CHANGES AND AMENDMENDS OF PERSONAL INCOME TAX ACT AND FINANCIAL ADMINISTRATION ACT
On 11 March 2022, the Slovenian Parliament confirmed proposed changes and amendments to the Personal Income Tax Act (the “Act”). It is not yet known if the Act will become effective already from 1 January 2022, as the Slovenian Parliament has not yet decided on this. Accordingly, we will inform you when the Act will become effective.
We summarize the main changes and amendments of the Act below. We note that the changes have not yet been published in Official Gazzette and that summary below is prepared based on publicly available information and documents.
Company car – benefit in kind
In the case of a business electric motor vehicle used for private purposes, the benefit in kind is equal to zero.
The current regulation stipulated that in the tax base of an employee who uses an electric motor vehicle for private purposes is 0.3% of the purchase value of the vehicle per month, if the value at the time of acquisition of the vehicle, including VAT, does not exceed 60 thousand euros. If the purchase value of the vehicle was higher, the excess part of the purchase value of the employee's tax base was determined as if it were a normal motor vehicle.
Part of the salary related to business performance
According to the changes in the Act, the employer will be able to pay part of the salary for business performance in kind.
The conditions for who is entitled to a more favourable tax treatment for the payment of part of the salary for business performance do not change. However, the maximum amount of the part of the salary for business performance that has a more favourable tax treatment is changed, up to 100% of the average monthly salary of employees in Slovenia or up to 100% of the average monthly salary of the employee, including salary compensations paid for the last 12 months if this is more favourable to the worker.
Share and Stock Options plans
The Act stipulates a more favourable tax treatment of the right to purchase or acquire shares or stakes in a company, whereby the value of the taxable income should be 65% of the value of purchased shares.
The condition for claiming beneficial treatment is that the employment relationship between the employee and the employer lasted more than 1 year at the day of exercise of the right or disposal of the right to purchase shares and that the income is not subject to beneficial tax treatment as part of salary for business performance.
Personal income tax rate on capital income and rental income
The personal income tax rate for income from renting out real estate is reduced to 15%, and the amount of standard costs that a taxpayer can claim is reduced from 15% to 10%.
Personal income tax rate for income from capital - dividends, disposal of capital, interest, the tax rate is reduced to 25%.
A change is also introduced regarding the exemption from personal income tax for years of ownership of capital, namely the period is changed from 20 years of ownership of capital to 15 years of ownership of capital.
Possibility of including income from capital and rental income in the annual tax base
The Act introduces a novelty, namely the possibility of including income from capital and rental income in the annual assessment of personal income tax according to the progressive tax rates. The income will not be part of issued informative tax calculation, as the financial authority itself will not include this information in the annual tax assessment.
If the taxpayer decides on such method of tax assessment, the taxpayer will need to file objection against issued informative tax calculation and issued tax assessment for income from capital or rental income will be considered as an advance payment of personal income tax and will be deducted from the annual personal income tax assessment.
The Act envisages an increase in the general tax relief from 3,500 euros to 7,500 euros, which will be increased gradually, and if the Act enters into force retroactively, the general tax relief for 2022 will increase from 3,500 euros to 4,500 euros.
In 2023, the general tax relief is expected to be EUR 5,500, and in 2024 to EUR 6,500, which will lead to a target general relief of EUR 7,500 in 2025.
Personal allowance for taxpayers over the age of 70 is set at 1,500 euros.
The tax rate in the highest income tax bracket will be reduced from 50% to 45%, which means that the new tax brackets are between 16% and 45%.
However, the net annual tax base (progressive brackets) will be adjusted on an annual basis, but it is not yet known whether this will change for the 2022 tax year.
Financial administration Act
On Friday, Slovenian Parliament also confirmed changes and amendments of Financial Administration Act.
The main amendments of the Act are:
- The competence of financial offices and the division of tasks will be determined by a special Decree of the Government of the Republic of Slovenia.
- For more demanding cases of tax inspections, collegial decision-making is being introduced, namely a collegial body of three officials who will be deciding on the case.
- A special regime is introduced for revoking the authority of an official person in the event that repeated irregularities in decision-making procedures are identified.
- Supplementing the conditions for initiating a financial investigation.
How EY can help?
At EY, we regularly advise and assist clients in the field of tax and labor law. In this tax alert, we wanted to inform you about current changes in tax law. In case of specific questions regarding tax legislation or amendments to the Laws, our tax experts are at your disposal.