Global Tax Alert | 8 July 2013

Slovenian Government publishes proposal to amend Corporate Income Tax Act including thin capitalization rules

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Recently, the Slovenian Government published a proposal to amend its Corporate Income Tax Act. The amendments include changes to the thin capitalization rules. Under the proposal, the thin capitalization rules will cover loans from “sister companies.” In addition, the calculation/definition of equity will include accumulated losses.

Thin capitalization amendments

Loans from “sister companies” will be covered by the thin capitalization rules

Currently, interest on loans from shareholders, who directly or indirectly at any time during a tax year hold at least 25% of capital or voting rights of the taxable person is deductible only if it is attributable to the part of the loan not exceeding debt-to-equity ratio 4:1. Until now, loans from “sister companies” were not covered by the thin capitalization rules. The Slovenian Government proposes to include this category of persons in the definition of qualified shareholders.

Calculation/definition of equity will take into account also accumulated losses

The calculation/definition of equity for thin capitalization purposes will be aligned with the definition of equity for accounting purposes (i.e., it will take into account accumulated losses). Until now, only paid-in capital, retained earnings and reserves were taken into account. This change should consequently reduce the level of allowed interest deductions due to thin capitalization limitations.

Effective date

Changes to Slovenia's Corporate Income Tax Act should take effect as from 1 January 2014 onwards, if adopted by the Parliament. Future Alerts will cover legislative developments.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Slovenia), Ljubljana
  • Lucijan Klemencic
    +386 1 583 17 21
Ernst & Young LLP, Eastern European Business Group, New York
  • Miklos Santa
    +1 212 773 1395
  • Vladimir Sopkuliak
    +1 212 773 4144

EYG no. CM3619