Due to the extent of the floods, the Act Determining Intervention Measures for Recovery from the Floods and Landslides of August 2023 was additionally adopted, amending the laws currently in force in Slovenia and introducing specific measures. Below, we summarise the main temporary solutions of both laws in the field of taxation.

Support for the self-employed

A self-employed person in Slovenia who is unable to carry out his/her activity or whose activity significantly decreased as a result of the floods is for the period from August to December 2023 entitled to a support of EUR 1,200/month, provided that the following conditions are met:

• the activity is registered at least from 1 July until 11 August 2023;
• no outstanding liabilities towards the tax authorities at the date of submission of the declaration;
• all withholding tax returns from employment income for the last five years have been submitted;
• revenues in 2023 will decrease by at least 25% compared to 2022.

The self-employed person has to submit the declaration for the support for each month via the tax authorities’ information system (eDavki). The final deadline for submitting the monthly declarations for the entire period from August to December 2023 is 31 January 2024, with the payment on 9 February 2024.

Reimbursement of employees’ wage compensation

If an employer who has received (partial) reimbursement of wage compensation paid to employees as a result of force majeure or waiting time due to a natural disaster, has, as of 3 August 2023, paid out profits, purchased its own shares or stakes, paid management bonuses or paid part of the performance-related remuneration of management in or for the year 2023, the employer must notify the Financial Administration of the Republic of Slovenia within two months of the date of the payment.

The employer will have to return the funds received within 30 days after receipt of the decision, together with statutory interest from the date of receiving the reimbursement until the date of the repay.

Employers who fail to notify the Financial Administration of the Republic of Slovenia of their obligation to repay the funds within the prescribed period may be subject to a penalty of EUR 450 up to EUR 20,000.

One-time solidarity aid

One-time solidarity aid paid to an employee in nature or in cash in 2023 for severe flood and landslide damage is not included in the tax base of employment income up to EUR 10,000 (and not up to EUR 2,000, which is the generally applicable amount).

Before the one-time solidarity aid payment, the employee must provide the employer with appropriate proof of the damage suffered.

Additional tax incentive for donation for 2023

An additional tax incentive for donations is introduced in Slovenia for the full amount of the payments, up to a maximum of the tax base of the tax period for legal entities and natural persons carrying out independent economic activities.

The tax incentive applies to all payments up to 31 December 2023, paid to a bank account of the Republic of Slovenia, specially created for this purpose.

Prohibition to dismiss employees

An employer, who benefits from the measure of reimbursement of wage compensation for the period of waiting at home may not initiate proceedings to terminate an employment contract with an employee for business reasons, even after the measure has ceased to apply, for a period equal to the period of receipt of partial reimbursement of wage compensation.

The only exception is if the redundancy plan has already been adopted before 3 August 2023 and the employer has not claimed the right to partial reimbursement of the redundancy payments for these employees.

Disposal of equipment destroyed in a company

A Slovenian taxpayer who purchased the equipment less than three years ago and utilised the investment tax incentive under Article 55a of Slovenian Corporate Income Tax Act (CITA-2) does not have to return the investment tax incentive for the disposal of this equipment due to destruction in floods and landslides.

Solidarity working Saturday

The employer may designate one Saturday in 2023 and one Saturday in 2024 as a solidarity working Saturday, after consultation with the trade union, works council or employees.

Work performed on a solidarity working Saturday will be contributed by the employee to the Fund for the Reconstruction of Slovenia.

Employees will therefore contribute the amount of their net wage for solidarity Saturday by working on that day, based on a prior written agreement with their employer.  No social security contributions and taxes are due for payment for work on the Solidarity working Saturday.

The contribution will be calculated and paid by the employer on a special form „Calculation of contribution to the Fund for the Reconstruction of Slovenia”, including the following information:

• the employer and individual employees,
• the total amount of contribution of all employees,
• the contribution of each employee for each working Saturday.

The form is available for submission via eDavki.

The tax return will be due in the month following the solidarity working Saturday and the total amount of contributions for payment will be due within ten days of the return being submitted.

The amendments regarding the solidarity working Saturday were just adopted and are awaiting publication in the Official Journal of Slovenia.

Refund of compensation for the use of building land

Municipalities can refund all or part of the Building Land Use Tax paid to taxpayers who have suffered serious damage as a result of floods and landslides, which have endangered health and caused an inappropriate living environment.

