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SLOVENIA
Taxation of Nonresident Entities
Corporate Assessments and Payments
Personal Assessments and Payments
Since its formation in 1991, Slovenia has made much progress toward transforming its
socialist economy into one based on market principles. Located in south central Europe,
Slovenia is the most affluent of the former Yugoslav republics. The country boasts a
well-educated work force and a well-developed infrastructure.
Deloitte & Touche, the Deloitte Touche Tohmatsu International member firm in Slovenia,
has its office in Ljubljana. Deloitte & Touche provides accounting, auditing, tax, and
management consulting services.
Auditing Services: Alenka Podbevsek
International Services: Maja Nosan
Management Consulting Services: Maja Nosan
Tax Services: Alenka Podbevsek or Maja Nosan
Telephone: +386 (61) 131.81.11
Telecopier: +386 (61) 131.63.23
Forms of Business Organization. The following forms of business organization may be
established in Slovenia:
All of these entities are considered legal persons. Sole proprietorships may also be
formed. Only joint stock companies and limited liability companies are treated as separate
entities for tax purposes. In the case of general partnerships, the tax base of the entity is
computed and then allocated among the partners according to their interests in the
partnership. Profit shares of general partners in a limited partnership are subject to the
same tax treatment, but limited partners are taxed at the level of the partnership.
Furthermore, a 25% tax applies to distributions to limited partners.
Foreigners may form legal entities. Permanent establishments (subsidiaries) may also be
formed. In addition, many foreign investments are made through joint ventures with
Slovenian investors. In such joint ventures, the foreign investor participates in the
management of the Slovenian entity and receives a share of the entity's profits.
Exchange Controls. The Slovenian tolar (SlT) is internally convertible. Slovenian
residents, including foreigners that conduct activities in Slovenia, exchange currency at
authorized banks or in exchange offices. Slovenian residents can have accounts
denominated in Slovenian or foreign currency.
Profits may be repatriated freely. A permit must be obtained to repatriate capital.
Local Participation or Management Requirements. The director or procurator of a
business entity must be a citizen of Slovenia. If the executive management has several
members, the majority of those members must be citizens of Slovenia.
Investment Incentives. As of 1 January 1994, up to 20% of the amount reinvested in fixed
assets (except for cars used for personal purposes) and long-term intangible assets is
deductible from the investor's taxable income, provided that the amount does not exceed the
tax base.
Also with effect from 1 January 1994, an entity that hires a person who is just entering the
work force, a previously unemployed person, or a trainee for a position can deduct 30% of
the gross salary earned by such a person during the first twelve months of employment from
its taxable income. The employment must be for an unlimited period or for a fixed period
of at least two years. An entity that hires a disabled person is also eligible for the 30%
deduction. In this case, the deduction is available as long as the disabled person is
employed by the entity.
Both foreigners and Slovenians are eligible for these incentives.
Resident entities are subject to corporate income tax on their worldwide income. An entity
is considered resident if it is headquartered in Slovenia.
Corporate Income Tax Rate. The present rate of corporate income tax is 30%, but the
rate would be lowered to 25% under proposed legislation currently under consideration by
Parliament. Taxable income may be reduced by 20% of sums re-invested in specified
assets. Click for information on investment incentives. Thus, the effective tax rate in such a
case would be 24% (20% if the corporate income tax rate is lowered to 25%).
Taxable Income. Taxable income is gross income less expenses incurred in earning that
income.
Inventory valuation. Inventories can be valued using the first-in, first-out method; the
last-in, first-out method; or the weighted average method. The method chosen should be
used consistently; a taxpayer that changes methods must justify the change to the tax
authorities.
Dividend income. Distributions made from profits that were subject to tax at the normal
corporate income tax rate are not included in the recipient's taxable income. In other cases,
dividends are taxable to the recipient.
A withholding tax of 25% is levied on payments of dividends to residents. (A withholding
tax of 15% is levied on payments of dividends to nonresidents.)
