Tax news - December 2024

Changes in tax legislation

On 28 November 2024, due to a veto by the National Council, the members of the National Assembly again approved the amendments to Personal Income Tax Act (ZDoh-2) and Value Added Tax Act (ZDDV-1), and so now, together with the amendments to Corporate Income Tax Act (ZDDPO-2), Tax Procedure Act (ZDavP-2), Act on the Fiscal Verification of Invoices (ZDavPR) and Mass Real Estate Valuation Act (ZMVN-1), which were approved on 14 November 2024, the entire package of proposed tax changes has been adopted, which we have already written about in detail in the July issue of Tax News[1]. Most changes will enter into force on 1 January 2025.

I. VAT

VAT groups

Associated taxable persons with a registered office or a permanent establishment in Slovenia will be able to form a VAT group and have only one VAT number, with transactions between the members of the group being outside the VAT system.

Threshold for entry into the VAT system

The threshold for entering the VAT system has risen from EUR 50,000 to EUR 60,000.

Raised VAT rate

The VAT rate on all beverages with added sugar or sweeteners has increased from 9.5% to 22%.

Other Changes

Other changes include:

-        Introduction of a special scheme for small taxpayers, which allows exemption from charging VAT in other Member States under a certain threshold;

-        Mandatory submission of records of VAT charged and VAT deduction records by the deadline for submitting the VAT return;

-        A new rule for determining the moment when the right to deduct VAT arises, when a taxpayer who charges VAT following payment of an invoice charged on cash basis, purchases goods from a taxpayer who charges VAT following payment of an invoice charged on cash basis;

-        The place of supply of services related to entrance fees for events, which are provided to a taxpayer and where participation is virtual, is determined based on the first paragraph of Article 25 of the ZDDV-1.

 II. INCOME TAX

Change for normalized sole proprietors

The limit for the recognition of normalized expenses is lowered from EUR 100,000 to EUR 60,000 or – for part-time sole proprietors - from EUR 50,000 to EUR 30,000 of annual income. The standardized expenditure will be 80%. The tax rate will remain at 20%.

Normalized expenses will be 80% of income up to EUR 60,000. For part-time sole proprietors, the 80% rate will apply only up to the threshold of EUR 12,500, and for higher income, it will be 40%.

Tax relief for foreigners

New tax residents are entitled to a reduction in income tax of 7% of the salary or salary allowance they receive, if they have a salary that exceeds twice the average salary in Slovenia (around EUR 4,700 gross), they are under 40 years of age, and they have not been tax resident in Slovenia for the last two years. The income tax reduction under these conditions is granted for a maximum of 5 years.

Share options in innovative companies

As of new, income earned by employees in innovative companies (the company will have to be entered into the register of innovative start-ups), i.e. bonuses in the form of shares, will be considered for the calculation of tax liability at the time of the disposal of the shares or stocks.

Other Changes

Other changes related to personal income tax include:

-        Exemption of income in the form of shares or stakes from the grossing system;

-        Implementation of the long-term care system;

-        Abolition of the zero benefit for electric vehicles starting from 1 January 2030;

-        The use of bicycles and the provision of electricity at employer charging stations are not considered benefits;

-        Benefit for group liability insurance for management or supervisory board members;

-        A special tax base for public employees and officials posted abroad.

Other changes related to income tax from the activity include:

-        Limitation on the transfer of tax losses to 5 years;

-        The possibility of utilizing a relief for investments in the digital and green transition within 5 years after the investment;

-        Additional relief for donations amounting to 0.2% of taxable income for payments to other non-governmental organizations in the field of protection against natural and other disasters, operating in the public interest;

-        Exemption from income tax for the processing of areas with limited opportunities.

III. CIT

Limitation of recognized interest

The thin capitalisation rule, which defines interest on excess loans over a capital/debt ratio of 1:4 as tax-deductible, is abolished. For tax purposes, interest expenses are limited to an absolute threshold for recognising excess borrowing costs, which the amendment to the law raises to 3 million EUR or 30% of EBITDA (if EBITDA exceeds 3 million EUR).

