This measure is relatively transferable to other EU Member States and can be easily replicated. References: VAT Amending Act Important remarks The Small Business Act (SBA) Fact Sheets are produced by DG Enterprise and Industry as part of the SME Performance Review (SPR), which is its main vehicle for economic analysis of SME issues. They combine the latest available statistical and policy information for the 28 EU Member States and nine non-eu countries which also contribute to the EU s Competitiveness and Innovation Framework Programme (CIP). Produced annually, the Fact Sheets help to organise the available information to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an assessment of Member States policies but should be regarded as an additional source of information designed to improve evidencebased policy-making. For example, the Fact Sheets cite only those policy measures deemed relevant by local SME policy experts. They do not, and cannot, reflect all measures taken by the government over the reference period. More policy information can be found on a database accessible from the SPR website. Please also see the end notes overleaf. 2014 SBA Fact Sheet Slovakia 15

For more information SME Performance Review: http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm Small Business Act: http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm The European Small Business Portal: http://ec.europa.eu/small-business/index_en.htm Entr-SPR@ec.europa.eu 1 The 2014 SBA Fact Sheets benefited substantially from input from the European Commission s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data. 2 AMECO Annual Macroeconomic Database from the European Commission: http://ec.europa.eu/economy_finance/ameco/user/serie/selectserie.cfm (last update Feb. 25th 2014). 3 National Council of the Slovak Republic. 2013. Labour Code (Zákonník práce) http://www.szk.sk/files/legislativa/2001-311_znenie_20130822.pdf; accessed 04.03.2014 and National Council of the Slovak Republic. 2012. Amendment to Act no. 595/2003 Coll. about Income Tax effective from 1.1.2013 http://www.pp.sk/1563/zmeny-v-zakone-o-dani-z-prijmov-od-1-1-2013-pre-pravnickeosoby_dupp46924.aspx; accessed: 04.03.2014. 4 Podnikateľská Aliancia Slovenska. 2013. Zhoršovanie podnikateľského prostredia sa spomaľuje. http://alianciapas.sk/category/pravidelne_aktivity/index_podnikatelskeho_prostredia/; accessed 25.02.2014. 5 The economic sentiment indicator (2010 = 100) is a weighted average of the confidence in industry indicator (40 %), the confidence in construction indicator (5 %), the confidence in retail trade indicator (5 %), the confidence in services indicator (30 %) and the consumer confidence indicator (20 %). The Economic Sentiment Indicator (ESI) is calculated as an index with a mean value equal to 100 and a standard deviation of 10 for the fixed set of standardised statistical survey period. 6 Consultation with SARIO. 7 Economic news (Hospodárske noviny). 8 National Agency for Development of Small and Medium Enterprises. Report on status of SMEs in Slovakia in the year 2012, http://www.nadsme.sk/files/msp_nadsme_sk_2012.pdf p. 133; accessed: 24. 02. 2014 and Statistical Office of the Slovak Republic. 9 New legislation: Amendment to the Commercial Act which entered into force on 01.12.2013. 10 National Council of the Slovak Republic. Act Nr. 357/2013 Coll. Amendment to the Commercial Code. 2013. 11 Filip Glasa. 2013. Rekordný počet novozaložených firiem v októbri vzniklo vyše 4000 spločností. http://ako-investovat.sk/clanok/629/rekordny-pocet-novozalozenych-firiem-v-oktobri-vzniklo-vyse-4000- splocnosti; accessed: 25.02.2014. 12 National Bank of Slovak Republic. 2013. Strednodobá predikcia 4.Q. 2013. ISSN 1338-1466. http://www.nbs.sk/_img/documents/_publikacie/predik/2013/protected/p4q-2013.pdf; 18.02.2014. accessed: 2014 SBA Fact Sheet Slovakia 16

13 The three graphs below present the trend over time for the variables. They consist of index values for 2008 to 2015, with the base year 2008 set at a value of 100. As from 2012, the graphs show estimates of the development over time, produced by DIW Econ on the basis of 2008 11 figures from the Structural Business Statistics Database (Eurostat). The data cover the business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover enterprises in the financial sector, agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: http://ec.europa.eu/enterprise/policies/sme/facts-figuresanalysis/performance-review/index_en.htm. 14 The policy measures presented in this SBA Fact Sheet represent only a selection of the measures taken by the government in 2013 and the first quarter of 2014. The selection was made by the national SME policy expert contracted by CARSA Spain (DG Enterprise s lead contractor for the 2014 Fact Sheets). The experts were asked to select only those measures that, in their view, were the most important, i.e. were expected to have the highest impact in the specific SBA area. The complete range of measures that the experts compiled in producing this year s Fact Sheets will be published alongside the Fact Sheets in the form of a policy database on the DG Enterprise website. 15 The quadrant chart combines two sets of information. Firstly, it shows the status quo performance based on data for the latest available years. This information is plotted along the x-axis measured in standard deviations of the simple, non-weighted arithmetical average for EU-28. Secondly, it reveals progress over time, i.e. the average annual growth rates for 2008 14. The growth rates are measured against the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants provides information not only about where the country is located in this SBA area relative to the rest of the EU at a given point in time, but also about the extent of progress made in 2008 14. 16 New legislation: Amendment to the Commercial Act which entered the force on 01.12.2013. 17 SARIO. Misia14. http://misia14.zoznam.sk/o-projekte.html; accessed 26.02.2014. 2014 SBA Fact Sheet Slovakia 17