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  • Service: Tax, International Executive Services
  • Type: Regulatory update, Survey report
  • Date: 2/20/2014

Income Tax 

Taxation of international executives
Tax returns and compliance
Tax rates
Residence rules
Termination of residence
Economic employer approach
Types of taxable compensation
Tax-exempt income
Expatriate concessions
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample tax calculation


Income tax information based on Slovenian Personal Income Tax Act (Official Gazette of the Republic of Slovenia, No. 117/06 with subsequent amendments and supplements).


Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?


31 July. From 2008 on, the tax authorities are obliged to generate an annual tax assessment from their own information, to assess the tax and submit the assessment to the taxpayer. If the tax assessment has not been submitted to the taxpayer by 15 June, the taxpayer is obliged to file an annual income tax return by the end of July. The tax liability of the taxpayer will be calculated by the tax authorities (the tax assessment shall be issued by 31 October of the same year).


What is the tax year-end?


The tax year is a calendar year.


What are the compliance requirements for tax returns in Slovenia?


Residents


Advance tax payments are usually made on a monthly basis, these are withheld by employers when the salary is paid. If a resident receives salary from a foreign entity, tax advances are paid on the basis of a tax return.The tax assessment is issued by the tax authorities in 15 days following the receipt of the tax return.


The annual tax declaration has to be filed by 31 July of the current year (if the preliminary tax assessment is not received by 15 June) for the previous year. The tax authorities have to issue a tax assessment by 31 October of the same year.


Non-residents


Non-residents are liable to income tax on income derived in Slovenia. Tax payments are made on the basis of the tax return filed with the tax authorities or the tax is withheld by the payer of income. The tax paid is considered as a final tax.


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Tax rates

What are the current income tax rates for residents and non-residents in Slovenia?


Residents and non-residents


Income tax table for 2014


Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From EUR To EUR EUR Percent
0.00 8,021.34 0.00 16
8,021.34 18,960.28 1,283.41 27
18,960.28 70,907.20 4,236.92 41
Over 70,907.20 - 25,535.16 50

The tax rates for residents and non-residents are the same.


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Residence rules

For the purposes of taxation, how is an individual defined as a resident of Slovenia?


An individual is deemed to be a resident of Slovenia if his/her officially registered permanent address, habitual place or the center of his/her personal and economic interests is in Slovenia. In addition, any person who has been present in Slovenia in a tax year for more than 183 days in the aggregate is deemed to be a resident in that tax year.


Article 18 of the Act defines the following sources of income that are taken into account for the personal income tax return:


  • income from employment
  • income from basic agriculture and forestry
  • income from business activity
  • income from capital (dividends, interest, and capital gains)
  • income from rents and royalties
  • other income accruing to persons liable to tax in Slovenia.

During the year tax is paid as advance payments for each of the income mentioned above. These advance payments are taken into account when calculating the final tax obligation in the annual tax return (except of income from capital, rents and income from business activity, whereby the taxable basis is determined with standard costs).


Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.


No.


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Termination of residence

Are there any tax compliance requirements when leaving Slovenia?


Personal income tax return has to be filed prior to departure from Slovenia if a person is obliged to file such tax return for the current year.


What if the assignee enters the country before their assignment begins?


Applicable in case of tax residence status if it is determined on the basis of presence in Slovenia (more than 183 days in a calendar year).


What if the assignee comes back for a trip after residency has terminated?


In principle, it has no tax implications.


Communication between immigration and taxation authorities


Do the immigration authorities in Slovenia provide information to the local taxation authorities regarding when a person enters or leaves Slovenia?


Yes. In principle, data from civil register regarding temporary residence (address) registered in Slovenia are available to the tax authorities.


Filing requirements


Will an assignee have a filing requirement in the host country after they leave the country and repatriate?


An assignee is obliged to file the annual tax return prior to departure from Slovenia. If the tax return is filed prior to departure, the assignee has no further obligations, unless he receives additional payment in the future related to his assignment in Slovenia i.e. payment related to his working days in Slovenia.


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Economic employer approach1

Do the taxation authorities in Slovenia adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Slovenia considering the adoption of this interpretation of economic employer in the future?


In principle, yes.


De minimus number of days2


Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?


No.


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Types of taxable compensation

What categories are subject to income tax in general situations?


As a rule, it can be stated that all types of compensation and benefits-in-kind received by an employee for services rendered, constitute taxable income. These include, but are not limited to, the following:


  • the use of a company car for private purposes
  • housing allowances
  • the benefit from a loan at an interest rate lower than the market rate or with no interest
  • insurance premiums and similar payments
  • educational expenses not related to employment
  • a discount granted for goods or services
  • the right to purchase shares (stock options).

Benefits in kind include any advantage provided by an employer or any other person (related party) to an employee or his/her family member. Minor privileges (not exceeding EUR 13 per month) are not considered as benefits in kind unless provided regularly.