Tax loss carryforwards

The amended law limits the time limit for claiming tax loss carryforwards to five tax periods, with a transitional period of five tax periods for claiming unused losses from tax periods that started before the law came into force.

Allowance for investment in the digital and green transition 

The amendment allows the unused portion of the digital and green transition investment allowance to be used over five tax periods after the investment period. This applies to investments made after the amendment becomes applicable.

Other Changes

Other changes include:

-        Additional relief for donations amounting to 0.2% of taxable income for payments to other non-governmental organizations in the field of protection against natural and other disasters, operating in the public interest;

-        Abolition of "standardized" limited liability companies (d.o.o.).

IV. OTHER TAX NEWS/ CHANGES                  

Amendment to the Companies Act (ZGD-1M)

The National Assembly has adopted the amendment to ZDG-1M, which we have already written about in detail in the August issue of our tax news[2]. In brief, the amendment broadens the scope of entities required to report on sustainability and introduces new public reporting requirements for multinational companies. In addition, the amendment introduces incentives for businesses to achieve a more balanced representation of women and men in leadership positions, aligns the criteria for determining company size due to the effects of inflation in recent years, mandates the labeling of companies and sole proprietors at visible locations on business addresses, and also changes the definition of a public interest entity.

Slovenian language requirement for foreigners

Please be informed about the amendments to the Foreigners Act (ZTuj-2), which have entered into force and concern the fulfilment of the Slovenian language requirement.

As of 1 November 2024, family members of holders of a single residence permit must attach to their applications proof of having passed an examination in Slovenian at level, which allows basic communication in simple, predictable everyday situations. Eligible foreigners can take a 180-hour Slovenian language course free of charge and can receive an additional 60 hours of support if needed. They must apply for the course at the administrative unit, where they will also need to obtain a certificate of eligibility.

Foreigners applying for a permanent residence permit must also attach a certificate of successful completion of the Slovenian language exam at the basic level (A2) from 1 November 2024.

Regulation on the Right to Disconnect

The right to disconnect is a new provision introduced by the amendment to the ZDR-1D, which ensures that employers guarantee to employees that during their rest periods or during authorized absences from work in accordance with the law, collective agreements, or general acts, they will not be available to the employer. To this end, the employer is required to take certain measures, which must be communicated to employees in writing in the usual manner, typically through the adoption of an internal regulation. Employers were required to implement the appropriate measures regarding the right to disconnect by 16 November 2024.

Case law - Charging interest in tax control proceedings

On 24 October 2024, the Constitutional Court ruled that Article 95 of the Tax Procedure Act (ZDavP-2), which provides for an annual interest rate of 7% on unpaid tax liabilities, is not incompatible with the Constitution[3]. According to the Court, the interest rate pursues legitimate objectives, such as preserving the value of money, depriving taxpayers who are in arrears of potential financial benefits and encouraging the timely fulfilment of tax obligations.

Case law – Performance-related pay

On 19 September 2024, the Supreme Court of the Republic of Slovenia, in its decision VIII Ips 9/2024[4], decided on a case with important implications for the tax treatment of performance payments. The Court considered whether there had been discrimination in the entitlement of employees to performance bonuses for sickness absence.

According to the Supreme Court, performance pay is linked to the performance of the company, since it constitutes a system of collective remuneration for all employees of the employer, rather than an individual contribution to the company's performance. Moreover, sickness absence is a circumstance beyond the control of the employee. Therefore, a reduction in the payment of a performance bonus on the grounds of absence due to personal circumstances such as sickness is not permissible, as this would disadvantage the employee for discriminatory reasons.

An employer who fails to ensure equal treatment for a worker in the payment of a performance bonus on the grounds of the worker's state of health is liable to damages under Article 8 of the Employment Relationship Act. The employee will thus be able to claim compensation for material (loss of remuneration) and non-material damage.