The municipality will reimburse part or all of the contribution by decision, based on the application and criteria set by the municipality.

Special reduced VAT rate for firefighting equipment

A special reduced VAT rate of 5% is introduced for supplies of:

• standardised fire-fighting vehicles and
• special protective and rescue equipment for firefighters.

The special reduced rate may only be applied on condition that the purchaser is a public fire service or a voluntary firefighting unit in a fire brigade.

Accommodation for victims of floods and landslides

Free or reduced rent for persons, who have suffered serious damage to their personal property as a result of floods and landslides and have been forced to find new or temporary accommodation will not be treated as income until the end of 2024.

Accommodation costs incurred by a taxable person offering free or reduced rent to flood and landslide victims are tax deductible until the end of 2024.

If you need more information on the tax measures related to floods and landslides in Slovenia or you need help in preparing the written agreement for the solidarity working Saturday at your company, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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Reverse hybrid discharges

Hybrid inconsistencies were already part of the previous CITA in Slovenia. A hybrid discrepancy arises in the case of a double deduction of the same income, or a deduction without being included in two different countries, which means the income is not included in the tax base in any country. Hybrid mismatches occur often between related persons.

According to the Anti-Tax Avoidance EU Directive II (ATAD II), the amendments to the Slovenian CITA also include reverse hybrid inconsistencies, which now cover a larger circle of participants. The new provisions are a must-read for international groups of cross-border operating companies.

Extension of national list of low-tax-countries

Companies from countries classified on the so called “blacklist” are treated less favourably from a tax point of view. These companies are not eligible for the exemption of dividends and dividend-like income, as well as up to 50% of the exemption from profit from share sales, donation allowances and other tax benefits.

There are two blacklists in Slovenia:

• Slovenian national list, includes countries in which the general or average nominal corporate income tax rate is lower than 12.5%, and

• EU list, countries on the list of non-cooperative tax jurisdictions, published in the Official Journal of the European Union.

Tax base assessment from January 2022

The amendment to the Slovenian CITA stipulates several changes that affect the assessment of the tax base. The changes that apply in 2022 for the first time cover the following areas:

Accruals 

In determining the tax base or in recognising the taxpayer’s income, accruals are recognised as an expense in the total amount charged. However, for the following groups of accruals, only a 50% expense is recognised for tax purposes in the amount charged:

• guarantees given when selling products or providing services,
• accruals for expected losses from dubious contracts,
• pension accruals and
• accruals for anniversary awards and retirement severance payments (exception 2022-2026).

It is important to know that the latest amendments to the Slovenian CITA introduce a transition period for the accruals of pensions, anniversary awards and retirement severance payments from 1 January 2022 to 31 December 2026. In this period these accruals are recognised in the total 100% amount for tax purposes too.

Writing off of receivables

According to the amendments to the Slovenian CITA, writing off receivables is now recognised as a tax expense for all reported and confirmed receivables that were reported by the taxpayer in a timely manner in the compulsory settlement procedure or bankruptcy proceedings. The receivables must be confirmed by the liquidator. This means that the taxpayer will no longer have to wait for the issuance of a final court decision on the completed bankruptcy proceedings or a decision on confirmation of the compulsory settlement to write these off.

Expenses for hospitability and payments to Supervisory Board members

Expenses for business hospitability costs and payments to members of the Supervisory Board are deductible for tax purposes in the 2022 calendar year up to 60%, but from 2023 onwards the deductibility will again be only 50%.

Depreciation of leased assets

For the right to use a leased fixed asset, the highest annual depreciation rate corresponding to the term of the contractual lease of the fixed asset is used for tax purposes.

Employment allowance

In accordance with the latest amendments to the Slovenian CITA, in addition to tax-deductible salary costs, an additional employment allowance of 55% of the employee’s salary in the first 24 months of employment is possible if the employee is under 25 years of age and employed for the first time.

An employment allowance of 45% of the salary is possible for an employee in the first 24 months of employment, who:

• is under 29 years of age, or
• over 55 years of age, or
• performs a job for which there is a shortage of job applicants on the labour market (list from Slovenian Labour Ministry).

The main condition for the employment allowance is an increase in the number of employees in a year.

Please note that to claim the benefit, future employees no longer have to be registered with the Employment Service before employment.

