Tax Alert, December 2024

In this tax alert we inform you about the adopted amendments of Personal Income Tax Act and Value Added Tax Act by the National Assembly on 28 November 2024 following the veto of National Council. The amendments will become applicable with 1 January 2025.

A. Value-Added Tax

• VAT Grouping

The amendment introduces the possibility of forming a VAT group for related taxable persons with their headquarters or fixed establishment in Slovenia, meaning that several entities within the group could have one VAT number, and transactions between members would be considered outside the VAT system.

• Limitation on the transfer of VAT surplus

The amendment limits the possibility of transferring the VAT surplus to the next tax period and the possibility of submitting claims for the refund of the VAT surplus to a period of five years from the submission of the VAT return. This limitation applies to surpluses identified with VAT returns for tax periods from 1 January 2025, while surpluses from previous tax periods can be carried forward until 31 December 2029.

• Accounting

The amendment mandates the obligation to keep two records (VAT books) within the taxable persons accounting, namely the record of charged VAT and the record of deducted VAT. It also establishes the obligation to transmit data from these records to the tax authority.

• Adjustment of taxation on sugary drinks

The amended act provides for the application of the standard VAT rate to beverages containing added sugar or sweeteners, which were subject to a VAT rate of 9.5%.

• Issuance of invoices at vending machines

The issuance of invoices at vending machines for the sale of goods and services will no longer be mandatory, only the reporting of sales data to the tax authority will be required.

• Special scheme for small businesses

The threshold for annual turnover for small taxable persons for mandatory VAT identification in Slovenia is raised from EUR 50,000 to EUR 60,000. The exemption will apply to all taxable persons headquartered in the EU. This policy equalizes business conditions for small businesses in the EU territory.

The amendment establishes the right to exemption from VAT on cross-border supplies of goods and services in another EU member state, which in its national VAT regulations allows exemption for small businesses. Eligibility for the exemption is provided if the turnover does not exceed the amount determined by that Member State, with the absolute threshold set at EUR 100,000. According to the amendment, a taxable person based in Slovenia will obtain an individual identification number for cross-border exemption based on a prior notification sent to the tax authority in electronic form.

B. Personal Income Tax

• Gross-up of benefit in kind from equity plans

For income received from shares of a company, the general rule of grossing up income may be waived, if the beneficial treatment from paragraphs 6, 7 and 8 of Article 43 of the Personal Income Tax Act is not applied and if the employer properly notifies the Tax authorities through payroll tax return. Following such notification the Tax Authorities issue the tax assessment directly to the taxable person (employee).

• Special personal allowance for new tax residents

New tax residents (foreigners and returning Slovenian citizens) are granted a reduction in personal income tax of 7% of the received salary or salary compensation under the conditions that:

- is a tax resident of Slovenia;

- has not been a tax resident of Slovenia in the last two consecutive tax years before the date of commencement of work in Slovenia and during this period did not have taxable income with a source in Slovenia from employment income or business income;

- has guaranteed a salary in the employment contract in amount of at least twofold of the last known average annual salary of employees in Slovenia, published by the Statistical Office of the Republic of Slovenia, converted to a monthly salary;

- is employed in Slovenia for at least 10 months in a tax year with an employer who is a resident of Slovenia according to the law or a non-resident of Slovenia (who has a non-resident's permanent establishment in Slovenia or a branch in Slovenia), if the salary or salary compensation is considered a deductible item when calculating the employer's tax base in Slovenia;

- has not reached the age of 40 at the start of work in Slovenia.

The reduction in personal income tax under these conditions is recognized for a maximum of five consecutive tax years and is not compatible with the special tax relief determined in Article 45.a of the Personal Income Tax Act.

• Encouraging employee ownership in the ownership structure of innovative start-up companies

According to the amendment, for the income of employees in innovative start-up companies, i.e. securities in the form of shares or stocks, the moment of disposal of these shares or stocks or a certain other moment, such as e.g. termination of the employment contract, transformation of the company, will be considered for the calculation of tax liability.

For the taxation of this type of income, the principle of "averaging" will be considered.

• Elimination of zero benefit for electric motor vehicles

The benefit for private use of a company electric motor vehicle is set at 0.75% of the purchase value of the vehicle per month, with a transitional period of zero benefit until the end of 2029.

• Bicycles and charging electric vehicles

Providing electric energy to an employee for charging his personal vehicles at the employer's non-commercial charging stations and the use of (e)bikes owned by the employer will no longer be considered a benefit.

• The special tax base for posted public officials and functionaries is abolished from the tax year 2026 onwards.

• Standardized sole proprietors

The highest allowed limit for participation in the system for full standardized sole proprietors is reduced from EUR 100,000 to EUR 60,000 of annual income, if that taxable person was compulsorily insured on the basis of self-employment for full-time uninterrupted at least nine months. For afternoon sole proprietors, this limit is reduced from EUR 50,000 to EUR 30,000.

Full standardized sole proprietors will be able to claim 80% standardized expenses for revenues up to EUR 60,000, which represents an increase compared to the previous amount of up to EUR 50,000, while for afternoon sole proprietors, up to EUR 12,500 will be recognized at 80%, and from EUR 12,500 to EUR 30,000 at 40%.

Exiting the system of standardized expenses will be required, if the taxable person exceeds the average of EUR 60,000 or EUR 30,000 of income in two consecutive years, depending on the condition of the taxable person's inclusion in insurance. A transitional period is envisaged for the implementation of the changes, which will last until the end of 2026.

• Transfer of tax losses

Covering tax losses in subsequent tax periods (which is unlimited under the current system) will be limited to the next five tax periods, while for already accrued tax loses this period will be limited up to and including the tax year 2029.

• Tax relief for investments in digital and green transition

The amendment provides that the unused part of the incentive for digital and green transition can be transferred to the next five tax periods.