Institutes in Slovenia can be established and registered by local or foreign individuals and businesses if no other legal provisions are stipulated for individual activities or individual types of institute.
The minimum share capital is not fixed. An institute may be established and registered if its status as a 'going concern' is guaranteed, and if all other legally stipulated conditions are fulfilled.
When the institute is added to the Companies Register the court decides if the invested assets are sufficient for the establishment and performance of the institute's activities.
The name of the institute must contain a symbol that indicates its activity, and the head office of the institute; it may also contain the name of the founder. A symbol or graphic image may also be part of the name; an institute may also have an abbreviated name. Example:
- Name: XY, Private Research Institute, Ljubljana;
- Abbreviated name: XY, Ljubljana.
Advantages and disadvantages of registering an institute in Slovenia
Advantages of registering an institute in Slovenia:
- no fixed minimum share capital;
- founders are not liable for the institutes' obligations (which must be determined in the articles of association);
- reports provided to AJPES are not published publicly (however, they must be submitted); profits from non-profit activity are not taxed.
Disadvantages of registering an institute in Slovenia:
- limited number of activities which an institute can perform;
- non-profit purpose of establishment must be determined;
- an institute may not be established free of charge or modified through Slovenian Business Point portal; however, it may be established via a notary (not free of charge) and the procedure is more time-consuming.
Relationships between partners
The managing body of a private institute is led by a director who organises the institute, manages and represents it, and is also liable for the legality of the institute's work. The director is appointed and dismissed by the institute's founders; the term of a director's period in office is 4 years (if the articles of association do not stipulate a shorter term).
Articles of association
The articles of association of a private institute constitute the institute's fundamental document, which regulates the institute's operations and the relationships between the founders.
In accordance with Article 8 of the Institutes Act, the articles of association contain:
- the name and head office or address of the founder;
- the name and head office of the institute;
- the institute's activities;
- provisions on the institute's bodies;
- the means guaranteed for the institute's establishment and initiation of work;
- the sources, methods and conditions for obtaining finance for the institute's work;
- the method of allocating the surplus of revenues over expenses and method of covering deficits of finance for the institute's work;
- the obligations and responsibilities of the institute in legal transactions;
- the provisions on the founder's liability for the institute's obligations;
- the mutual rights and liabilities of the founder and institute;
- eventual other provisions in accordance with the law.
The preparation of the articles of association should focus primarily on the following elements:
- the institute's activities (as well as in cases of other forms of legal organisation the articles of association must state all activities (according to the code of activities) that the institute plans to perform);
- the method of allocating the surplus of revenues over expenses (the articles of association must specifically state that the surplus of revenues over expenses may be used for other purposes than the implementation and development of activities);
- the founder's liability regarding the institute's obligations (the articles of association must state that the founders are not liable for the institute's obligations);
- provisions on the disposal of capital shares (disposal of the capital share of the founder is possible only when this is explicitly stated in the articles of association).
Taxation of institutes
Regarding VAT and personal income taxation, the same rules apply to institutes as to other legal entities established for the purpose of performing economic activity.
Specific conditions related to the non-profit purpose of establishment apply in the field of corporate income tax (hereinafter referred to as DDPO).
The institute does not pay DDPO if it was established for the purpose of performing a non-profit activity and operates in accordance with the purpose of its establishment and operations. Regardless of this provision, the institute pays DDPO on profitable activity.
In the assessment of DDPO, all the institute's activities must be distributed to non-profit and profitable activity, whereas DDPO is paid exclusively on profitable activity.
More: rules on determining profitable and non-profit activity (OG RS no. 109/07 and 68/09).
In principle, profitable activity is activity performed in the market with the purpose of obtaining profit; or the institute competes in the market in this activity against other entities performing a profitable activity.
For the purpose of optimising DDPO in private institutes, along with establishing the amount of revenues accruing from profitable and non-profit activity, all income related to a special type of activity must also be established. DDPO is paid exclusively on the surplus of revenues over expenses that are established in the tax assessment.
The amount of expenses related to profitable activity can be established in two ways:
- Ensuring the correct ratio between expenses and profit (the amount of expenses related to profitable activity is determined in the share of all expenses which equals the share of revenues accrued from profitable activity in the total revenue. E.g. the institute creates 60% of revenues from profitable activity; therefore, the entire amount of 60% of all expenses is included in the assessment of DDPO);
- actual establishment of the amount of expenses (in this case, we establish for each expense whether it is connected with the performance of profitable or non-profit activity); in this case, separate accounting should be implemented throughout the year, i.e. for profitable and non-profit activity.
To reduce the tax liability it is best to calculate the proportion of expenses connected to a profitable activity if a relatively small amount of expenses is connected with the performance of profitable activity (in the alternative case, the tax base for DDPO is higher).
If relatively high expenses are connected with the performance of profitable activity, it is more rational to establish the amount of expenses on an actual basis (in this way, we reduce the tax base for DDPO more than in the case of the proportional establishment of the amount of expenses).
Note: the limitation regarding the performance of non-profit activity in institutes is not absolute, since Article 18 of the Institutes Act (hereinafter referred to as the ZZ) states that an institute can perform an economic activity if the institute was established in order to perform that activity. Due to this provision and some other advantages, an institute is an interesting alternative to other legal organisational forms, especially limited liability companies (LLC or d.o.o.).
An institute is established through a notary. The founders tell the notary all necessary information about the institute by personal visit, post or e-mail, because the notary requires this information for drafting the articles of association and other documents: The information required is as follows:
- name and abbreviated name;
- head office (place) and business address;
- founders' identification data (personal name, personal identification number, permanent address for natural persons, company, identification number and business address of legal entities, tax number for foreign individual and businesses);
- type and scope of founders' liability for the institute's obligations;
- identification data and type of representation (e.g. director, management member, procurator) and representation method (independently or jointly);
- institute's activity;
- means guaranteed for the institute's establishment and initiation of work;
- sources, method and conditions for obtaining means for the institute's work;
- method of allocating the surplus of revenues over expenses and method of covering a deficit of means for the institute's work.
When the founder adopts the articles of association, the acting director of the management board (director) is appointed; s/he is also authorised to perform the preparations for the initiation of institute's work under the supervision of the founder.
Founders must be personally present at the compiling and signing of all documents (individuals or authorised business representatives). Each founder may be represented by an authorised representative. An authorised representative should use a notorial record in the articles of association.
The notary files a proposal for the entry in the Companies Register in electronic form which includes all attachments that are preliminarily transformed into electronic form and certified with an electronic signature.
The register court decides on the request for entry in the Companies Register. By entering the articles of association in the Companies Register, the institute acquires legal capacity.
Based on the decision of the register court on the entry of the company in the Companies Register, the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) determines the main activity code and company identification number for the institute.