Facilitating investment in digital and green transition

Taxpayers in Slovenia can claim a tax base reduction of 40% of digital transformation and green transition investments in the tax period, in particular for:

• cloud computing, artificial intelligence and big data,
• environmentally friendly technologies,
• cleaner, cheaper and healthier public and private transport,
• decarbonisation of the energy sector, energy efficiency of buildings and
• introduction of other standards for climate neutrality.

Facilitating obligatory internships

The tax allowance for practical work in the professional education of an apprentice or student is increased to 80% of the average monthly salary of employees in Slovenia, and can be claimed for each month of practical work in an obligatory internship.

Donation allowance

• Basis allowance 1%: From 2022, corporate taxpayers can claim the allowance for donations of 1% of taxable income (so far only 0.3%) as an allowance for donations for humanitarian, disability, social welfare, charitable, scientific, educational, health, sports, cultural, ecological, religious and generally useful purposes, which are performed not only by such organisations in Slovenia but also in the EU.

• Additional allowance of 0.2% and 3.8%: In addition, 0.2% of the corporate taxpayer’s taxable income in the tax period may be claimed for payments in cash and in kind for cultural and sports purposes and for payments to voluntary associations established to protect against natural and other disasters and acting for those purposes in the public interest. The donation of 8% of the taxpayer’s taxable income for payments in cash and in kind also goes to providers of top sports programmes for investments in top sports.

• Donation beneficiaries: All described donations can be given to an organisation based in Slovenia or in the EU.

Higher deduction for expense reimbursements for employees

The amendments to the Slovenian CITA introduce the following maximum daily allowances for business trips within Slovenia from 1 January 2023:

• over 12 and up to 24 hours: EUR 27.81
• over 8 and up to 12 hours: EUR 13.88
• over 6 and up to 8 hours: EUR 9.69

The mileage allowance for transport costs incurred on a business trip is EUR 0.43 per kilometre.

The business trip surcharge for an employee who works and spends the night away from his usual place of dwelling and the employer’s registered office for at least two consecutive days is set at EUR 5.84 per day.

From 1 January 2023, the anniversary bonus will be determined as a percentage of the last known average annual salary of employees in Slovenia, broken down to one month, and for January 2023 will be as follows:

Compensation for retirement is 300% of the last known average annual salary in Slovenia, calculated per month (January 2023 set at EUR 5,908.77).

Solidarity assistance in the case of death of an employee or their family member is tax-exempt up to the amount of EUR 5,000.

Solidarity allowance in the case of a severe disability or long-term illness of the employee as well as natural disasters or fire incidents affecting the employee are tax-exempt up to the amount of EUR 2,000.

Remuneration for students for obligatory internships is not included in the tax base up to an amount of 15% of the last known average annual salary of employees in Slovenia, broken down into months (for January 2023 set at EUR 295.44).

The meal allowance for employees is tax-exempt in the amount of EUR 7.96/working day (valid from 1 September 2022).

The employee’s commuting costs to and from work are tax-exempt at the rate of EUR 0.21/kilometre (valid from 1 July 2022).

If you need more information on amendments to the Slovenian CITA 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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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.

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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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The Slovenian tax package adopted in October 2019 includes amendments to the Personal Income Tax Act (ZDoh-2V), the Corporate Income Tax Act (ZDDPO-2R), the Act on Tax on Profit from the Disposal of Financial Derivatives (ZDDOIFI-A) and the Tax Procedure Act (ZDavP-2M). The amended and new provisions will apply from 1 January 2020, with the exception of the provisions on the depreciation of assets from operating leases, which have been in force since 1 January 2019.

Taxation of companies according to new Slovenian tax package

Although Slovenia had proposed to increase the general corporate tax rate (DDPO) from 19% to 20% in February, according to the adopted Slovenian tax package this tax rate will remain at 19%, as in 2019, and will not change in 2020.

While the rate remains unchanged, all companies in Slovenia will have to pay corporate income tax from 2020. If a legal entity generates taxable income, any tax exemptions and tax losses from previous tax periods can be used up to a maximum of 63% of the taxable base. This means that companies generating profits for tax purposes and who previously reduced their tax base to zero due to high research and development (R&D) investments, investments in fixed and intangible assets, for employing certain categories of worker (disabled people), as well as for investing in voluntary supplementary pension insurance and for donations, will from now on always have to pay corporate income tax.

