Distance selling of goods

Regulations for service provision and the distance selling of goods made it into the Slovenian VAT Act this year too, although they have been in force since 1 July 2021. Due to EU requirements, the new regulations should have been implemented in national law as early as 1 July 2021, but they were temporarily set in the Rules on the Implementation of the VAT Act, now abolished.

Abolition of paper invoices

Due to the recent VAT changes, customers in Slovenia will receive a paper invoice only if they want one. The aim of the amendment is to relieve the administrative burden on both taxpayers and the tax authority, and to support the consideration of environmental aspects. Issuing a paper invoice to the consumer is thus no longer a responsibility of the seller.

Input VAT may already be deducted for the period of the VAT liability

Accountants welcome this novelty, which allows input VAT also to be taken into account for invoices that were not received in the period for which VAT is calculated, but in the following period. The deduction of input VAT can already be considered in the period when the input VAT obligation arose if there is an invoice available when preparing the VAT report (DDV-O). This settles the VAT calculation and the VAT deduction in the same period for different taxpayers.

VAT changes related to electric passenger vehicles

The requirements for deducting input VAT for electric passenger vehicles since 22 January 2022 are the following:

• the motor vehicle emits no carbon dioxide emissions;
• the value of the motor vehicle, including VAT and other charges, does not exceed EUR 80,000;
• the vehicle is intended for a taxable person to perform business activities, but can also be used for private purposes;
• the VAT obligation arises for every kilometre driven for private purposes, multiplied with the refund for the business trip in kilometres, which is acknowledged as the highest tax deductible refund of the business trip;
• the calculations of the VAT base for private use of the car is as follows: no. of kilometres for private use multiplied by EUR 0.37 / km (and from 1 July 2022 EUR 0.43) = tax base for VAT;
• the period to calculate the VAT obligation is a month, a quarter or at least one time in the calendar year, no later than by 31 December.

Furthermore, the taxable person can assert the right to deduct VAT on the purchase of fuels, lubricants, spare parts and services related to these motor vehicles, if these purchases are related to vehicles that meet the above conditions.

The entitlement to input VAT deduction may also be enforced for vehicles already purchased by taxpayers in the previous years, but only for a proportionate part of the period up to five full years from the purchase date.

Abolition of mandatory identification of a non-resident taxpayer in Slovenia for VAT purposes

Until now, a non-resident taxable person who supplies goods and services in Slovenia had to be identified for VAT purposes in Slovenia, e.g. when delivering goods with installation or work on real estate in Slovenia.

According to the latest VAT changes, from 22 January 2022 a foreign taxable person performing a supply with installation or works on real estate in Slovenia or any other taxable supply in Slovenia may designate a recipient of supplies and services, registered for VAT purposes in Slovenia as a VAT payer (expansion of reverse charge system).

A recipient can be a local company or a foreign entity, as long as it has a valid VAT number in Slovenia. A non-resident taxable person in Slovenia does not have to identify himself for VAT purposes in Slovenia and is still entitled to deduct input VAT charged in Slovenia. Input VAT is refunded via an electronic communication channel at the tax administration in his resident country.

The simplification rule does not apply where a non-resident taxable person in Slovenia supplies goods or services:

• to a person who is not a taxable person for VAT purposes, such as a small taxpayer or end customer, or
• to a taxable person with a VAT ID number in Slovenia based on special arrangements under the local VAT Act, such as the VAT ID no. only for the purpose of supplying/receiving services in the EU (atypical taxable person).

Submission of issued and received invoices at first VAT-O return no longer necessary

An important change for accountants is the abolition of the obligation for taxpayers who submit a VAT return for the first time to enclose with the first VAT-O return:

• a list of received invoices,
• a list of issued invoices, which are the basis for compiling the first VAT return.

If you need more information on the most recent VAT changes or other tax news in Slovenia, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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However, the Slovene tax administration sees the opportunity to expand the fiscal income with the introduction of new taxation rules for virtual currencies for private investors. The draft of a new tax regime for virtual currencies in Slovenia was introduced in October 2021, but its transposition and effectiveness are currently uncertain.

Legislative definition of virtual currencies in Slovenia

The draft bill is not limited to crypto currency but refers to virtual currencies, a broader concept defined in the money laundering legislation. Virtual currency means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically. The meaning of virtual currency is technologically neutral, as it does not define any specific technology features of the digital asset.

Taxation of virtual currencies in Slovenia at a flat rate of 10%

According to the legislative proposal, the flat tax rate (10%) will apply to

• any exchange of virtual currency for Fiat currency or
• purchase of goods or services with virtual currency.

