Tax News - February 2024

Changes in tax legislation and tax case law

i. Income tax

Tax treatment of interest received from institutions other than banks

In the online publication Capital Income - Interest, Dividends and Capital Gains[1], Slovene Tax Authority (hereinafter STA) explains, among other things, the tax treatment of interest earned with institutions other than banks and savings banks, established in Slovenia and the EU. These are, for instance, eToro, AS Mintos Marketplace and Vianinvest from Latvia, Bondoro Capital OU from Estonia, Helskeeiche a. s. from Slovakia, Interacitve Broker Central Europe Zrt. Hungary and Interacitve Brokers Ireland Limited from Ireland.

The publication mentions that the taxable person shall pay tax at the rate of 25% on the total amount of interest received from such institutions. This interest is not subject to the exemption from income tax on the aggregate of the tax bases of EUR 1,000 defined in Article 133 of Personal Income Tax Act (ZDoh-2).

Contributions base for persons unsured under another legal relationship

In the online publication Income Tax - Income from Employment (Income from Other Contractual Relationships)[2], STA explained that as of 1 February 2024, the basis for the payment of contributions for the insured persons referred to in Article 18 of Pension and Disability Insurance Act (ZPIZ-2) (persons liable under other legal relationships) is each individual payment for work or services received on the basis of another legal relationship, which is deemed to be income under the ZDoh-2, reduced for standardized costs at the rate of 10%.

[1]Access to the publication here.

[2] Access to the publication here.

ii. Wages

New minimum wage

According to the Minimum Wage Act (ZMinP), the minimum wage is adjusted once a year to be in line with the increase in the cost of living. The adjustment is based on the official data of the Statistical Office of the Republic of Slovenia (SURS) on the year-to-year increase in consumer prices in December of the previous year compared to December of the year before, which amounted to 4.2% last year.

On this basis, the minimum wage now stands at EUR 1,253.90 and is increased for EUR 50.54 EUR compared to last year's minimum wage (EUR 1,203.36).

Increase in the minimum hourly rate for pensioners

Starting March 2024, the minimum gross hourly rate for pensioners' work will increase. Employers will not be allowed to pay them less than EUR 7.21 for temporary or occasional work, and their gross income in the calendar year 2024 shall not exceed EUR 10,781.07. The new amounts are the result of the alignment with the minimum wage.

According to last year's Order, until 29 February this year, the hourly rate for an hour of temporary or occasional work carried out by pensioners is set at EUR 6.92, and the amount of such work shall not exceed EUR 10,346.52 in aggregate for the year.

It should be taken into account that, although a pensioner may carry out temporary or occasional work for a maximum of 60 hours in a calendar month, unused hours may not be carried forward to a new month. However, pensioners may carry out a maximum of 90 hours of temporary or occasional work per month up to three times a year, but not exceeding a total of 720 hours in a calendar year.

New minimum hourly rate for students

As a result of an increase in minimum wage for 2024, the minimum gross hourly rate for temporary casual work for students has also increased. The new gross hourly minimum rate amounts to EUR 7.21 from February 3 on.

iii. VAT

STA tightens its penalty policy

Taxpayers are hereby informed that the STA will tighten its penalty policy from January 2024 onwards by focusing on penalizing the area of VAT return submission. Taxpayers who have submitted VAT returns for several tax periods after receiving a request to submit the return and will continue to do so in 2024, will be penalized.

STA will no longer allow an additional deadline for compliance with the obligation to submit the VAT return by issuing a request for its submission, as the deadline is laid down in Article 88 Value Added Tax Act (ZDDV-1). The purpose is to increase the discipline of taxable persons in submitting VAT returns in the future.

According to Article 88 of ZDDV-1, the taxable person is obliged to submit VAT return by the last working day of the month following the end of the tax period, or by the 20th day of the month following the end of the tax period, if he is obliged to submit the recapitulative statement (referred to in Article 90 of the same Act) for that tax period. The taxable person shall submit a VAT return irrespective of whether he is liable to pay VAT for the tax period for which the return shall be submitted.

Failure to comply with the obligation to submit a VAT return or failure to submit a VAT return within the prescribed deadline or in the prescribed manner constitutes a serious tax offence. Legal persons are liable to a fine of between EUR 4,000 and EUR 75,000, sole traders to a fine of between EUR 3,000 and EUR 50,000 and individuals to a fine of between EUR 400 and EUR 5,000.

iv. CIT

Act Amending the Corporate Income Tax Act (ZDDPO-2T)

On 9 February 2024, the Act Amending Corporate Income Tax Act (ZDDPO-2T) was published.

The amendments relate to provisions concerning the determination of a non-resident's permanent establishment (Article 6) and the place of business of a non-resident who is not a permanent establishment (Article 7). The most significant change is that the provisions governing the place of business of a non-resident who is not a permanent establishment do not apply to a place of business used or maintained by a non-resident who is closely related to another non-resident or resident and if that person carries out business activities at the same or another place in Slovenia and those business activities are part of an overall business.

