Článok Hello world! je zobrazený ako prvý na Highgate.

We are thus relatively intimately familiar with the related realities of this segment. Whether it is the topic of tax optimization, “employing sole traders”, investor entry, setting up a holding company, automated accounting, ESOPs, the legal, practical and tax pitfalls of scaling a business abroad, or operating with cryptos, these are all topics that we encounter in practice.

For this reason, we perceived that this conference can help many entrepreneurs to navigate through the complex tangle of more complex Slovak and foreign tax and legal issues. It was also intended to help to better understand the perspective of an investor or potential buyer in a company exit.

Sale of the company or entry of an investor :

• What are the basic situations and types of investor entry into companies?
• What are the key motivations and areas of interest for the investor and the company owner?
• What should an IT firm focus on to maximize the benefits of the investment for the firm and the business owner?
• Structured transactions and relevant tax implications from an income tax perspective (e.g. tax burden through a Slovak vs. a foreign holding company);
• Transaction Experience;

Relevant financial ratios when a company is sold or an investor enters :

• What is of interest to the investor or the buyer in accounting?
• Risks associated with incorrect accounting;
• Capitalization of the company;
• Transaction Experience;

Foreign IT contractors and work “from Bali” :

• Withholding taxes on payments to foreign contractors;
• Working from “Bali” – tax and levy implications;
• Setting up contract documentation;

ESOP – Best practice :

• What forms of shares and options can Slovak companies offer to their employees?
• Legal and practical context;
• Tax and levy context;
• Cross-border structure and practical experience;

Functioning in the crypt :

• Receiving retribution and paying contractors in the crypt;
• Types of crypto projects (token issuance, management, consulting, community token,…) and regulatory and tax aspects;
• Accounting and tax pitfalls in Slovakia and best practice when leaving Slovakia;
• Experience;

Scaling the IT business abroad :

• Do I need to have a company abroad in different business situations?
• Establishment of a permanent establishment, VAT regimes, withholding taxes;
• A company in an offshore jurisdiction from a legal, tax and practical perspective;
• Holding abroad – advantages and disadvantages;
• Investor requirements for foreign structure;
• Protection of the owner’s private property in the context of the political situation in Slovakia;
• Transfer pricing;

Software contracts :

• Framework or one-off contracts;
• Waterfall vs. agile SW development;
• Licensing Terms;
• Warranties and liability for defects in the SW;
• Problematic provisions – experience from practice;

Structuring business to the US :

• How best to enter the US market;
• Where can I get some help/information/grants?
• What is the tax and administrative burden?
• How to choose the right lawyer and accountant?
• How to get into the investors/funds horizon?
• In which state are the best conditions to enter the US market?

Tax optimization for digital and IT companies :

• Holding structure – owner protection;
• Patent Box and Supercomputing – how some IT companies do not have to pay income tax in Slovakia;
• Other tax and levy types and practical experience;
• When is tax optimisation already a criminal offence;

Schwarz system :

• Tax-tax implications and calculations;
• Impact on employees’ social insurance benefits (maternity, pension, sick leave,…);
• What impact does the change to a sole trader’s trade have on a sole trader’s pension?
• Analysis of court decisions that have dealt with the topic;
• Practice of tax administrations and labour inspectorates;
• Criminal liability;
• Setting up contracts with contractors;

Relevant financial ratios when a company is sold or an investor enters :

• What is of interest to the investor or the buyer in accounting?
• Risks associated with incorrect accounting;
• Capitalization of the company;
• Transaction Experience;

Many topics and many questions from conference participants. Companies were particularly interested in topics around ESOPs, tax optimizations or company sales. However, many attendees stayed until the end to hear the current practice in connection with the so-called In the meantime, there was a lot of interest in the practice of the shvarc system (i.e. the employment of freelancers).

We received a lot of positive feedback on the content and organisation of the conference. We are therefore very pleased that after the conference on setting up investment funds, this conference was also a success.

If you are interested in this topic, please do not hesitate to contact us.

Článok Conference on legal and tax optimization for technology companies je zobrazený ako prvý na Highgate.

In the lecture we mainly discussed:

• Classification of cryptocurrencies in an entity;
• Requirement for analytical record keeping;
• Valuation of cryptocurrencies (or just virtual currencies);
• Accounting transactions with cryptocurrencies and the impact on the tax base;
• Examples from practice;
• Linking accounting to income tax;
• VAT complications;

In our practice, we have been dealing with the accounting and taxation of cryptocurrencies in detail for a long time. In addition to our Crypto Tax & Law platform, we are part of working groups at the level of the Financial Directorate of the Slovak Republic and the Ministry of Finance of the Slovak Republic dealing specifically with cryptocurrencies and capital markets. We have even prepared an EBook on cryptocurrency accounting in a Slovak entity. We give lectures on cryptocurrencies at various forums, write numerous articles and organise conferences. At the last one about setting up funds, we also discussed the topic of cryptocurrencies.