Transactions up to EUR 15,000 cumulatively per calendar year are tax-exempt. In order to secure simplicity of taxation, the tax base is the amount of virtual currency sold. Additionally, a tax-exempt transaction is also the exchange of the virtual currency for the purchase of real estate or corporate shares. The timing of taxation is the day, when the exchange for the fiat currency or purchase of the goods / services takes place. The annual report of all sales or exchanges of virtual currencies in Slovenia for a specific calendar year must be submitted to the tax authorities electronically by the end of February of the following year. Tax must be paid in five days after the submission of the annual report.

Alternative to the flat rate taxation

Alternatively, the taxpayer may choose taxation of the profit from the exchange or usage of the virtual currencies in Slovenia. Profit is defined as the residual between the sale price and purchase price. The tax rate for the alternative method would be 20%.

Conclusion

The new legislation for the taxation of virtual currencies in Slovenia, including crypto currencies, will probably be effective in 2022. The tax-free sale and exchange of crypto currencies currently entices EU citizens to change their residence to Slovenia to sell their crypto asset tax-free. We expect that – once the date of effectiveness of the new legislation is determined – the sale of crypto (virtual) currency by Slovene residents will rise, as the new legislation will tax all sales and exchanges, regardless of a holding period.

If you need more information on the expected taxation of virtual currencies in Slovenia, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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• of the high refund flexibility;
• it is a sort of self-financing, with no negative effect on credit ratings, and
• in comparison to loans granted by associated companies, they are unlimited.

Financing via additional capital contributions 

Additional capital contributions are additional payments made by company owners. Usually, these kinds of payments are foreseen in a company agreement, but this is not mandatory. If there is no clause regarding additional capital contributions in the company agreement, company owners have following options:

• amend the company agreement with a clause on additional capital contributions, or
• amend the company agreement with a clause that foresees a unanimous decision from the company owners that additional capital contributions have to be paid. This is the alternative normally used by company owners.

In compliance with Art. 491 of the Slovene Corporate Law (hereinafter referred to as: ZGD-1), company owners can contribute money, movable or immovable assets, rights, shares or a complete company as an additional capital contribution into their company. Additional capital contributions can only be paid by directly involved associates, and they do not increase common capital stock, shareholdings or initial contributions.

Returning additional capital contributions to company owners 

Additional capital contributions may only be refunded when all material and formal requirements are met. Moreover, in compliance with Art. 495 ZGD-1, refunds are only allowed if the equity capital is positive.

Furthermore, a decision on the refund must be published on the AJPES official website three months before the additional capital contribution is transferred back to the company owners. If an initial contribution of a company owner has not been paid, or at least not fully, the additional contribution is offset against the missing amount of the initial contribution.

Taxation of additional capital refunds since 2020 

The changes regarding additional capital refunds relate to:

• all refunds that are about to be paid back and
• refunds that have already been transferred back to owners.

Refunds can be paid back at the same or at a higher amount than the additional contributions. The amount of the refund is important for taxation purposes.

A) Refund at same amount as contribution

If the refund is the same as the contribution, the company owner gets the invested money back and no benefit has been achieved. Therefore, this kind of refund is tax free. Furthermore, it does not matter if the refund is paid in one or multiple amounts.

B) Refund is higher than contribution

The additional capital refund can be higher than the previous additional capital contribution. In this case, the difference between the refund and the contribution is considered a dividend and is charged with 27.5% tax.

The company paying the dividend has to determine the tax and pay it to the Slovene tax authorities (Form REK-2, income nr. 1923). If the refund is paid to a legal entity, there is no need to assess the tax or report a refund to the tax authorities. Moreover, it does not matter if the refund is paid in cash or not.

C) Sale of shares and additional capital refunds

If an owner decides to sell his share in the company and his additional capital contribution has not been refunded, or no decision about a refund has been made, then the amount of the additional capital contribution is included in the acquisition costs.

Given that a decision about a refund has already been made and this decision has been published on the AJPES website in compliance with ZGD-1, the (previous) owner has a claim against company in the amount of the additional capital contribution.

D) Buying shares and additional capital refunds

In some cases, a new shareholder can get a refund even though the previous shareholder paid the additional capital contribution. This is most common in cases of inheritance or gifts. It rarely happens that a share is sold without refunding the previous additional contribution.

In such a case, the refund is treated as if the additional capital contribution was paid by the new owner. The implications are the following:

• If the refund is the same as the previous additional capital contribution, there is no tax liability.
• If the refund is higher than the previous additional capital contribution, the difference between the two is taxed at 27.5%.

When the additional capital contribution is refunded to the new shareholder, his purchase cost of the share is reduced by the amount refunded. Moreover, the taxpayer (new shareholder) has to assess and pay the tax to the authorities. An income tax return has to be filed by 28 February of the following year.

New rules from 2021: refund reports 

From 2021 all companies have to submit automated refund reports to the Slovene tax authorities. The reporting obligation only applies to refunds of additional capital contributions on the part of individuals. Companies with additional capital contributions on their balance sheet have to submit the following information to the Slovene tax authorities:

• name and surname of the person,
• date of birth,
• tax number,
• country of residence,
• date and amount of additional capital contribution and
• date and amount of additional capital contribution refund.

