Every businessperson would love to expand globally. Yet, there are times when the financial aspect comes in the way. Having a global presence in Europe is a dream some entrepreneurs pursue. Slovenia could be an ideal place due to its location, business activities, and business-friendly approach.
Slovenia, a Central European nation, has a well-established tax system that applies to businesses operating within its borders. It is crucial for both local and foreign entrepreneurs to comprehend the various aspects of business taxation in Slovenia. This article offers a comprehensive overview of the fundamental components of business taxation in Slovenia, encompassing business tax rates, income tax, taxation of foreign income, and other pertinent subjects.
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Table of Contents
Slovenian residents are generally subject to income tax on their worldwide income, whether earned in Slovenia or abroad. This applies to both citizens and foreign residents. Based on Slovenian Accounting Standards 2016 or International Financial Reporting Standards (IFRS), companies are also taxed on their worldwide income. Both individuals and companies must comply with Slovenian tax regulations and fulfil their tax reporting and payment obligations.
Business Taxation in Slovenia
Business taxation refers to the taxes businesses must pay to the government based on their income, profits, or other relevant factors. In Slovenia, businesses are subject to various types of taxes, including corporate income tax, progressive tax rates, value-added tax (VAT), and social security contributions.
The specific rules and regulations regarding business taxation in Slovenia can be complex and may require professional advice or assistance to ensure compliance and optimize tax planning strategies. It is important for businesses operating in Slovenia to understand and fulfil their tax obligations to avoid penalties and legal issues. The Slovenian tax system supports the country's economy and funds public services and infrastructure development.
Slovenian tax residents (anyone who carries out any economic activity) must pay corporate income tax on all their income, regardless of its source. At the same time, non-residents are only subject to taxation on income sourced in Slovenia.
Business or Corporate Income Tax
For businesses operating in Slovenia, the rate of business taxes is an important consideration. Slovenia's standard corporate income tax rate is 19% as of 2024. However, certain business activities or geographical areas within the nation may be subject to particular requirements and incentives. In Slovenia, companies with annual business income below €50,000 are not liable for corporate tax. However, they must still file tax returns and meet other tax obligations, like VAT and social security contributions.
In Slovenia, a supervisory board oversees a company's management to ensure it operates in the best interests of stakeholders. The board monitors performance, establishes goals, and ensures compliance with legal and regulatory requirements. It is typically comprised of external members appointed by shareholders, and its size and composition can vary based on the company's specific needs. The board conducts regular meetings and provides shareholders with updates on its activities and the company's performance.
Income Tax Rate
In Slovenia, self-employed people must pay personal income tax on their business profits. Slovenia has a progressive rate that ranges from 16% to 50%. Because of this progressive tax system, the tax rate for higher-income individuals is higher. In addition, self-employed people have to pay social security contributions, which are determined by their income. These contributions pay for Social Security benefits like healthcare, pensions, and disability insurance.
Taxation of Foreign Income
Slovenia has particular laws governing the taxation of overseas earnings. While non-residents are only subject to taxation on their income originating in Slovenia, residents are typically taxed on their income earned worldwide. Treaties against double taxation may be applicable to stop Slovenia from taxing the same income twice.
Slovenia imposes a consumption tax known as the value-added tax (VAT) on providing goods and services. In Slovenia, the VAT threshold is €50,000. This implies that companies with yearly sales under this threshold are exempt from the need to register for VAT. They can still register and get any VAT they paid back on their purchases voluntarily, though.
Slovenia applies a reduced VAT rate of:
- 5% for books and newspapers (including e-books)
- 9.5% on foodstuffs (except alcoholic drinks and catering services); water supplies; passenger transport; books, newspapers and periodicals if they contain no more than 50% of the promotional content or content that includes no more than 50% of music, movies and games, including lottery, as well as shows and events in the fields of politics, culture, art, sports, science and entertainment; services of authors and composers; agricultural products and services; pharmaceutical products and medical equipment; cultural events; hotel accommodation; use of sports facilities; services of undertakers and cemetery services
- Zero-rated supplies include exports of goods outside the EU and related services and intra-community supplies of goods and intangible services supplied to another taxable person established in the EU or to a recipient outside the EUTac.
- Tax exemptions are in real estate transactions (except "new buildings"), financial services, insurance transactions, betting, gambling, lotteries, public radio and television broadcasts, education, health care and medical services, and cultural services.
- Other consumption taxes include alcohol, tobacco products, mineral oils, natural gas, electricity, coal, and coke, which are subject to excise duties. A motor vehicle tax applies to all vehicles registered for the first time in Slovenia, with rates depending on fuel range, engine power, and CO2 emissions (ranging from 0.5% to 31%). An additional tax is imposed on motor vehicles with engine displacements above 2,500 cc, with rates varying according to engine size.
A capital tax is a charge on an individual's or company's capital. There isn't a specific capital tax in Slovenia. Corporations must pay corporate income taxes on all their earnings, including capital gain income. Furthermore, capital gains made by individuals are subject to personal income tax, which is levied at the same rate as other forms of income.