Capital gains. Capital gains are included in taxable income and charged at the normal rate
of corporate income tax.
Deductions. In general, expenses must be related to the earning of taxable income to be
deductible.
Depreciation. Depreciation on fixed assets and intangible long-term assets is deductible if
it does not exceed set rates. The straight-line method must be used. Rates include 5% to
10% for buildings and other structures, 33.3% for most machinery and equipment
(including vehicles), 50% for computer equipment, and 20% for goodwill.
Interest. Interest is deductible to the extent that it does not exceed the average interbank
interest rate.
Investment reserve. A taxpayer can create a reserve for future investments in Slovenia.
Up to one-tenth of taxable income may be contributed to this reserve annually. Sums
contributed are deductible. These sums must be used after four years, or they become
taxable.
Other deductions. Approved charitable donations may be deducted, subject to limitations.
Only 70% of entertainment expenses are deductible.
Tax Treatment of Losses. Losses may be carried forward for five years. No carryback is
allowed.
Taxation of Nonresident Entities
Nonresident entities are taxed only on income derived from activities carried out in
Slovenia. The rules for calculating taxable income are the same as those that apply to
resident entities. The rate of tax (currently 30%) is also the same. A withholding tax of
15% applies to dividends paid to nonresidents. In addition, foreigners are subject to a 5%
tax on international transportation if they earn income from conducting transportation
activities in Slovenia.
Slovenia permits groups to file consolidated returns. The parent company must hold at least
90% of the consolidated subsidiaries' capital. All companies included in the consolidated
return must be residents of Slovenia.
Corporate Assessments and Payments
The tax year is the calendar year to 31 December. A return for a tax year must be filed by
31 March of the following year (15 April for a consolidated return). Fines are levied for
failure to file a return.
In general, the tax system relies on self-assessment. With its annual return, a company must
submit a calculation of its taxable income. The tax authorities can adjust the tax liability
shown by the company if they determine that this liability was calculated incorrectly.
Heavy penalties are levied for false information on a tax return or if tax evasion is
suspected.
Advance payments must be made once a month during the tax year. These payments are
based on the company's taxable income in the previous year. After submitting its annual
return, a company has five days in which to pay any balance that is due. If the tax
authorities later adjust the tax liability, the company must pay the amount owing, with
interest, within thirty days of the date on which the adjustment was issued. A refund can be
obtained if advance payments exceed the actual tax liability.
Resident individuals are subject to income tax on their world-wide income. Nonresident
individuals are subject to income tax on Slovenian-source income. An individual is
regarded as resident if his or her permanent residence is in Slovenia or if he or she has a
temporary or permanent domicile there. An individual who stays in Slovenia for at least
183 consecutive days in a calendar year is regarded as temporarily domiciled there.
Treatment of Families. Slovenia does not provide for the joint taxation of families. All
individuals are taxed separately.
Tax Rates. Income tax is chargeable annually at progressive rates. In the case of personal
income (income from a salary, a pension, or any other gross receipt of an employee), the
employer pays advance tax on behalf of the employee. The tax charged will later be
credited against the employee's annual income tax liability. Tax rates are defined on the
basis of the average salary in Slovenia in the previous month:
Advance taxes are payable on other types of income also, at varying rates. The tax rate on
income derived from contractual work and from providing different services is 25%.
Taxable Income. Income tax is paid on personal income, income from agriculture, income
from various activities, investment income, and income from property and property rights.
Personal income. Personal income consists of salary income, pension income, or any other
gross receipts of an employee. Many employer-paid fringe benefits are included in
personal income, including the value of gifts, accommodations, or cars used for personal
purposes.
Income from various activities. Income from various activities includes income derived
from business and professions. Income from a sole proprietorship or from a general
partnership (or income derived by a general partner in a limited partnership) would fall
into this category.
