Tax News - July 2024

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Proposals for changes in tax legislation

On 3 June 2024, the Ministry of Finance submitted a new package of tax change proposals for public consultation. The proposals presented below, include changes in the areas of income tax, corporate income tax (CIT), value added tax (VAT) and tax procedure.

The interested public can submit comments on the proposals of the Ministry of Finance until July 3, 2024 inclusive, which may lead to changes or amendments to the proposals.

Following a public consultation and inter-ministerial coordination, the government is expected to approve the legislative proposals in September, which would mean that the National Assembly would finally approve the amendments towards the end of 2024, with entry into force on 1 January 2025.

i. Income tax

Changes for normalized sole proprietors

The threshold for entry into the normalized expenditure scheme for sole proprietors would be raised from EUR 50,000 to EUR 60,000, the ceiling for recognizes expenses for full-time sole proprietors would be lowered from EUR 100,000 to EUR 60,000, and from EUR 50,000 to EUR 30,000 for part-time sole proprietors.

Gradual abolition of the zero benefit in kind for electric passenger vehicles

Under the proposal, the zero benefit in kind for private use of an electric company passenger vehicle would be abolished within 5 years (i.e. after 2029). After this transitional period, the benefit in kind would be set at 0.75% of the purchase price of the vehicle per month.

New special tax allowance

It is proposed to grant new Slovenian tax residents (foreigners and returning Slovenian citizens) a reduction of 7% of the income tax on the salary or salary compensation received. This measure is intended to encourage immigration and the return of Slovenian citizens.

Changes to the annual tax assessment for non-residents

The proposal removes the requirement for non-resident taxpayers to prove that income earned in Slovenia is exempt from taxation in the country of tax residence or is non-taxable in the country of tax residence.

Incentives for employee ownership in the ownership structure of start-ups

The proposal foresees that for the income of employees in start-ups, i.e. bonuses in the form of shares or stocks, the moment of calculation of the tax liability on the employment income is postponed to a later date (e.g. at the moment of disposal of the acquired share or termination of the employment relationship). However, the tax base is the value of the share at the time of acquisition, reduced by any negative difference between the value of the share at the time of the tax liability and the value of the share at the time of acquisition, and income tax is calculated at the average rate. The difference between the sale value of the share and the value of the share at the time of acquisition is treated under the existing capital gains tax rules.

Bicycles and electric vehicle charging

Under the proposal, the use of employer-owned (e-)bicycles will not count as a benefit in kind. Similarly, electricity provided by the employer to employees to charge their cars will not be considered as a benefit in kind.

Special tax treatment for posted civil servants and officials is abolished

The proposal abolishes the special tax treatment for posted civil servants and officials, and thus puts them on an equal footing with those posted to work abroad from the economy.

Benefit in kind for insurance premiums

The proposal introduces the determination of a special method of valuing benefit in kind for insurance premiums for corporate liability insurance of members of management and supervisory bodies, thereby eliminating the current ambiguities.

ii. CIT

Limitation of recognized interest

It is proposed to delete the thin capitalization rule (Article 32 ZDDPO-2), which defines interest from excess loans that exceed the ratio between capital and debt in the amount of 1:4, as tax non-taxable. Under the new proposal the limitation of interest would be linked to an EBITDA ratio of 30% or to the absolute threshold for the recognition of excess borrowing costs, which will be 3 million EUR.

Tax loss carryforwards

The proposal limits the time for claiming tax losses to 5 years, with a transitional period of 7 years for claiming unused old losses.

Allowance for investment in digital and green transition

Possibility to carry forward the unused portion of the Digital and Green Transition Investment Allowance over the next 5 tax periods after the investment period.

iii. VAT

Raising the threshold for entry into the VAT system

The proposal raises the threshold for entering the VAT system from the current EUR 50,000 to EU 60,000.

Special arrangement for small taxable persons

Special arrangement would allow small taxable persons who are not identified for VAT purposes in Slovenia (they do not exceed the threshold for entering the VAT system) to operate in other EU Member States without being identified for VAT purposes and without having to account for VAT (up to a turnover limit of EUR 100,000).