Capital Gains Tax
The profits from selling capital assets, like stocks, investment bonds, and real estate, are known as capital gains. In Slovenia, the tax rate for capital gains (ordinary income) aligns with the personal income tax rate, which is progressive and varies from 16% to 50%. However, specific exemptions and deductions might be applicable to lessen the tax burden on capital gains based on individual circumstances.
In Slovenia, capital gains tax is applied to the disposal of shareholdings based on the holding period, with varying tax rates. For shareholdings held for 0–5 years, the tax rate is 25%; for 5–10 years, it's 20%; and for 10-15 years, it's 15%. This applies to shareholdings of at least 8%. There is an exemption from capital gains tax if the disposal occurs more than 20 years after the acquisition of shares.
Slovenia has a tax on the sale of shares, with the tax rate depending on the holding period. As of June 5, 2023, the tax rates are as follows: 25% for a holding period from 0 to 5 years, 20% for a holding period from 5 to 10 years, and 15% for a holding period from 10 to 15 years. Slovenian taxpayers may be eligible for a partial exemption of 47.5% on gains from the disposal of equity shareholdings under certain circumstances. In Slovenia, capital gains from the sale of shares in local corporations by non-residents are not taxable.
In Slovenia, real estate owners are subject to immovable property taxes. The tax is paid yearly and is determined by the property's value. The location and kind of property determine the tax. Generally speaking, residential properties have lower taxes than commercial properties. The local government where the property is situated is in charge of collecting the tax.
Numerous credits and deductions are available in Slovenia to lower a person's tax obligation. Deductions for specific investments, charitable contributions, and personal and family expenses may fall under this category. Furthermore, certain tax incentives are available for undertakings related to job creation, environmental preservation, and research and development. Depending on the unique tax laws and circumstances, the terms and availability of tax relief may change.
Slovenia has increased the general tax allowance from 4,500 to 5,000 euros. There is also new tax relief for investment in digital and green transition. Pensioners receiving over €1,110 can get an annual allowance of €150. Amendments to the Personal Income Tax Act include an annual tax allowance for disabled taxpayers based on disability percentage.
Slovenia offers investment incentives such as favourable tax treatment, financial incentives for R&D, and a temporary corporate tax rate increase. The country also benefits from EU-supported projects and reforms to boost its economy. For more details and eligibility criteria, interested parties should refer to Slovenian government resources or consult with local authorities.
Slovenian tax residents are required to pay personal income tax on their global income as part of a comprehensive tax system for residents.
Residents may qualify for various deductions and reliefs, including special tax relief for individuals under 29 years old, leading to potential tax savings.
In the case of legal entities, corporate tax residence in Slovenia is established if they have a statutory seat or place of effective management and are subject to the country's corporate tax regulations.
Tax residents have access to public services and benefits provided by the Slovenian government.
Slovenian tax residency is determined based on factors such as registered permanent residence, habitual residence, or the center of personal and economic interests, providing clarity on one's legal status.
For Individuals (personal income tax):
Meeting the Physical Presence Requirement: You will be classified as a tax resident if you are physically present in Slovenia and fulfil the conditions of having a registered permanent residence, habitual residence, or the center of personal and economic interests in the country.
183-Day Criteria: If you spend more than 183 days in Slovenia within a calendar year, you may also be recognized as a tax resident and are liable to pay personal income tax.
Applying for Inclusion in the Tax Register: Submit an application for inclusion in the tax register (DR-02 form) before receiving any taxable income or acquiring taxable assets.
For Legal Entities:
Statutory Seat or Effective Management: A legal entity will be considered a Slovenian tax resident if its statutory (registered) seat or place of effective management is in Slovenia.
Process for Filing Taxes as a Non-Resident in Slovenia
To file taxes as a non-resident in Slovenia, follow these steps:
- Determine if you are a non-resident by reviewing criteria set by Slovenian tax authorities.
- Gather the necessary documentation, such as proof of income and bank statements.
- Complete the tax return form for non-residents, which may differ from the form used by Slovenian residents.
- Submit the form within the specified deadline to avoid penalties or fines.
- The tax authorities will review the information provided and assess the tax liability.
- If additional information is required, they may request it through formal communication.
- Once the tax liability is assessed, the non-resident will receive a tax assessment notice outlining the final tax liability and payment instructions.
The process may vary depending on individual circumstances and tax treaties between Slovenia and the home country. Seek professional advice or consult the Slovenian tax authorities for specific guidance.
Tax treaties are agreements between two or more countries to prevent double taxation and promote cooperation in tax matters. These treaties ensure that individuals and businesses are not taxed twice on the same income or profits in different countries. Tax treaties typically cover various aspects of taxation, including the determination of residency, the allocation of taxing rights, and the reduction or elimination of withholding taxes on cross-border payments.