In addition, the new Article 54(c) also modifies the taxation of interest and permanent establishments and provides for a new rule on the treatment of the tax recognition of interest. The new interest limitation rules apply only to companies that are part of an international group and related parties. The new rule does not apply at the level of the international group but to each individual taxable entity within the group. A taxable entity with no related parties is excluded from the scope of the new rule. In the tax period in which incurred, a taxable person who has a related party will be allowed to recognize excess borrowing costs as an expense up to the higher of:

• 30% of the taxpayer's earnings before interest, taxes, depreciation, and amortization (EBITDA), or
• EUR 1,000,000

For the period from and including 2024, changes are also introduced in annexes to the CIT return, relating to disclosure of information on loans between related parties (Annex 15) and transactions between related parties (Annexes 16 and 17). New form of annexes will no longer require type of related party relationship (taxable persons will have to determine this by themselves), but rather the type of transaction (e.g. intangible/tangible assets, services, sale and purchase of products/goods/materials, etc.)

v. Other changes

Changes to excise duties

On 21. February 2024, the Government approved the draft of the Act amending Excise Duty Act. The essential part of the proposal is that excise duties on refills for e-cigarettes will be significantly increased, and customs officers, i.e. STA officers who control the circulation of excise goods, will be able to seize anything from the offender if they find a violation of the law. This means not only undeclared tobacco could be seized, but also machinery and equipment.

Under the proposal, the excise duty would be payable on:

• Cigarettes: at least 60% of the weighted average retail selling price of a packet of cigarettes released for consumption, but not less than EUR 145 (now EUR 141) per thousand cigarettes from the class of the weighted average retail selling price of cigarettes
• Cigars and cigarillos: 6.4% of the retail selling price, but not less than EUR 57 (now EUR 56) per thousand pieces
• Fine-cut tobacco: 38% of the retail selling price plus EUR 57, but not less than EUR 124 (now EUR 119) per kilogram
• Other smoking tobacco: EUR 57 (now EUR 56) per kilogram
• Heating tobacco: EUR 180 (now EUR 132) per kilogram of filler tobacco
• Electronic cigarettes: EUR 0.70 for a milliliter of nicotine-containing liquid (now EUR 0.27) and EUR 0.31 for a milliliter of non-nicotine-containing liquid (now EUR 0.12). This means that, over an inch, a bottle of 10 milliliters of nicotine-containing liquid could be around EUR 4 more expensive, while a bottle of nicotine-free liquid could cost almost EUR 2 more.
• Herbal heating rolls, water pipes: excise duties will also be payable on the above, how much will depend on the definition of what the product is.

Deadline for reporting to the Commission for the Prevention of Corruption (KPK) is approaching

There is an approaching deadline on 1 March 2024 for submitting whistleblower reports to the KPK. This is a mandatory reporting obligation introduced by the Reporting Persons Protection Act (ZZPri), which was adopted on 27 January 2023. Reporting obligations apply to all entities with more than 50 employees or more than 10 employees in certain sectors.

The aim and purpose of the law is to protect “whistleblowers” and to prevent actions and pressures on the whistleblower that would discourage a person from reporting or disclosing information. ZZPri requires entities satisfying criteria mentioned above to adopt amendments to the Internal Act, which include:

• a designated person (trustee) to receive and handle all complaints.
• A separate e-mail address, telephone number or other contact details for receiving complaints.
• Procedure for informing the internal organizational units responsible for correcting infringements.
• How to inform management and employees about the complaint.

As mentioned above, these entities are then required to submit a report by 1 March, which includes the name of the authorized person and the number of notifications received by that person in the previous year (if none, then enter 0). In case of failure to comply with the reporting obligation a penalty between EUR 2 000 and EUR 6 000 may be imposed. The electronic format of the report from the KPK website is available on link https://zzpri.kpk-rs.si/notranja-prijava.

New draft of the Act amending Labour and Social Security Registers Act

The Ministry of Labour has drafted amendments to the Labour and Social Security Registers Act. The latest Amendment stipulates that records must be kept for all workers who perform work for an employer on any basis - if they do so personally and are involved in the employer's work process or predominantly use means of work which are part of the employer's work process. This means that for employees with copyright or sub-contract, students evidences must now also be kept.

The Ministry now proposes to delete the provision that records must be kept for persons "who perform work in such a way that they predominantly use means of work which are part of the employer's work process".

In addition, the Ministry also proposes to delete the obligation to record the use and extent of breaks during working time.

Electronic submission of tax refund claims

From now on it is possible to submit a tax refund claim (forms KIDO 9 to KIDO 12) electronically via eTaxes portal, based on Article 262 of the Tax Procedure Act (ZDavP-2). For taxpayers, this means a simplified way of submitting claims and thus a faster route to claiming the benefits of the double taxation treaties. It will still be possible to submit KIDO claims in the usual way (paper form). Claimants who have so far submitted KIDO claims in paper form or via the eTaxes portal as own document (“lastni document”) are advised to use the new electronic form.

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