Possibility to set up a VAT group

It would introduce the possibility of setting up a VAT group for related taxable persons established or having a permanent establishment in Slovenia, which means that several companies within the group could have one VAT number and transactions between member countries would be treated as outside the VAT system.

VAT surplus carry-forward

The carry-forward of VAT surplus and the possibility of claiming a refund of VAT surplus are limited to a period of 5 years from the date of submission of the VAT return.

Vending machine sales data reporting

The proposal envisages mandatory reporting to the tax authority on sales at vending machines for the sale of goods and at vending machines for the sale of services.

VAT rate increase on energy drinks and sugary drinks

The proposal would raise the VAT rate on energy drinks and sugary drinks from the standard 9.5% to 22%.

iv. Tax procedure

Changes to taxpayer diction

The proposed changes provide for an extension of the employer's liability to pay tax, which will have a direct impact on posted workers and employers where workers receive income paid by a foreign related company. According to the new regulations, companies that are the formal employer of an employee would be required to report to the tax authority any remuneration received by the posted worker because of the posting abroad or in connection with the employment by the foreign company by the formal employer, in a withholding tax return.

Payment of income tax from stock or shares in a company

In practice, many cases of employee share-based remuneration require income to be tax grossed up by a tax coefficient, which increases the overall cost and tax burden for employers. Income from employment in the form of shares in a company received by innovative start-ups will not be increased by the withholding tax coefficient, provided that the taxpayer notifies the tax authority in the withholding tax return, which, based on this notification, determines the payment of income tax by means of a decision.

Automatic data provision in the case of innovative start-ups

Employers of innovative start-ups will be required to provide the tax authority with the information necessary for the collection of tax on this income on an annual basis for employees who have received stock options or shares or income in the form of shares in respect of which special tax treatment may be claimed. The proposal also imposes an obligation on the Slovenian Enterprise Fund to provide the tax authority, on an annual basis, with information on the registration and deregistration of companies entered in the register of innovative start-ups.

Other tax news / changes

New proposals for measures to fight against money laundering and terrorist financing

On 24 April 2024, the European Parliament approved a package of proposals to make the EU's fight against money laundering and terrorist financing more effective. This package includes a proposal for a Sixth AML Directive, a proposal for an AML Regulation and a proposal for a Regulation establishing an AML/CFT Authority. The package must be formally adopted by the EU Council before it can be published in the Official Journal of the EU.

The new provisions give journalists, civil society organizations and supervisory authorities immediate and free access to beneficial ownership information in national registers, which will contain data for at least five years. The legislation strengthens the powers of financial intelligence units to analyze and suspend suspicious transactions and requires enhanced customer identity checks on banks, asset/crypto asset managers and real estate brokers, who are required to report suspicious activities.

The new rules also apply, inter alia, to top football clubs involved in high-value financial transactions with investors or sponsors, including advertisers and player transfers. There will also be stricter controls on wealthier individuals (i.e. those with total assets of at least EUR 50 million, excluding their main residence), as cash payments will be limited to a maximum of EUR 10,000 at EU level, except for individuals in a non-professional environment.

Supervision will be carried out by a newly created authority in Frankfurt (AMLA), which will directly supervise the riskiest financial entities and intervene in supervisory failures.

Directive on corporate sustainability due diligence

In May 2024, the EU Council adopted the Corporate Sustainability Due Diligence Directive, which will require large companies to ensure that their supply chains respect human rights and environmental obligations. The Directive will affect companies with more than 1,000 employees and a turnover of more than EUR 450 million and will affect the whole chain of activities.

Under the new Directive, companies will therefore have to ensure that their chain of activities respects human rights and environmental obligations. If they are found to be in breach of these obligations, companies will be required to take appropriate measures to prevent, mitigate, eliminate or minimize negative impacts. In extreme cases, companies may also be potentially liable for damages.

The Directive enters into force on the 20th day following its publication in the Official Journal of the EU. Member States have a 2-year implementation period within which to transpose the objectives or purpose of the Directive into Slovenian law.