Companies have time to report information on the above, more precisely, the deadline is 31. January 2021 for the year 2020. Furthermore, companies have to share the status of all additional capital contributions paid by individual associates. The status of additional capital contributions has to be reported via E-davki (Slovenian electronic tax program).

Please note that there is no reporting obligation for refunds handled for legal entities.

If you would like to know more about additional capital contributions and refunds in Slovenia, or you are interested how your company can profit from it, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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On 26 February 2019, the Slovene Ministry of Finance presented a tax package for the period 2019 to 2022, which has not yet been adopted. As stated by the country’s finance minister, the main goal of the tax reform in Slovenia is “to increase the net income of employees to make the Slovenian labour market more competitive internationally”. The provisions for the relief of taxation on employment income follow the latest suggestions of the OECD, and are warmly welcome, but the changes in taxation on capital income and capital gains should be considered carefully before implementation.

Tax reform in Slovenia for companies: increase in CIT rate

The current corporate income tax (CIT) rate in 2019 is 19%, which will increase in the coming years as follows:

• in 2020 the CIT rate will be 20%,
• in 2021 the CIT rate will be 21%,
• from 2022 onwards the CIT rate will be 22%.

Taxation of individuals: heavier tax on capital income and capital gains

So far, the taxation on interest, dividends, rental income and capital gains has been 25% and final. At present, the following tax rates apply to capital gains realised in 2019:

• ownership of capital < 5 years => tax rate of 25%,
• ownership of capital from 5 to 10 years => tax rate of 15%,
• ownership of capital from 10 to 15 years => tax rate of 10%,
• ownership of capital from 15 to 20 years => tax rate of 5%,
• ownership of capital > 20 years => tax free.

With the 2019-2022 tax reform, the taxation of interest, dividends and rental income will increase from the current 25% to 30%.

Taxation of capital gains from the disposal of shareholdings, real estate and other property will be taxed as follows from 2020 onwards:

• ownership of capital up to 10 years => tax rate of 30%,
• ownership of capital > 10 years => tax rate of 15%.

It is clear from the tax reform in Slovenia that capital gains will not be tax free anymore from 2020 onwards. The government’s proposal does not provide for a transition period for old rights acquired under the existing Income Tax Act.

Taxation of employees: holiday remuneration

The payment of holiday remuneration is currently subject to an advance payment of personal income tax up to 70% of the average gross salary in Slovenia at the time of payment, which is EUR 1,247.49 in March 2019.

After the tax reform in Slovenia, the holiday remuneration should be free of tax and free of any social contributions. Simply put, this means the employer’s cost would equal the net payment to the worker at the maximum amount of an average gross salary in Slovenia, which for March 2019 is EUR 1,782.

It is expected that holiday remuneration already paid in 2019, for which the advance payment of income tax has been charged and withheld, will be refunded to the employee in the course of the 2019 annual income tax assessment.

Example:
Following the tax reform proposal, a company who pays out holiday remuneration amounting to a gross EUR 1,500 should incur a labour cost of EUR 1,500, and the employees should receive a net amount of EUR 1,500 of holiday remuneration to their bank account.

More favourable income tax brackets and tax-free amount

The income tax brackets are designed to relieve employment income from heavy taxation, as evaluated by the OECD.

The following income tax brackets are proposed:

The general relief for taxable persons / residents is determined based on the total annual income of the individual and is expected to be the following:

This means a general tax deduction from the current EUR 3,302 would increase to EUR 3,500 for all taxpayers.

Bonus salary

Currently, a social contribution of 38.2% is levied without limitation on one-time bonus salaries, or on “part of remuneration for successful business” in translation from the Slovenian, but there is no advance tax payment for 100% of the average gross salary in Slovenia. The bonus salary may be paid out once a year only, and to all employees who fulfil the requirements, as specified in the decision of the Management Board.

The tax reform in Slovenia suggests that from 2020 onwards a bonus salary, which is exempt from personal income tax, will be based on the following:

• in 2020 it will increase to 150% of the average gross salary in Slovenia or about EUR 2,550,
• in 2021 it will increase to 175% of the average gross salary in Slovenia or about EUR 2,975,
• and from 2022 it will increase to 200% of the average gross salary in Slovenia, currently around EUR 3,400.

It is also important to note that the bonus salary is not taken into account in the calculation of annual income tax.

Example of calculation for payment in 2022:
Gross bonus salary: EUR 3,400
Employer’s cost: EUR 3,947.40
Net payment to employee: EUR 2,648.60 

It is expected that the proposals will be adopted in the current form, but there might be some transitional provisions which would prevent sudden decisions of capital owners / residents in Slovenia to flee from the Slovene capital market.

If you would like to find out more detailed information about the current tax reform in Slovenia, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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