Tax News - January 2024

Changes in tax legislation and tax case law

i. Income tax

Changes to income tax relief for investors

On 22 December 2023, the Act on Reconstruction, Development and the Provision of Financial Resources (ZORZFS) entered into force, bringing a new income tax relief for investors (natural persons) into securities, which will be issued by the Republic of Slovenia in 2024, 2025 or 2026. For the purposes of income tax, interest paid on these securities will be treated same as interest on cash deposits made with banks and savings banks, of which the total is not taxed up to 1.000 EUR. This limit will now also include all interest earned by resident on securities which will be issued by Republic of Slovenia in 2024, 2025 or 2026 and are offered only to natural persons.

Claiming the special relief for dependents for 2023

5 February 2024 is the deadline for application to claim special relief for dependents for 2023. However, if the application is submitted via eTaxes portal, the deadline will not expire until 20 February 2024, as the electronic portal will remain open while the data from paper applications is being entered.

Income tax return on capital gains, rental income and income tax return on gains from disposal of derivatives

The deadline for filing income tax returns on capital gains (gains from the disposal of securities and other shares and investment coupons, interest on cash deposits, other interest and dividends), rental income and income tax return on gains from the disposal of derivatives for 2023 expires on 28 February 2024.

ii. Wages

Compulsory health contribution

As of 1 January 2024, the supplementary health insurance has been replaced by a new compulsory health contribution. Following the announcements by insurance companies of a rise in monthly supplementary insurance premiums, the government has introduced an amendment of the Health Care and Health Insurance Act adopted last summer.

The first month for which the new compulsory health contribution will have to be paid is January 2024, with payment due in February. For the period from January 2024 to February 2025, the compulsory health contribution is 35 EUR per month.

For employees, the compulsory health contribution will be paid by the employer, who will cover the amount of 35 EUR from the employee's salary. For pensioners, the contribution will be paid by the Pension and Disability Insurance Institute of Slovenia from pension income. The Employment Service of Slovenia will pay a contribution on unemployment benefits for individuals who were insured as employed before the entitlement was triggered.

As this is a compulsory contribution, non-payment will result in a debt. Once the amount of outstanding contribution obligations exceeds eight per cent of the average monthly gross wage in Slovenia for the previous year (which now means approximately five months of non-payment of the contribution), the entitlement will be suspended, but not earlier than 30 days after the written notification by the Health Insurance Institute of Slovenia (ZZZS).

New developments in the calculation of salary reimbursement charged to compulsory sickness insurance for sickness absences from 1 January 2024 onwards

Health Care, Labour and Social Care Intervention Measures Act (ZIUZDS), which entered into force on 1 January 2024, introduces innovations in the calculation of reimbursements for all work absences from 1 January 2024 onwards, i.e. in the calculation of reimbursements for the month of January 2024, irrespective of when the temporary absence started.

• For absences from and including 1 January 2024 (regardless of when the first day of continuous absence took place), the burden transfers to ZZZS from the 31st working day.
• ZIUZDS introduces the so-called social cap, which acts as an additional upper limit in the calculation of salary reimbursement. The social cap is 2.5 times of the last known average monthly gross salary in the Republic of Slovenia according to Statistical Office of the Republic of Slovenia (SURS). The value of the parameter changes as of 1 March 2024, depending on the growth of the average wage of the previous year.
• Even though the burden transfers to ZZZS from the 31st working day of the absence, the provision that the employer shall pay the salary compensation for only 80 working days in a calendar year at its own expense remains in force. The pass-through of burden to ZZZS remains on the 81st working day, as does the employer's obligation to attach to the reimbursement claim proof of payments for these 80 working days and the obligation for ZZZS's designated doctor to decide from the 81st working day onwards.

iii. VAT

New rules against cross-border payment fraud in the EU

On 1 January, new transparency rules came into force to help EU Member States crack down on Value Added Tax (VAT) fraud, especially in online trading. This is particularly exposed to the risk of non-compliance and VAT fraud.

The new rules take advantage of the key role of payment service providers such as banks, e-money institutions, and other payment institutions, which together enable more than 90% of online purchases in the EU.

From 1 January, these payment service providers must monitor the recipients of cross-border payments and, from 1 April, provide EU Member States' administrations/authorities with information on those who receive more than 25 cross-border payments per quarter. This information will then be centralized in a new European database to be developed by the European Commission, the Central Electronic Payment Information System, where it will be stored and cross-checked with other data.

