Taxing authority and tax law
Tax authority: Davčna uprava Republike Slovenije (DURS)
Tax law:
- Corporate Income Tax Act (Zakon o davku od dohodkov pravnih oseb)
- Regulation on Transfer Prices (Pravilnik o transfernih cenah)
- Regulation on the Acknowledged Interest Rate (Pravilnik o priznani obrestni meri)
- Tax Procedure Act (Zakon o davčnem postopku)
Relevant regulations and rulings
Articles 16 and 17 of the Corporate Income Tax Act provide the definitions of related parties and general requirements they need to comply with. The latter are explained in more detail in the Regulation on Transfer Prices.
Article 18 of the Corporate Income Tax Act sets the basis for documentation requirements which are then elaborated in the Tax Procedure Act.
Article 19 of the Corporate Income Tax Act provides the general rules in relation to acknowledged interest rate on loans between related parties. The rules are defined in more detail in the Regulation on the Acknowledged Interest Rate. The acknowledged interest rate rules determine a safe harbor for loans between related parties.
OECD guidelines treatment
As the Slovenian transfer pricing regulations follow the principles of the OECD Transfer Pricing Guidelines, the tax authority, where there is no guidance in Slovenian legislation, also consider them in their tax audits.
Priorities/pricing methods
All five standard methods are acceptable, however the CUP and in the next stage also resale price method and cost plus method are preferred. If none of the specifically identified methods are suitable for determining the arm’s length price, the taxpayer is permitted to adopt a suitable combination of such specified methods.
Transfer pricing penalties
A taxpayer may be fined up to EUR 30,000 if the transfer pricing documentation is not submitted in the prescribed manner; additionally, the individual responsible for the preparation of the documentation on behalf of the taxpayer may also be fined up to EUR 4,000. In case of a tax adjustment, late payment interest and penalties for offences may be charged. If the additional tax exceeds EUR 5,000 the tax offence is qualified as a severe tax offence and fines in the amount of 45% of the additional tax may be levied.
Penalty relief
If the tax authority is able to conclude that the taxable person has cooperated well during the tax audit, fines are usually not levied.
Documentation requirements
The Slovenian transfer pricing documentation requirements are based on the master file concept. Under this concept, as recommended by the European Community (EC) Council as well as the EU Joint Transfer Pricing Forum, the transfer pricing documentation should consist of a master file and a country-specific file. Disclosure of any related parties transaction amounts should be provided with the tax return when it is filed with the tax authority.
The local legislation sets the following documentation requirements:
The Master File
The master file normally includes documentation common to the whole group. It may be prepared by the group’s headquarters and should include a general description of the way business is conducted by the group companies. The file should include the following:
- a description of the taxable person
- a description of the global organizational structure of the group
- an explanation of the type of connections between the companies in the group
- an explanation of the method used in the determination of transfer prices
- a description of the business activities and business strategies ( including any general economic and other factors, an assessment of the competitive environment, etc.)
Country specific documentation
As in the Master file, the local documentation should describe the company’s course of business but on a local level. The country-specific documentation should normally include:
- a description of transactions between affiliated persons
- a functional analysis determining the main functions performed and risks undertaken by the tax payer and outlining which adjustments may need to be made in relation to comparable situations
- a description of any comparable search performed
- a description of business strategies
- a description of goods/services transferred/rendered
- a description of the method applied for establishing the arm’s length price
- any other information that might be relevant from the transfer pricing perspective should also be included in the documentation
Documentation deadlines
The documentation should be provided to the tax authority upon its request, usually made in the course of a tax inspection. Wherever any such documentation proves impossible to submit immediately, a deadline extension of up to 90 days (depending on the extent and complexity of the information) may be granted. If the master file is not kept in the Slovenian language, it must be translated, before submission, at the tax authority’s request. An additional period of 60 days may also be granted for the translation of the Master file.
Statute of limitations on transfer pricing assessments
The statute of limitation on transfer pricing assessments is five years. The transfer pricing documentation must be archived for a period of 10 years.
Return disclosures/related-party disclosures
Related-party transactions are reported in the scope of the annual corporate income tax return.
Audit risk/transfer pricing scrutiny
High risk
The tax authority mainly initiates a transfer pricing audit where a Slovenian taxable person is part of a multinational group. The following transactions are currently in the focus of the tax authority:
- Intra-group services
- Intangible goods (e.g., royalties and licensing)
- Financial transactions (e.g., loans and cash-pooling)
Additional risk factors are the profitability of the local taxpayer, business restructurings, the nature and volume of related-party transactions, transfer pricing issues identified in previous tax audits, information available from media.
APA opportunity
The possibility of applying for APAs is not available in Slovenia.
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