Slovenia and Tax Treaties
Like many other countries, Slovenia has entered into tax treaties with several other nations. These tax treaties between Slovenia and other countries affect non-residents' tax rates. Non-residents are individuals or businesses that are not considered residents of Slovenia for tax purposes. The tax treaties may affect the tax rates applicable to non-residents in Slovenia, potentially reducing their tax liability or providing other benefits. The specific provisions of each tax treaty will determine the extent to which non-residents' tax rates are affected.
Impact on Non-Residents' Tax Rates
The tax treaties between Slovenia and other countries may provide reduced tax rates for non-residents on certain types of income. For example, a tax treaty may stipulate a lower withholding tax on dividends, interest, or royalties received by non-residents from Slovenia. This can benefit non-residents as it reduces the tax they have to pay on such income. Tax treaties may also provide exemptions or deductions for certain types of income or expenses incurred by non-residents. These provisions can further reduce the overall tax burden for non-residents in Slovenia.
Determining the Applicability of Tax Treaties
- The applicability of tax treaties to non-residents' tax rates in Slovenia depends on various factors, including the individual's country of residence, the type of income, and the specific provisions of the relevant tax treaty.
- Non-residents seeking to benefit from the provisions of a tax treaty should consult the treaty itself and seek professional advice to understand its implications on their tax rates.
- It is important to note that tax treaties are bilateral agreements, meaning they only apply to residents of the countries that have signed the treaty.
Non-residents from countries that do not have a tax treaty with Slovenia may be unable to avail themselves of the benefits these treaties provide.
Double-Taxation Agreement (DTA)
Slovenia has double taxation (international taxation) agreements to prevent income taxes on the same income in multiple jurisdictions. These agreements aim to eliminate or reduce double taxation for residents of Slovenia and their foreign counterparts by specifying rules for taxing different types of income. They also include provisions for providing relief from double taxation through methods such as tax credits or exemptions. It's essential for individuals and businesses engaged in cross-border activities involving Slovenia to refer to the specific double taxation agreement applicable to their situation, as terms and conditions can vary between agreements.
Investment Funds and Insurance Companies
Slovenia has a special 0% tax rate for investment funds, pension funds, and pension insurance companies under certain conditions. This tax incentive aims to promote investment activities and the growth of investment funds in the country. It's essential to stay updated on tax laws and consult with professionals for the latest information.
The compulsory pension system in Slovenia is based on a pay-as-you-go system managed by the Pension and Disability Insurance Institute of Slovenia (ZPIZ), with three pillars, including a mandatory state pension system, a voluntary pension system through private funds, and a voluntary individual retirement savings system.
The compulsory contributions for pension plans include employees in Slovenia who invest 13.5% of their gross salary in the pension funds system, while employers contribute 22.5%; self-employed individuals contribute 22.5% of their annual income.
Slovenia has a mandatory public pension and disability insurance system where employed individuals contribute. The system operates on a defined benefit pay-as-you-go basis and is supplemented by private pension schemes.
Slovenia has a comprehensive supplementary pension insurance system with mandatory and voluntary occupational plans, offering additional retirement income beyond the state pension. Companies like Prva Group provide compulsory and voluntary plans, with consideration for contribution rates, investment strategies, and payout options for individuals interested in these plans.
Non-profit activities in Slovenia, such as those conducted by institutes, associations, and foundations, are generally exempt from corporate income tax. Profits from these activities are not taxed, creating a favourable environment for organizations involved in charitable, scientific, educational, and similar pursuits. This exemption aligns with Slovenian tax regulations and promotes social welfare and community development through support for non-profit entities. However, it's important to note that there may be restrictions on the range of activities allowed for non-profit entities, such as limitations on the number of activities an institute can undertake upon registration.
In conclusion, navigating the intricacies of business taxation in Slovenia is a fundamental aspect of operating a successful business in the country. By understanding the business tax, income taxes, and other relevant tax regulations, entrepreneurs and business owners can make informed decisions and ensure compliance with Slovenian tax laws.
Do note that, in general, capital tax and corporate tax are separate taxes with different purposes and calculations. However, there may be instances where certain aspects of capital tax and corporate tax overlap or are interconnected in the tax system of a particular country. Do consult a professional (they can help both a natural person and a foreign company).
Armed with the right information, you can now be ready to follow your dreams. Good luck!
Who is a taxable person?
In Slovenia, taxable persons include legal persons and legal entities who must register for tax purposes and pay taxes on their revenue, profits, or other sources of revenue, with specific obligations and rates varying based on income type and taxpayer's status, including potential taxation for non-residents with Slovenian-source income.
What is a tax period?
In Slovenia, taxpayers must report and pay their taxes for a specific period, usually annually. Still, some taxes may have different reporting and payment requirements, such as quarterly or monthly.
Can a tax resident get health insurance?
Yes, a tax resident in Slovenia can get insurance. Health insurance is mandatory for all residents of Slovenia, including tax residents. The Slovenian healthcare system is based on a social health insurance model, where individuals contribute to the system through social security contributions and receive healthcare services based on their needs.