If you are interested in this topic, please do not hesitate to contact us.

Článok Lecture on accounting and taxation of cryptocurrencies at an accountants’ conference je zobrazený ako prvý na Highgate.

Accounting for virtual currencies in legislation and basic concepts

We draw on the following sources:

• Act No. 431/2002 Coll. on Accounting, as amended (hereinafter referred to as the “AoA”)
• Measure of the Ministry of Finance of the Slovak Republic No. 23054/2002-92 of 16. December 2002 laying down details of accounting procedures and the framework chart of accounts for entrepreneurs accounted for in the double-entry bookkeeping system (hereinafter referred to as “accounting procedures”)
• Act No. 595/2003 Coll. on income tax as amended (hereinafter referred to as the “Income Tax Act”)

For the purposes of this publication, we consider the terms cryptocurrencies and virtual currencies (also abbreviated as “VMs“) to be identical terms.

The term ‘entity’ means a company or other entity accounted for in accordance with accounting procedures.

A micro-entity is an entity that meets at least two of the following conditions:

• the total amount of assets did not exceed EUR 350 000,
• net turnover did not exceed EUR 700 000,
• the average number of employees during the financial year did not exceed 10.

Accounting treatment of accounting for trading in virtual currencies

Accounting reporting for virtual currency trades

Virtual currency acquired for consideration and virtual currency acquired in exchange for another virtual currency are current financial assets.
The additions to and disposals of virtual currency shall be accounted for , for example, in account 258-Virtual currencies, or in another account in account group 25-Current financial assets that the entity establishes in its chart of accounts.
Analytical accounts shall be established on a virtual currency-by-virtual-currency basis.

Virtual currency shall be shown on line 68 in the balance sheet of the small and large entity and on line 23 in the balance sheet of the micro entity.

Valuation at purchase

Virtual currency is measured at fair value at the date of the accounting event.
Fair value is measured (Section 25(1)(h) of the CGU):

• virtual currency acquired for consideration,
• the virtual currency acquired by mining on the date of exchange for another asset or service,
• service and property acquired in exchange for virtual currency, excluding cash and securities valued at face value,
• a virtual currency acquired in exchange for another virtual currency.

The virtual currency is converted into euros at the date of the accounting event (§ 24 para. 10 of the CGU). The fair value of the virtual currency expressed in a foreign currency shall be translated into euro at the ECB/NBS exchange rate on the day preceding the date of the accounting event (§ 27(13) of the CGU).

A virtual currency is also measured at fair value by a micro-entity.

The fair value of a virtual currency is the market price at the date of the accounting event (e.g. the date of purchase or sale of the virtual currency) , as determined by the entity from the selected public market for the virtual currency.
An entity uses the same method of determining fair value for a given virtual currency during the accounting period.

As the virtual currency is converted to fair value at the date of acquisition, the resulting valuation differences are debited to account 568 – Other finance costs (if the price at which the virtual currency was acquired is greater than fair value) or credited to account 668 – Other finance income (if the price at which the virtual currency was acquired is less than fair value), depending on the nature of the valuation.

However, in the case of an exchange purchase, these revaluations to fair value should not arise as the exchange purchase is already at fair value. Rather, these revaluations relate to the situation where the virtual currency is acquired by purchasing in an individual trade (so-called P2P trades).

Fees… (more in the e-book we have prepared)

If you are interested in this topic, please do not hesitate to contact us.

Článok Accounting for cryptocurrency trading in a trading company je zobrazený ako prvý na Highgate.

Under the Statutory Audit Act, the auditor’s report expresses the statutory auditor’s opinion as to whether the financial statements give a true and fair view of the financial position and financial performance.

Could you explain what the auditor’s main objective is?

The auditor’s objective is to obtain reasonable assurance about whether the financial statements taken as a whole are free from material misstatement, whether due to fraud or error, which enables the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with applicable law.

Is the audit relevant to the public?

Yeah. When we look at what an audit brings to the public, we come to the conclusion that an audit enhances the credibility and relevance of the information reported in the financial statements and, in many cases, substitutes for direct control by the state. After all, the very reason for the emergence of auditing was the emergence of capital companies, in which there is a separation of ownership of assets from their management, and therefore the investor seeks the opinion of an independent expert.

Who is to be audited?

The obligation to have the financial statements audited applies to the entity’s ordinary and extraordinary separate financial statements. The range of entities to which the obligation applies can be divided into four groups. In the first group are companies and cooperatives, if they exceed the size criteria. In the second are companies and cooperatives whose securities are admitted to trading on a regulated market. The third group includes entities for which a specific regulation imposes this obligation. The audit obligation applies, for example, to foundations, municipalities, non-profit organisations that exceed the established criteria. The fourth group includes entities that prepare accounts in accordance with International Financial Reporting Standards (IFRS).

