Personal allowances in 2023

Basic personal tax allowance 

The amount of the total basic personal tax allowance is determined by total income in 2023. In the case of total annual income up to EUR 16,000, the annual basic tax allowance is EUR 5,000 plus 18,761.40 – 1.17259 x total income. If the total annual income exceeds EUR 16,000, the annual basic tax allowance is EUR 5,000.

If the employee presents a written request to the employer that the increased tax base should not be taken into account when calculating the income tax from the employment relationship, the monthly allowance amounts to EUR 416.67.

Personal tax allowances

According to the amendments to the Slovenian Personal Income Tax Act, a special tax allowance for young people up to the age of 29 has been introduced for 2023 and later. The tax allowance for people under 29 amounts to EUR 1,300 per year.

The special tax allowance for people with a valid student or scholar status amounts to EUR 3,500 annually.

The tax allowance for voluntary additional pension insurance is capped at EUR 2,903.66 annually, or up to 5.844% of an employee’s annual gross salary.

In 2023, the annual tax allowance in Slovenia for a disabled taxpayer with a 100% physical disability is EUR 18,188.61, while the monthly allowance amounts to EUR 1,515.72. Taxpayers over the age of 70 years are entitled to a EUR 1,500 annual or a EUR 125 monthly senior allowance. Taxpayers involved in civil defence or rescue tasks on a voluntary and non-professional basis for at least ten years without interruption are entitled to the same amount of tax allowance.

Special tax allowance for supported family members

In accordance with the amendments to the Slovenian Personal Income Tax Act, the tax allowance for 2023 only increased for supported family members, as follows:

Minimum wages 2023 

The gross minimum monthly salary for work performed after 1 January 2023 amounts to EUR 1,203.36.

Income tax scale 2023

Due to amendments to the Slovenian Personal Income Tax Act, the tax rate in the 5^th tax bracket has been increased from 45% to 50%. Accordingly, the income tax is:

• 16% if the annual tax base is EUR 8,755 or less;
• EUR 1,400.80 + 26% on the part of the tax base exceeding EUR 8,755, if the annual tax base is between EUR 8,755 and EUR 25,750;
• EUR 5,819.50 + 33% on the part of the tax base exceeding EUR 25,750, if the annual tax base is between EUR 25,750 and EUR 51,500;
• EUR 14,317 + 39% on the part of the tax base exceeding EUR 51,500, if the annual tax base is between EUR 51,500 and EUR 74,160;
• and EUR 23,154.40 + 50% on the part of the tax base exceeding EUR 74,160, if the annual tax base is over EUR 74,160.

Donations up to 1% of income tax

With a special note, taxpayers can request that 1% of their annual income tax is used as a donation to certain beneficiaries (non-governmental organisations, political parties, representative trade unions, registered churches and other religious communities, school- and child-care funds).

Taxation of capital gains

The amendments to the Slovenian Personal Income Tax Act left tax rates on capital gains from property sales or the sale of shares unchanged. The tax rates are:

• 25% if the ownership period is 5 years or less;
• 20% if the ownership period is between 5 and 10 years;
• 15% if the ownership period is between 10 and 15 years;
• and 0% if the ownership period is over 15 years.

Income from rentals

The tax rate for renting out property is 25% again, not 15% as in the year 2022.

Furthermore, in 2022 it was possible to choose between flat or progressive taxation of rental income. According to the amendments to the Slovenian Personal Income Tax Act, this option no longer exists in 2023. If we compare the tax assessment on rental income in accordance with the income tax scale for 2022, while taking into account a pension of EUR 800/month, the gap in taxation for 2023 is almost twice as high as in 2022.

Taxation on share sales to the company: acquisition of own shares

From this year onwards, acquiring own shares is not considered a disposal of capital anymore. The taxation is the same as the taxation for dividend payments, i.e. a rate of 25%. One exception is the acquisition of own shares listed on an organised stock market.

The tax base is the revenue reduced by the purchase value of the sold shares.

Income taxation of full-time self-employed entrepreneur

The lump-sum expenses in the case of a full-time insured self-employed entrepreneur (s.p.) or a full-time employee in 2023 are as follows:

• 80% of the total income, if the annual income is EUR 50,000 or less;
• 40% between EUR 50,000 and EUR 100,000;
• and 0% over EUR 100,000.

It means, for example, that in the case of annual income of EUR 95,000, the annual income tax will almost double: in 2022 the tax was EUR 3,800 and in 2023 the tax amounts to EUR 7,400.