The tax allowances for R&D and equipment, as well as in fixed and tangible assets may be carried forward for a limited period of five tax years, while other allowances reduce the tax base only in the year they originated, which further limits the actual application of tax allowances. The same provisions also apply to sole entrepreneurs who determine income tax on the basis of actual expenses. 

Example:
A company generates a profit before corporate tax of EUR 1,000,000 and has invested EUR 1,500,000 in R&D in 2020. In 2020 the company can only consider a tax exemption for the R&D investment amounting to EUR 630,000, and then the difference over the next five years. 

Corporate income tax base: EUR 1 Mio x (1 – 0.63) = EUR 370,000
Corporate income tax calculation: EUR 370,000 x 19% = EUR 70,300 

Irrespective of the high level of investment or previous tax losses, the company will have to pay corporate income tax of EUR 70,300, which represents 7.03% of the profit. 

The changes to depreciation of assets in operating leases are the most important amendments that apply retroactively, i.e. from 1 January 2019. This means that by incorporating the operating lease into fixed and intangible assets in accordance with international and also Slovenian accounting standards, the legislator set the depreciation at the highest annual rate possible, which corresponds to the actual depreciation period of the asset, i.e. the asset’s useful life in operating leases. This provision already applies to the preparation of the corporate income tax self-assessment for 2019 and the determination of income tax for sole entrepreneurs for 2019.

Taxation of capital owners 

In 2019, taxpayers still have to pay 25% of the final tax on investment income (interest, dividends, capital gains and gains on the sale of derivative financial instruments). From 2020, capital gains will be taxed at the rate of 27.5%.

For capital gains realised in 2019, we present the comparable tax rates that will apply from 2020:

To close the legal discrepancy and avoid abuse, income of a shareholder from the sale of shares to the company (purchase of own shares) or company shares from non-regulated market are taxed as a dividend at the total amount paid.For income from real estate leasing, taxpayers can take into account standardised costs of 15% (only 10% in 2019), but the income tax rate for income from real estate leasing increases to 27.5% as well (in 2019 the tax rate is 25%). 

The transferor may inform the taxpayer in writing about the acquisition value of the shares or units sold prior to the tax settlement. 

Taxation of employees

From 4 May 2019 the annual holiday payment is completely exempt from social security contributions as well as income tax. This means that the employer’s costs are equal to the employee’s net payment, which corresponds to the average gross salary in Slovenia, amounting to EUR 1,726 in August 2019. 

Example:
A company pays out the holiday payment at a gross amount of EUR 1,700. It actually has personnel costs of EUR 1,700 and the employee receives a net amount of EUR 1,700 to his or her bank account. 

The Slovenian tax package for 2020 is also intended to change the income tax categories in terms of reducing income from employment of the middle tax brackets.

From 2020 the following income tax categories apply:

Also, the common tax allowance will increase and from 2020 should be the following:

This means that the common tax allowance for all taxpayers will rise at least from the current EUR 3,302 to EUR 3,500.

To apply and recognise a special allowance for supported family members (adult and unemployed children, parents or adoptive parents), the significant change is that such a person must have the same permanent residence as the taxpayer who declares that family member as a supported family member. This does not apply to children under 18 years.

To promote the purchase and use of electric vehicles, the Slovenian tax package reduces the benefit in kind when purchasing company vehicles used by employees for private purposes. The monthly benefit in kind for the private use of a small electric vehicle will only amount to 0.3% of the purchase price of the vehicle, if the purchase cost of the vehicle including VAT does not exceed EUR 60,000. The benefit in kind for private use of company vehicles for conventional petrol and diesel vehicles, as well as for larger electric vehicles (only for a surplus over EUR 60,000), remains at 1.5% of the initial cost in the first year.

According to the new Slovenian tax package the taxation of part of the salary for business success (so-called 14^th salary or Christmas bonus) currently remains unchanged for the coming years. The 14^th salary can be paid without income tax, and only bears the obligatory social security contribution deduction of 38.2%. In 2019, the tax-exempt part of the Christmas bonus can be paid out up to approximately EUR 1,700.

If you would like to find out more detailed information about the adopted Slovenian tax package, 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.

The post Tax reform in Slovenia 2019-2022 appeared first on WTS Klient | adótanácsadás | könyvelés | bérszámfejtés | HR szolgáltatások | digitális megoldások | állami támogatások.