In general, the taxable value of a benefit-in-kind is its comparable market price less any amount paid by the recipient. If the comparable price is not possible to determine, the cost price is used. There are specific rules perscribed for determination of the benefit for private usage of the company car.


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Tax-exempt income

Are there any areas of income that are exempt from taxation in Slovenia? If so, please provide a general definition of these areas.


Severance payments received by a taxpayer upon retirement or terminations on account of business reason or due to incapability as defined by the labor legislation are tax-exempt up to the limit/amount determined in the governmental decree or in the law.


Jubilee awards and solidarity help payments are also tax-exempt up to the limit/amount determined in the governmental decree.


Reimbursements of costs in connection with employment are tax-exempt if they are paid up to the certain amount, which is determined by the governmental decree. Such costs include among others:


  • meal allowances during the work
  • costs of transport to and from work
  • daily allowances in relation to business trips
  • costs of transport and accommodation on business trips
  • separate living compensation (separation allowance).

Severance payments


Severance payment at retirement: EUR4,063.


Severance payment because of the cancellation of the employment contract due to business reasons or due to incapability: at most 10 average Slovenian monthly salaries, i.e. EUR 16,171.90 (average Slovenian monthly gross salary for November 2013: EUR 1,617.19).


Severance payment for termination of the fixed-term employment contract: at most 3 average Slovenian monthly salaries, i.e. EUR 4,851.57 (average Slovenian monthly gross salary for November 2013: EUR 1,617.19).


Jubilee bonus and solidarity help


Jubilee awards


  • For 10 years of service: EUR460.
  • For 20 years of service: EUR689.
  • For 30 years of service: EUR919.
  • For 40 years of service: EUR919.

Solidarity help


  • Death of the employee or his family member: EUR3,443.
  • Disabled persons, longer illness, elementary accident and fire: EUR1,252.

Meal allowances


  • EUR6.12 per day (if the employee is present at work at least four hours).
  • Additionally, EUR0.76 per hour from eight hours of work (if employee is present at work at least ten hours).

Costs of transportation


  • Costs of public transport or EUR 0.18 per full kilometre (if the employee cannot use public transport due to justifiable reasons).

Daily allowances


For business trips in Slovenia, the following daily allowances apply.


  • Six to eight hours: EUR7.45.
  • Eight to twelve hours: EUR 10.68 (if breakfast included, the allowance is reduced for 15 percent).
  • Twelve to twentyfour hours: EUR 21.39 (if breakfast included, the allowance is reduced for 10 percent).

For business trips abroad (allowances are determined in a separate regulation for each country), the following daily allowances apply.


  • Six to eight hours: 25 percent of the allowance.
  • Eight to fourteen hours: 75 percent of the allowance (if breakfast included, 75 percent minus 15 percent).
  • Fourteen to twentyfour hours: 100 percent of the allowance (if breakfast included, 100 percent minus 10 percent).

Costs of transportation and accommodations on business trips


  • Transportation: refund of costs raised based on the invoice or EUR 0.37 per kilometre for the use of own car for business purposes.
  • Accommodation: refund of costs raised based on the invoice.

Separate living compensation


EUR334 per month.


Taxable income is income exceeding the above stated figures.


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Expatriate concessions

Are there any concessions made for expatriates in Slovenia?


Expatriates having income generated in Slovenia can deduct expenses incurred in generating that income as indicated in the section Tax Exempt Income.


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Salary earned from working abroad

Is salary earned from working abroad taxed in Slovenia? If so, how?


Foreign employment income the resident of Slovenia receives for working abroad is taxable in Slovenia.


According to the tax treaty, if the income is taxed abroad, tax can be credited in Slovenia or the income can be exempted.


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Taxation of investment income and capital gains

Are investment income and capital gains taxed in Slovenia? If so, how?


Capital gains are taxable at the rate of 25 percent for natural persons (residents or non-residents).


Capital gains are taxable given the following conditions are fulfilled:


  • capital gains derived from the sale of immovable property prior to expiration of the 20-year period from the purchase of this immovable property
  • capital gains derived from the sale of securities and other shares in capital prior to the expiration of the 20-year period from the purchase of these securities/shares.

Capital gains are taxed at a 25 percent tax rate. The tax rate is reduced each five years of holding period (25 percent for the first 5 years of holding period; 15 percent for holding period 5 to 10 years, 10 percent for holding period 10 to 15 years, 5 percent for holding period 15 to 20 years, 0 percent after 20 years holding period) Consequently, any gains are exempt after a 20-year holding period.


Capital gains derived from the disposal of immovable property acquired before 1 January 2002 are not taxable. Gains on immovable property, which was used as a permanent home of the taxpayer for at least three years preceding the disposal are tax exempt.