Income taxation of part-time self-employed entrepreneur

The amendments to the Slovenian Personal Income Tax Act have also changed the income tax on business activities by sole entrepreneurs who determine their tax base based on lump-sum costs and are socially insured based on their employment relationship (i.e. “afternoon s.p.”). In their case, the lump-sum expenses amount to:

• 80% of the total income, if the annual income is EUR 12,500 or less;
• 40% between EUR 12,500 and EUR 50,000;
• and 0% over EUR 50,000.

This means, for example, that in the case of annual income of a part-time entrepreneur totalling EUR 20,000, the annual income tax increases by 75%: in 2022 the tax was EUR 800, and in 2023 the tax will amount to EUR 1,400.

Deadline of advance tax payments

According to the amendments to the Slovenian Personal Income Tax Act, from 2023, advance income tax payments for sole entrepreneurs must be paid by the 20^th of the following month.

Legal entities, which have to make advance payments of corporate income tax must do so by the 20^th of the following month as well, and no longer by the 10^th of the following month.

If you need more information on amendments to the Slovenian Personal Income Tax Act or other tax news in Slovenia, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

A Amendments to the Slovenian Personal Income Tax Act for 2023 bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

Reasons to invest in Serbia 

The Serbian tech industry is a very dynamic industry. Serbia is a proud nation of great scientists (Nikola Tesla, Mihajlo Pupin, Milutin Milanković), the School of Electrical Engineering (University of Belgrade) and Mathematical Grammar School are recognised worldwide – their students continue their education at the world’s best universities and work for the largest technology companies.

Serbia generates 10% of GDP from the ICT sector and is one of the main exporting industries. The country has such successful start-up stories, as the Nordeus (Top Eleven Football Manager), FishingBooker (Airbnb of fishing trip charters) or 3Lateral (designing games such as GTA V, Batman, and Spiderman). It is one of the best outsourcing and nearshoring destinations in Europe and many multinational technology companies are already doing business in Serbia (Microsoft – Development Center, SAP, NCR).

There are many reasons to invest in Serbia, but for the technology sector two reasons are especially important. These are the attractive workforce and the significant tax incentives available for a Serbian IT company.

Labor environment in Serbia

Foreign companies like to work with a Serbian IT company for the following reasons:

• Good knowledge of English language and other European languages (mainly German)
• Compatible cultural background: Serbian culture is a specific mix of Western European, Eastern European (Slavic), Mediterranean, and oriental influences. Therefore, employees from Serbia can adapt to working with people from everywhere.
• Time zone: Serbian time is only one hour ahead of London time
• Cost efficiency

The total number of employees in the ICT (information and communication technology) sector in Serbia was 105,572 in Q4 2021, which is an increase of 9.2% in comparison with the same quarter of 2020. The total workforce in ICT is 4.7% of a total number of employees in Serbia (source: Republic Office for Statistics, Republic of Serbia). In 2021, average net salary at a Serbian IT company was approximately EUR 1,500 / month.

Corporate income tax incentives for a Serbian IT company

The government of the Republic of Serbia issued changes in Corporate Income Tax Law several years ago in order to help Serbian companies which are developing intellectual property and other intangibles (such as own branded software). Those are the following incentives:

• Research and development expenses are deductible in double the amount in the tax balance sheet.
• 80% of revenue is generated on the basis of intellectual property registered in Serbia (except the transfer of ownership right on the property), after some adjustments are made.

Investments into the equity of a newly founded innovative company are subject to a tax credit in the amount of 30% of made investments. The maximum amount of tax credit for investment in one company is RSD 100 million (roughly EUR 850,000) and can be used in a period of up to three years. The total amount of tax credit that can be used in one fiscal year is RSD 50 million (roughly EUR 425,000).

Separately from tax incentives available for an innovative Serbian IT company, for all companies in Serbia, there is an opportunity for ten year of corporate income tax holiday if:

• investments in fixed assets are made in amounts higher than RSD 1 billion (roughly EUR 8.5 million),
• at least 100 people are employed.

Although the standard corporate income tax rate is fairly low (15%, regardless of the level of generated revenue), it can get significantly lower with these incentives.

Personal income tax incentives for a Serbian IT company

There is a possibility for tax relief on the part of personal income tax liabilities:

• for Serbian citizens who did not live in Serbia for at least 12/24 months before entering into a labour agreement with a Serbian company,
• for employees who work on research and development activities,
• if employing persons who were registered as unemployed for at least six months,
• if employing disabled persons.