Does the audit also depend on the amount of income?

Legal entities defined in the Income Tax Act, whose amount of the received share of the tax paid for the accounting period exceeds EUR 35 thousand, are also obliged to have their financial statements audited by an auditor for the accounting period in which the funds were used. In addition to the individual financial statements, the consolidated financial statements shall also be subject to statutory audit, irrespective of size or other criteria.

Who should submit the annual report?

An entity subject to the obligation to audit its financial statements shall prepare an annual report. These must also be audited. The auditor assesses, for example, whether the annual report is consistent with the financial statements, whether it complies with all the statutory requirements or whether it is free from material misstatements.

What else is taken into account?

As the size criteria have gradually changed in recent years, it is necessary to take into account the current criteria when assessing the audit obligation. It shall be assessed whether at least two of the three established size conditions have been exceeded in the current and immediately preceding accounting period. In assessing the obligation to audit the accounts drawn up for the financial year 2021, the company or cooperative shall assess whether, in the current financial year, i.e. 2021, the total assets (gross value) exceeded EUR 3 000 000, the net turnover exceeded EUR 6 000 000 and the average number of employees in one financial year was more than 40. For the immediately preceding accounting period, i.e. 2020, it must be assessed whether the total assets exceeded EUR 2 000 000, the net turnover exceeded EUR 4 000 000 and the average number of employees exceeded 30.

When do the financial statements need to be audited?

It must be audited within one year of the end of the accounting period for which it is drawn up. This means that financial statements drawn up as at 31.12.2006 shall be audited at the end of the period from 31.12.2006 to 31.12.2006. December 2021 must be audited by the end of 2022 at the latest.

When are the accounts to be approved?

The entity shall approve the financial statements not later than one year after the end of the accounting period for which the financial statements are prepared. This means that, if the financial statements were drawn up at 31 December 2006, the financial statements must be presented at 31 December 2006. December 2021, it must be approved by the end of 2022 at the latest. If the financial statements have been approved before they are entered in the register, the entity shall indicate this fact in the general terms of reference by indicating the date of approval on the first page of the financial statements. In this way, it shall fulfil its obligation and shall have no further obligations in relation to the approval.

If you are interested in this topic, please do not hesitate to contact us.

Článok Milan Gedeon gave an extensive interview to Hospodársky noviny on the topic of audit and its meaning je zobrazený ako prvý na Highgate.

• the total amount of assets exceeded EUR 2 000 000;
• net turnover exceeded EUR 4 000 000;
• the average number of employees in one accounting period exceeded 30.

In 2021, these criteria are increased as follows:

• the total amount of assets exceeded EUR 3 000 000;
• net turnover exceeded EUR 6 000 000;
• the average number of employees in one accounting period exceeded 40.

And from 2022, the audit will only apply to businesses that meet at least 2 of the following 3 criteria:

• the total amount of assets exceeded EUR 4 000 000;
• net turnover exceeded EUR 8 000 000;
• the average number of employees in one accounting period exceeded 50.

What is the opinion of our founder Peter Varga on these changes? Find below.

Článok Peter Varga and his short statement to Hospodárske noviny on the audits je zobrazený ako prvý na Highgate.

Even though 2021 is coming, we still see some accountants manually uploading some data into accounting software, despite the existence of ways to import this data into the accounting software in a structured way. Highgate Group is an accounting company that will never develop its own accounting or extraction software. Not only is this not within our power, it is not within our remit either. Our role in accounting is to be an advisor and analyst if needed, but often times we mainly “clean up the mess” if someone has insight into the company (e.g. a bank, investor, buyer) or the client has wilder business and/or habits.

Our role is also to advise clients on asset protection, tax and levy optimization, contract setup, representation before investors, invoicing to own company, etc. (for a list of some of the topics we cover, please visit our education platform). We want to be our client’s full-service legal, tax, levy and accounting advisor. It is therefore not our role to develop technical solutions.

And that’s the way it should be.

And if we want our clients not to pay a disproportionate amount for accounting in relation to their revenues, it is also our task to act as a consultant who knows the various standard technical solutions and can find the ideal solution for a particular client in their tangle. In this context, it should be taken into account that for most smaller companies, bookkeeping is only a necessary legal obligation without added value. The ultimate goal is that the client does not pay for manual bookkeeping. That is why, especially for e-commerce, we can provide significantly lower prices for bookkeeping than the market standard.

Článok Manual bookkeeping and inefficient tax and tax system still complicate the functioning of small and medium-sized companies – interview for Trend je zobrazený ako prvý na Highgate.