The tax on capital gains is paid on the basis of the tax return filed with the tax authorities (by 28 February for the previous year) who issue the tax assessment. The tax paid is considered as final.


Dividends, interest, and rental income


Dividends and other profit distributions are taxed at 25 percent final withholding tax.


Interest is taxed at a 25 percent rate withholding tax or by assessment. However, interest on bank deposits paid by a bank situated in Slovenia or another EU Member State is taxable only for the part that exceeds EUR1,000. The tax is considered as final tax.


As of 1 January 2013 rental income is taxed at a flat tax rate of 25 percent and is not added to other taxable income like in previous years. The tax is considered as final tax.In case of rental income, the taxable income for renting out immovable property is reduced by the actual maintenance costs proved by invoices. Instead of calculating the actual costs, a lump-sum deduction of 10 percent of the income received can be claimed.


Gains from stock option exercises


The difference between the actual stock option price and the market value of shares is taxable at the moment of exercise.The income is considered as benefit in kind, which is taxable as employment income. The stock option income is also subject to social security contributions.


Residency status Taxable at:
Grant Vest Exercise
Resident N N Y
Non-resident N N Y*
Other (if applicable) N/A N/A N/A

* Only if the employment is exercised within the territory of Slovenia when exercise of stock options occurs.


Foreign exchange gains and losses


In general, foreign exchange gains and losses are considered when determining taxable basis. However, this is not applicable if securities and shares were acquired before 1 January 2003 (in this case, market value as of 1 January 2006 is considered).


Principal residence gains and losses


Principal residence gains are not taxable if the taxpayer has owned it and actually resided there for three years before the disposal.


Capital losses


Capital losses can be offset against capital gains. However, in certain cases, capital losses do not decrease taxable basis (investment coupons, debt securities, and shares from venture capital investments).


Personal use items


Not taxable.


Gifts


Individuals receiving an inheritance or a gift of a value of EUR 5,000 or more are liable to pay inheritance and gift tax. The threshold does not apply for immovable property and property rights. The spouse and all direct descendants are exempt.


The taxable basis for movable property is the market value, reduced by the amount of EUR5,000. The taxable base for immovable property is 80 percent of its market value. The tax is levied at progressive rates (the progression depends on the relationship between the donor and the beneficiary and on the value of the gift).


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Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Slovenia? If so, please discuss?


Not applicable.


Pre-CGT assets


Not applicable.


Deemed disposal and acquisition


Not applicable.


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General deductions from income

What are the general deductions from income allowed in Slovenia?


For determination of taxable income, the following annual deductions apply in year 2014.


EUR
Basic allowance (total annual income up to EUR10,866.37) 6,519.82
Basic allowance (total annual income from EUR10,866.37to EUR12,570.89) 4,418.64
Basic allowance (total annual income more than EUR 12,570.89) 3,302.70
Disabled persons with 100 percent disability 17,658.84
For the first dependent child or dependent family member 2,436.92
For the second supported child 2,649.24
For the third supported child 4,418.54
For the fourth supported child 6,187.85
For the fifth supported child 7,957.14
Child with a mild, moderate or severe physical or mental impairment 8,830.00
Student allowance 2,477.03
Additional pension insurance 2,819.09

Residents from other EU/EEA Member States who can file an annual tax return in Slovenia (if more than 90 percent of their income is taxable in Slovenia and the income received/taxable in Slovenia is exempt in his/her residence country) may claim the basic allowance, the relief for supporting family members, allowance for additional pension insurance etc.


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Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Slovenia?


In Slovenia employment agreements are usually concluded in gross amounts. In this case, the employer is required to withhold appropriate taxes and social security contributions when the income is paid. If the income is agreed in net amounts, it is grossed-up for the purpose of taxation. Expatriates usually have net agreements and the income should be declared to tax authorities in the tax return (as the income is paid by a foreign entity). According to the explanation of the tax authorities, if the tax liability is paid by the foreign employer, the employee should report his gross income in the prepayment tax return (the gross income consists of the following: net income + employee's social security contributions and estimated Slovene tax liability).


According to Slovene legislation, residents are entitled to deduct taxes paid abroad from their tax liability in Slovenia. However, such deduction may not exceed lower of the following:


  • tax on foreign income, which was final and actually paid,
  • tax, which would be due on that foreign income, if deduction was not possible.

If Slovenia has concluded double tax treaty with respective country, provisions of that treaty should also be considered.


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Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Slovenia? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.


Pay-as-you-go (PAYG) withholding


Please see previous mention.


PAYG installments


When the income is paid, social security contributions are deducted (contributions are shared by employers and employees).


When are estimates/prepayments/withholding of tax due in Slovenia? For example, monthly, annually, both, and so on.


In general, when income is paid by the Slovene entity, tax is withheld at payment of income.