Targeting the right IT company

When identifying the right target for acquisition, you need to start with your strategy. You need to ask yourself:

• Where is my company (business) right now? What is my strategy for the next period?
• What do I want to achieve with my acquisition? How will that affect my existing business and my strategy?
• What do I want to do with the acquired company?
• What resources (financial and other) do I have in order to perform the acquisition?

From a financial perspective, there are three main reasons to acquire a company:

• Buying an undervalued company: you are able to purchase a company for a much lower price than its value
• Better management: you are able to manage the company in a better way than the current owner (better financing, higher revenue – new clients and new projects, lower expenses – higher efficiency)
• Synergy: your company and the company you acquire value more together than if they operate separately. You may be able to finance a consolidated company for lower costs. Market strength of a consolidated company could be greater (e.g. you become more attractive for new clients when you unite your resources). The consolidated company could operate more efficiently (less overhead expenses, smaller administration staff, etc.)

After you answer all these questions, you will be able to form a profile of your target Serbian IT company. You may use qualitative criteria, such as:

• type of services provided
• type of industry it provides services to
• country in which it operates

Also, quantitative criteria are important, such as profit margins, level of generated revenue, level of debt etc.

Cooperating with the target

You may already know your target. Maybe you already cooperate with a Serbian IT company. You know the owners, the employees, and the quality of work they perform. But before you go in negotiation, you should take a glance at their financials:

• What is their revenue growth? Did sales prove to be immune to crises (Covid19, recession, Russia – Ukraine war, etc.)?
• What about their bottom line? Do they have a proven track record of several consecutive profitable years?
• Are they in excessive debt? Were their bank accounts frozen?

At the end of initial negotiation, you should agree on some general conditions of acquisition, as well as on non-binding and indicative purchase value.

Part 2 of this article covers the second part of the process of buying IT company in Serbia: M&A analysis, acquisition agreement, and post-acquisition integration. If you are interested, please click here!

The consulting team of WTS Serbia has extensive experience providing services to technology clients. WTS Serbia is a one-stop shop advisory firm that can assist you in the whole process of acquiring and managing a Serbian IT company (including identifying and also contacting new target IT companies).

A Acquisition of a Serbian IT company bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

ARX Equity Partners today announced that it has acquired a majority holding in Klient Holding, the holding company of WTS Klient, part of the global WTS network. The parties’ mutual intention with the transaction was for the new investor not only to provide financial support for further organic growth, but to create new opportunities for market acquisitions. In addition to expansion, the quick application of technological innovations and the most advanced IT solutions is also a strategic goal for the group, which now has a new ownership structure.

Starting with the acquisition, WTS Klient shall ensure dynamic growth by first appointing senior partners and new business division partners. Tamás Gyányi will be the new senior partner for tax advisory and payroll services, while Szabolcs Szeles will be the new senior partner for financial advisory and bookkeeping services. Bookkeeping partner Eszter Balogh will be joined by an additional three senior staff as business division partners: Marianna Fodor will head the Payroll division, Csaba Baldauf the Financial Advisory division, and András Szadai the Tax Advisory division. Robert Stöllinger, former Big4 Managing Partner, will be the new Chairman of the Supervisory Board at WTS Klient. With his more than 25 years’ experience in advisory services and company management in Hungary he will make a significant contribution to the continued growth.

“By acquiring an interest in WTS Klient we have invested in a new and dynamically developing industry that fits well into the investment portfolio of ARX Equity Partners. We are confident that WTS Klient, with its client base and highly trained experts, will push further forward on the list of Hungary’s leading tax and financial advisory firms” – said Béla Lendvai-Lintner, Hungarian partner of ARX, on the acquisition.

With its 120 employees and annual sales revenue of more than HUF 1.7 billion, WTS Klient is the only Hungarian member and one of the strongest Central and Eastern European partners of WTS Global, one of the world’s leading tax and financial advisory service networks.

“We are delighted that in ARX Equity Partners we have found a co-investor who can support the group’s further unrelenting development with its regional experience, clear growth strategy and stable financial background. We are sure that with the support of ARX Equity Partners and the assistance of our new senior and business division partners we can play a leading role in the consolidation of the Hungarian accounting and tax advisory market in the coming years” – said Zoltán Lambert, the group’s Managing Partner.

WTS Klient was assisted during the transaction by Clairfield International as its financial advisory partner, and by VJT & Partners Law Office as its legal partner.

You can download the press release in PDF format here:
WTS Klient Press Release 01.03.2022 – Financial investor at WTS Klient (PDF)

A Financial investor at WTS Klient bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.