All information in the electronic payment information system will then be made available to the Member States via Eurofisco. This is an EU network of experts, fighting against VAT fraud, set up in 2010, which will make it much easier for Member States to analyze data and identify online sellers who are not compliant with their VAT obligations, including businesses located outside the EU.

Eurofisco officers are also empowered to take appropriate action at national level, such as dealing with requests for information, audits, or cancellation of VAT numbers. Similar provisions already in place in some Member States and other countries have had a concrete impact in the fight against fraud in the e-commerce sector.

Case law – Claim for repayment of overpaid VAT (ECJ Judgment C-453/22)

In case C-453/22, the Court Justice of the EU (CJEU) ruled that the VAT Directive and the principles of VAT neutrality and efficiency must be interpreted as requiring that the recipient of supplies of goods has the right to claim directly from the tax authorities a refund of VAT wrongly charged and paid to his suppliers. In the present case, the VAT was overpaid by the recipient of the goods to its suppliers, who then paid it into the public treasury, and the overpayment could not be recovered because it was time-barred (under national law). Member States will therefore need to harmonize national legislations to allow recipients of goods to reclaim VAT overpayments directly from the tax authority if the overpayment cannot be recovered from the suppliers. If the tax authorities fail to reimburse the VAT unduly collected within a reasonable period, the damage caused by the unavailability of an amount equal to the VAT unduly collected will have to be compensated by the payment of interest on late payment.

iv. CIT

New 22% CIT rate

The already mentioned Act on Reconstruction, Development and the Provision of Financial Resources (ZORZFS), in addition to the new income tax relief, also brings us a new CIT rate to finance projects and measures related to floods and landslides. The following sources are identified as sources of revenue for the reconstruction fund:

• Temporary increase of CIT rate by three percentage points (from 19% to 22%).
• A temporary tax on the balance sheet total of banks and savings banks of 0.2 %.
• Temporary use of net and balance sheet profits of Slovenian Sovereign Holding (SDH)

CIT rate will be increased for a period of 5 years (i.e. for the years 2024, 2025, 2026, 2027 and 2028). The amount represented by the difference of 3 percentage points between the old and the new rate is earmarked as revenue for the reconstruction fund.

The change in the rate also has an impact on the preparation of the 2023 CIT return, where the tax will be calculated and paid at 19% and the new advance payments made in the year and for the year 2024 will be calculated at the new rate of 22%.

v. Other changes

Act Amending the Employment Relationships Act (ZDR-1D)

The amendment brings into the Slovenian law order Directive 2019/1152 on transparent and predictable working conditions in the European Union and Directive 2019/1158 on the balancing work and private lives of parents and carers, in so far as it relates to the exercise of employment rights and obligations.

Below are some of the key changes to the ZDR-1D:

• Subsidiary liability in the construction sector – The new rule will apply to the subsidiary liability of the main contractor on a project, i.e., the main contractor will be responsible throughout the supply chain for ensuring that all workers of all subcontractors are paid in full.
• Care leave – A worker will be entitled to this leave in the event of significant health care needs of a family member or a person with whom he/she lives in the same household.
• Higher compensation and better information for agency workers – The compensation for an agency worker on standby will now be 80% of the wage the worker would have received if he or she had been working (previously this was 70% of the minimum wage). However, the agency worker must now be informed in writing of the assignment to work for the user, as well as of the conditions of work with the user and of the rights and obligations with the user.
• Right to disconnect – The employer will now have to provide the worker with a right of disconnection, which means that the worker is not at the employer's disposal during the rest time or during justified absences from work. In the event of a dispute, the burden of proof is on the employer if the employee claims that the employer has failed to provide the right to disconnect.
• Work-life balance and protection of workers – A worker with a child up to the age of eight will now be able to propose to the employer a fixed-term part-time contract to meet the needs of reconciling work and private life. Care workers will also be able to do the same in the case of care.
• Changes for posted workers – For posted workers, the employer will have to provide information on the pay to which the worker is entitled under the law applicable in the host country. It must also, if it is more favorable to the worker, provide the worker with rights under national law and under the provisions of the collective agreement at the level of the activity governing working time, breaks and rest periods, night work, minimum annual leave, remuneration for work, the employment contract between the worker and the employer carrying out the activity of supplying work to another user, health and safety at work, special protection of workers and the guarantee of equal treatment.

New 12,5% default interest rate

The Ministry of Finance has published the statutory default interest rate in the Official Gazette of the Republic of Slovenija, No 2/2923 of 6 January 2023. The statutory default interest rate is now 12,5% and applies for the six-month period starting on 1 January 2024. The previous rate of 12,0% therefore expired on 31 December 2023.