When income is paid by the foreign entity, the tax return for employment income should be filed in 7 days following the receipt of income. Another tax return should be filed if income varies for more than 10 percent, otherwise, the tax authorities may assess the tax advances for the whole year.


Interest and dividends should be reported quarterly, rental income and capital gains annually.


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Relief for foreign taxes

Is there any Relief for Foreign Taxes in Slovenia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?


In all instances where the Act clearly determines that the income from a foreign source is taxable in Slovenia, the Act also enables that taxable person to take into account thetax paid abroad.


If Slovenia has concluded double tax treaty with respective country, provisions of that treaty should also be considered.


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General tax credits

What are the general tax credits that may be claimed in Slovenia? Please list below.


According to the tax treaties, tax paid abroad can be credited in Slovenia. However, the tax so credited cannot exceed the lower of the following:


  • the amount of foreign tax that was final and actually paid
  • the amount of tax that would be due on foreign income if a tax credit was not possible.

In the absence of a tax treaty, foreign tax is credited against the final tax liability according to the Act, however up to the amount of foreign tax actually paid or up to the amount of tax that would be due on foreign income. No other tax credits are available in Slovenia.


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Sample tax calculation3

This calculation assumes a married taxpayer resident in Slovenia with two children whose three-year assignment begins 1 January 2012 and ends 31 December 2014. The taxpayer’s base salary is USD 100,000 and the calculation covers three years.


2012
USD
2013
USD
2014
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Other assumptions


  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Slovenia.
  • The company car is used for business and private purposes and originally cost USD 50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income


Year ended 2012
EUR
2013
EUR
2014
EUR
Days in Slovenia during year 366 365 365
Earned income subject to income tax
Salary 77,833.13 75,295.53 73,265.44
Bonus 15,566.63 15,059.11 14,653.09
Cost-of-living allowance 7,783.31 7,529.55 7,326.54
Net housing allowance 9,339.98 9,035.46 8,791.85
Company car 4,669.99 4,517.73 4,395.93
Moving expense reimbursement 15,566.63 0.00 14,653.09
Home leave 0.00 3,764.78 0.00
Education allowance 2,334.99 2,258.87 2,197.96
Total earned income 133,094.65 117,461.03 125,283.90
Other income - interest 4,669.99 4,517.73 4,395.93
Total income 137,764.63 121,978.77 129,679.83
Deductions 10,582.39 10,825.78 10,825.78
Total taxable income 127,182.24 111,152.99 118,854.05

Calculation of tax liability


2012
EUR
2013
EUR
2014
EUR
Taxable income as above 122,512.26 106,635.25 114,458.12
Slovene tax thereon 47,172.22 43,399.19 47,310.62
Less 0.00 0.00 0.00
Domestic tax rebates (dependent spouse rebate) 0.00 0.00 0.00
Foreign tax credits 0.00 0.00 0.00
Total Slovene tax on earned income 47,172.22 43,399.19 47,310.62

Calculation of tax liability on interest income


2012
EUR
2013
EUR
2014
EUR
Taxable income as above 4,669.99 4,517.73 4,395.93
Slovene tax thereon 934.00 1,129.43 1,098.98
Foreign tax credits 0.00 0.00 0.00
Total Slovene tax on interest income 934.00 1,129.43 1,098.98
Total Slovene tax 48,106.22 44,528.62 48,409.60

  • For year 2012: Exchange rate EUR1 = USD1.2848 (average annual).
  • For year 2013: Exchange rate EUR1 = USD1.3281 (average annual).
  • For year 2014: Exchange rate EUR1 = USD1.3649 (as of 28 January 2014).
  • A spouse is considered as dependent family member (i.e. has no own income)
  • Benefit for car: For the calculation of the benefit the information of the purchase value of a car and date of purchase is required. Under the assumption that the employee makes more than 500 private kilometers monthly and that the employer pays for the fuel also for private use the car benefit in the first year is 1.875 percent of the purchase value. In the second, third and fourth year the purchase value is reduced by 15 percent each year. If car benefit is calculated according to domestic rules, the car benefit in the first year is USD11,250, in the second year USD9,563 and in the third year USD7,875.

Interest income is not included in the calculation as it is taxed at flat rate of 20 percent i.e. at the rate of 25 percent in 2013 and 2014. If interest income is received by domestic and EU member states’ banks and savings institutions tax exempt income amounts to EUR 1,000. The exemption is not considered in the calculation.




1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.


2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the economic employer approach.


3Sample calculation generated by KPMG poslovno svetovanje, d.o.o., the Slovene member firm of KPMG International, based on the Act and tax rates applicable for 2012, 2013 and 2014.



© 2014 KPMG poslovno svetovanje, d.o.o., a Slovenian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

 

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Taxation of international executives