Income from property and property rights. Income from property and property rights
includes rental income, income from profit participations, interest income, and royalty
income.
Capital gains. Gains on sales of real estate are taxable. From 1 January 1997, gains on
sales of securities will also be taxable.
Deductions and Reliefs. An amount equal to 11% of the average annual wage in Slovenia
may be deducted from the aggregate income tax base. In addition, specified expenses may
be deducted from the income tax base up to a maximum of 3% of the tax base, including:
Special concessions are also offered for the support of family members. The tax base is
reduced by 10% of the average annual wage of an employee in Slovenia for the first child
or dependent family member. This concession is increased by five percentage points for
each subsequent child or dependent.
Taxpayers who employ people may be eligible for the incentives for employers.
Personal Assessments and Payments
The tax year is the calendar year to 31 December. Tax returns must be filed by 31 March of
the following year. Some individuals do not have to submit returns, such as taxpayers
whose income is less than 11% of the average wage in Slovenia.
Tax is assessed by the tax authorities on the basis of information submitted by the taxpayer.
Advance payments are made during the tax year. A taxpayer can obtain a refund if the total
amount of the advance payments is greater than the annual tax liability. If the advance
payments do not meet the annual tax liability, the taxpayer must remit the difference to the
tax authorities within thirty days of the date on which an assessment was issued.
Basic Rates. Slovenia levies a withholding tax on dividends. The rate is 25% for residents
and 15% for nonresidents.
Slovenia also levies a withholding tax on royalties. The rate is 25% for resident and
nonresident individuals. The tax does not apply to legal entities.
No withholding tax is imposed at present on payments of interest.
Relief Under Double Tax Treaties. The former Yugoslavia concluded a number of
double tax treaties with other nations. Some of these treaties may still apply to Slovenia as
a successor state. The status of specific treaties should be checked in advance.
Sales Tax. Sales tax is levied on retail sales of goods and services and on imports. The tax
burden falls on the final consumer. Various rates may apply.
Sales tax must generally be paid to the tax authorities in advance, on the fifth and twentieth
days of the month, based on sales in the previous period. However, persons that do not
have regular sales tax obligations pay sales tax within five days after the tax liability was
incurred.
Legislation replacing sales tax with a value added tax is expected to be introduced into
Parliament during 1995. If such legislation passes through Parliament as expected, the new
value added tax will come into effect in 1996.
Social Security Contributions. Social security contributions are payable by employees;
private individuals; individuals who own enterprises; individuals who own, have the right
to use, or are beneficiaries of farmlands and forests; and individuals and entities employing
workers.
The tax base is the individual's gross employment income.
Tax on Temporary Work. Persons that hire individuals for temporary work are subject to
tax at 25% of the gross amount paid.
Inheritance and Gift Tax. Inheritances and gifts are taxable on the beneficiary. The tax
base is the market value of the inheritance or gift. Rates vary depending on the value of the
inheritance or gift and the degree of relationship between the beneficiary and the deceased
or donor. For example, a tax of just SlT 5 applies to gifts or inheritances with a market
value of up to SlT 1,164,822 when the beneficiary is a parent, brother, sister, nephew, or
niece of the deceased or donor. A rate as high as 30% applies to gifts and inheritances with
a market value of over SlT 33,741,163 when the beneficiary is not a relative of the
deceased or donor. Spouses and children are exempt from the tax.
Property Taxes. Property tax is levied on the value of buildings as determined by the
government. Progressive rates apply, no higher than 1.5%. Some buildings are exempt.
Property tax also applies to ships.
A tax on the transfer of immovable property is levied at 2% of the purchase price.
Customs and Excise Duties. Customs duties apply to most imports. Rates generally vary
from 0% to 25% of the customs value of goods. Special excise duties apply to fuel,
tobacco, and alcohol.
Miscellaneous Taxes. Taxes are also levied on lottery winnings and gambling.
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