Slovenian digital platform operators must report data to the Financial Administration until end of January

According to the amendment of the Tax Procedure Act (ZDAVP-2N), operators of digital platforms in Slovenia, through which providers sell their goods or services to third parties, must report information on these sales in 2023 to the Financial Administration by 31 January 2024.

Reporting obligations apply to all platform operators that allow other sellers to offer certain services or goods (personal services, rental of real estate, rental of any means of transport or sale of goods) to users through their platform for a fee. The data must be reported by a platform operator who is resident for tax purposes in Slovenia, is established, managed or has a permanent establishment in the Slovenia and is not a qualified platform operator outside EU. If a platform operator qualifies for reporting in different EU Member States, it may choose the Member State in which it will report, but it must notify all Member States in which it qualifies.

The Tax Authority will need to be provided with the identification details of the sellers, details of the compensation received, commissions, fees and taxes withheld, details of the number of activities carried out, details of the financial accounts to which the compensation has been paid and, in the case of rental properties, for each property, the type, address and identification of the property and the number of days of rental.

Reporting such data is done electronically via the ZBS B2B channel to the eTaxes system.

Minimum Tax Act (ZMD)

On 13 December 2023, the National Assembly adopted the Minimum Tax Act, which we wrote about in the October issue of this newsletter.[1] In brief, the new act will introduce an additional tax liability from 2024 onwards for groups whose annual revenue at consolidated level in at least two of the last four financial years amounts to 750 million EUR or more.

This is the so-called top-up tax, which is levied on the excess profits if a group reaching the threshold does not reach the minimum effective tax rate of 15% in a specific jurisdiction. Obliged groups will be required to prepare an annual information return as well as a domestic top-up tax return, whether they are liable to pay it.

The Ministry of Finance estimates that 412 international groups with parent companies in Slovenia or abroad and subsidiaries in Slovenia will potentially be affected by the changes. According to the information received, 144 of them have an effective tax rate lower than 15%.

Increases in the cost of posting workers

Transnational Provision of Services Act (ZČmlS), adopted at the end of March last year, requires the deletion (as of 1 January) of a provision in the Pension and Disability Insurance Act (ZPIZ-2) which currently allows employers to pay pension and disability insurance contributions for certain workers posted abroad from the gross salary that they would have received for the same work in Slovenia. As a result, the cost of posted workers will now be higher.

Changes to the size criteria for micro, small, medium, and large companies

On 17 October 2023, the European Commission adopted a proposal for a delegated Directive amending Directive 2013/34/EU of the European Parliament and the Council as regards the adaptation of the size criteria for micro, small, medium-sized and large groups (hereinafter "the Proposal").

The Proposal implies that the financial size criteria need to be adjusted for inflation. Therefore, the Proposal only deals with the adjustment of the criteria relating to net turnover and the value of assets. According to the proposed adjustment, the new criteria would be:

• A micro company is a company whose average number of employees in a financial year does not exceed 10, or whose net turnover does not exceed 900.000 EUR, or who’s assets does not exceed 450.000 EUR
• A small company is a company which is not a micro company and whose average number of employees is not more than 50, or whose net turnover does not exceed 10.000.000 EUR, or whose value of assets does not exceed 5.000.000 EUR.
• A medium-sized company is a company which is not a micro or small company and whose average number of employees does not exceed 250, or whose net turnover does not exceed 50.000.000 EUR, or whose value of assets does not exceed 25.000.000 EUR.
• A big-sized company is a company that is neither micro, nor small, nor medium-sized.

 Amendment to the Act on Labor and Social Security Records (ZEPDSV-A)

 On the 20 November an Act Amending the Labour and Social Security Registers Act (ZEPDSV-A) entered into force. The amendment imposes several additional obligations on employers to keep records on the use of working time and tightens the provisions on sanctioning working time infringements.

The main innovations introduced by the amendment to the ZEPDSV-A are:

• A new legal definition of a worker – the definition of a worker is extended to include any person who, on any legal basis, performs work for an employer and is involved in the work process. In practice, this means that the recording of working time is also compulsory for all students and employees on a fee-for service basis.
• Extension of the existing information to be entered in working time records – a complete working time record must now include, inter alia, the number of hours, overtime, arrival and departure times, break times, hours worked under other special working conditions (night work, shift work, Sunday work etc.), the running total of the worked hours in a week, month and year, showing reference period taken into account for uneven distribution and for temporary re-distribution of full-time work.
• Compulsory retention of working time records – working time records are kept as a permanent document, which means that they cannot be destroyed.
• The amendment to the ZEPDSV-A, in Article 19, requires the employer to provide the employee with access to the information from the records on the use of working time that relates to him/her. The employer must inform the worker in writing of the information contained in the working time record for the previous month by the end of the payday. Article 19c provides that direct electronic access by the worker to the working time record shall also be deemed to fulfill the obligation to give written notification of the information contained in the working time record.
• Compulsory electronic working time record keeping – electronic record keeping of working time will therefore be compulsory for offending employers who were fined for infringement of the statutory provisions on working time and/or on the keeping of records of working time.
• Higher fines and sanctions – Fines for offences related to record keeping range from 1.500 EUR to 20.000 EUR (lower for smaller employers and sole traders). Fines for offences related to electronic record keeping of work time are higher, ranging from 3.000 EUR to 20.000 EUR. Another new feature is the possibility of imposing sanctions on the employer’s responsible persons. The latter may be additionally fined from 150 EUR to 2.000 EUR

A new tax on carbon imports into the EU

On 1 October, the pilot phase of the Carbon Border Adjustment Mechanism (CBAM) was launched. CBAM is an environmental mechanism designed in the context of the Green Deal and in support of the EU's 2050 carbon neutrality target. The aim of the mechanism is to ensure that imported products contain a carbon footprint cost, i.e. to equalize the taxation of domestic and imported products, and to prevent carbon leakage due to the relocation of production from the EU to other countries that are less ambitious in terms of emission reductions. With the full implementation of the CBAM, importers of carbon-intensive commodities will be required to purchase CBAM credits worth a quantity of CO2 emissions at a price that is complementary to the price of emissions in the existing EU ETS. The CBAM mechanism applies to cement, iron and steel, aluminum, electricity, fertilizers and hydrogen (hereinafter referred to as "CBAM commodities").

During this period from 1 October 2023 until 31 December 2025, traders will only report emissions that are part of their imports subject to the mechanism, without paying any financial adjustment. This will give companies sufficient time to prepare for the new system, while allowing for a fine-tuning of the final methodology by 2026. Importers of CBAM goods will otherwise have to collect data for the fourth quarter from 1 October 2023, and will have to submit their first reports by 31 January 2024. An exception to reporting is CBAM goods with a real value per shipment of less than €150.

On 15 January 2024, detailed information regarding the registration of importers for reporting purposes and the reporting process itself was published on the Slovene Tax Authority’s website. Additional instructions and guidelines on registration and reporting are available also on the European Commission's website.[2]

Cancelation of the solidarity contribution

On 13 November 2023, the National Assembly approved an amendment to the intervention Act, which sets out measures and solutions to deal with the consequences of the August floods and, among other things, cancels the solidarity contribution. However, the possibility of a solidarity working Saturday is still provided for in the Act. This can be done by the employer in agreement with the employees' representatives, and the funds thus raised will be channeled into the Slovenian Reconstruction Fund. In addition, the amendment stipulates that no income tax or social security contributions are payable on the employee's wages for work done on that day.

Slovenia joins the implementation of the International Cryptocurrency Reporting Framework

Slovenia has agreed to a joint declaration by 48 countries and tax jurisdictions on the implementation of a new international standard on the automatic exchange of information on crypto assets. The declaration is needed for an efficient global information exchange system, also with the aim of minimizing tax fraud.

The standard, developed by the Organization for Economic Co-operation and Development (OECD), is part of the Crypto-Asset Reporting Framework (CARF) which was developed in view of the rapid growth and market for crypto assets and provides for the reporting of tax information on transactions in these assets in a standardized manner. Thus, this information is automatically exchanged on an annual basis with the jurisdictions where the taxpayers are resident.

The joint declaration aims at a swift transposition of this reporting framework into national law and its consistent and timely implementation with a target start of information exchange in 2027.

Intrastat developments in 2024

As of this year, the value of the inclusion threshold for receipts of goods for Intrastat reporting purposes has changed to €220,000.

In addition, the Eurostat website publishes the Intrastat instructions for 2024 as well as short video guides (reporting for Intrastat, inclusion in the reporting and the data submission procedure).

New list of countries at risk of money laundering or terrorist financing

A new list of countries at high and increased risk of money laundering or terrorist financing is published. Bulgaria is added to the Financial Action Task Force (FATF) list and Albania, Jordan, Cayman Islands and Panama are removed.

[1]https://eng.mazars.si/Home/Insights/Newsletters/Tax-news/Tax-News-October-2023

[2]https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en#legislative-documents

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