Tax News, October 2024

In October edition of tax news we inform you about the significant Supreme Court decision on payment of business performance bonuses, about the novelties regarding the implementation of the pillar two subject to tax rule, about the changes to the Foreigners Act (Ztuj-2) and Slovenian language proficiency requirement for certain groups of foreigners, about the extended measure for simplified employment of foreigners and about the adjusted tax reliefs and tax brackets for personal income tax year 2025.

SIGNIFICANT SUPREME COURT DECISION ON PAYMENT OF BUSINESS PERFORMANCE BONUSES 

The Supreme Court of the Republic of Slovenia, in its decision VIII Ips 9/2024 dated August 20, 2024, ruled on a case that has also implication for the tax treatment of business performance payments. As per Employment Relationship Act, the Court assessed whether there was discrimination against employees in their eligibility for business performance bonuses, due to illness.

The Court emphasized that payment for business performance is linked to the company's overall performance and not to an individual employee's contribution. Employees who are absent due to illness or other personal circumstances must not receive a reduced payment for business performance, compared to other employees who do not have such personal circumstances. Absence due to illness is a circumstance over which the employee has no control, and therefore should not affect their rights under the employment relationship, as it would otherwise constitute discrimination.

This ruling alerts employers that in paying business performance bonuses, in addition to collective agreements, they must consider judicial practice and ensure that reductions in payments are not based on discriminatory reasons.

SLOVENIA SUPPORTS THE IMPLEMENTATION OF THE PILLAR TWO SUBJECT TO TAX RULE

Slovenia, along with eight other countries, has signed the Multilateral Convention, which will enable the implementation of the Pillar Two Subject to Tax Rule, representing a significant step towards fairer international tax agreements.

The Subject to Tax Rule (STTR), allows developing countries to demand the inclusion of the rule in bilateral tax agreements with developed countries when the nominal tax rates on income for certain incomes fall below 9 percent. This rule is part of a broader package of rules for the global minimum taxation of multinational companies, which primarily protects developing countries.

SLOVENIAN LANGUAGE PROFICIENCY REQUIREMENT FOR CERTAIN GROUPS OF FOREIGNERS

We inform you about the changes to the Foreigners Act (Ztuj-2), which will soon come into effect and relate to the requirement of Slovenian language proficiency:

• As of 1 November 2024, family members of holders of a single residence permit will need to submit proof of passing a Slovenian language exam at the survival level when applying for residence permit extension. This level allows basic communication in simple, predictable everyday situations, where expression is routine and repetitive. Eligible foreigners may participate in a free 180-hour language course and, if necessary, an additional 60-hour course. To enroll in the course, foreigners must submit a request to the administrative unit and obtain a certificate confirming their eligibility.
• Foreigners applying for permanent residence will need to include a certificate of successfully passing the Slovenian language exam at the basic level (A2) with their applications, starting from 1 November 2024.

EXTENDED MEASURE FOR SIMPLIFIED EMPLOYMENT OF FOREIGNERS

In the September tax news we have already notified you regarding the simplification of the employment of foreigners brought about by the Act on measures for the optimization certain procedures in administrative units (ZUOPUE):

• The Government of the Republic of Slovenia has extended, by three months, the temporary arrangement that allows foreigners to legally work and reside in Slovenia based on a confirmation of submitted application for the issuance of their first single permit or for extending the single permit. With a valid Informativni list issued by the Employment Service of Slovenia, foreigners can work and reside in Slovenia while the administrative procedure continues until a final decision is made.
• The extension of the measure applies to applications submitted to administrative units between 1 October 2024, and 31 December 2024.

ADJUSTED TAX RELIEFS AND TAX BRACKETS FOR PERSONAL INCOME TAX FOR TAX YEAR 2025 

As per official government website (i.e., gov.si), social partners unanimously agreed on the adjustment of tax reliefs and the tax brackets for personal income tax assessment for the tax year 2025, at the session of the Economic and Social Council (ESS) expert committee for finance and tax legislation. The adjustment will follow a 100% growth of the average monthly wage in period from June 2023 to June 2024.