How can you take money out of an s.r.o. without paying tax or contributions?

If your business made a profit in the previous year, do not pay it out to yourself as dividends, and you will avoid the withholding tax on dividends. Save on tax. Move the profit into the social fund and pay yourself a generous cash meal allowance from this fund. Even if it were €200 a day, it is income exempt from tax and social and health insurance contributions.

How do I move retained earnings into the company’s social fund?

For the company to move retained earnings into the social fund, the accountant must have either:

• A decision of the sole shareholder
• The minutes of the general meeting.

The proceedings of the general meeting of a limited liability company (s.r.o.) must be recorded in the style and form of minutes. This is what the record of the general meeting is for. Before discussion of and decisions on the items on the general meeting’s agenda begin, a chair and a minute-taker must be elected. This obligation, laid down by law, is important for coordinating the course of the general meeting and documenting its proceedings. The minutes of the general meeting are drawn up by the minute-taker, who is chosen by the general meeting itself.

A general meeting when there is only one shareholder?

If a limited liability company has only one shareholder, this sole shareholder plays the key role in performing the functions of the general meeting. At the same time, under the provisions of the Commercial Code, all of their decisions must be documented in writing and bear their signature. For important matters concerning the company, however, such as decisions to increase or reduce the share capital or to appoint, dismiss and remunerate managing directors, there is a statutory obligation to have the authenticity of their signature officially certified. Such a general meeting is also referred to as a decision of the sole shareholder.

What is the social fund?

The social fund plays a role in implementing the company’s social policy in the area of employee care and represents a long-term liability of the business towards its employees. Creating a social fund is an obligation of the employer.

The employer must create the social fund from employees’ gross wages as follows:

• 0.6% of gross wages:
• • for employers whose business activity is aimed at making a profit and who do not meet the conditions for an allocation of 1% of the base,
  • for employers whose activity is not aimed at making a profit (e.g. a budgetary organisation) and whose budget does not allow them to create a social fund of 1% of the base.
• Up to a maximum of 1% of gross wages:
• • for employers whose business activity is aimed at making a profit and who:
    – made a profit for the previous calendar year* and
    – at the same time met all their contribution obligations towards the health insurance companies and the Social Insurance Agency (Sociálna poisťovňa) and their tax obligations towards the state, the municipality and the self-governing region (VÚC);
  • for employers whose activity is not aimed at making a profit, if their budget allows it.

The employer may also create the social fund from other sources, for example by deciding to create the social fund from retained earnings of previous years.

How can I use the social fund?

From the social fund, the employer provides employees with a contribution towards:

• employee meals over and above the scope laid down by special regulations – Section 152 of the Labour Code,
• commuting to and from work,
• attending cultural and sports events,
• recreation and services the employee uses to restore their capacity for work,
• healthcare,
• social assistance and cash loans,
• supplementary pension saving (other than the contribution to supplementary pension saving that the employer is required to pay),
• further implementation of the company’s social policy in the area of employee care.

A contribution from the social fund may be provided not only to the employee but also:

• to a family member of the employee (husband/wife, the employee’s dependent children),
• to a recipient of an old-age pension, early old-age pension, disability pension, long-service pension or long-service disability pension whom the employer employed in an employment relationship or a similar working relationship on the day they retired on such a pension,
• to a trade union to cover its costs of preparing analyses and expert opinions, or other services necessary for collective bargaining. This contribution must be agreed in the collective agreement and may not exceed the statutory limit of 0.05% of the base for determining the allocation to the fund.

The social fund in the collective agreement with employees?

The employer agrees the following with the trade union in the collective agreement:

• the creation of the fund,
• the amount of the fund,
• the use of the fund,
• the conditions for providing contributions from the fund to employees, and
• the way employees prove their expenses.

If there is no trade union at the employer, the employer sets these out in an internal regulation.

Contribution to compensate for the costs of commuting to and from work:

If the collective agreement does not provide for a further allocation to the fund, the employer is required to provide a contribution from the further allocation to the fund to compensate for the costs of commuting to and from work. An employee is entitled to this compensation if they:

• commute to work by public transport and
• have average monthly earnings that do not exceed 50% of the average nominal monthly wage of an employee in the Slovak economy for the calendar year two years before the calendar year for which the fund is created. An employee’s average earnings are governed by Section 134 of the Labour Code.

If the employer has no employees who meet these criteria, it cannot create a further allocation under this provision.

For an employee working part-time, the average monthly earnings are calculated on the basis of the weekly working time set at the employee’s workplace.
An employer that provides an employee with a commuting contribution from the further allocation may also provide a contribution towards commuting to and from work from the mandatory allocation to the fund.

The employer may not provide contributions from the fund as remuneration for work.