Slovenia is continuously striving to support the local economy and gradually optimize tax burden of individuals and companies, as well as to simplify administrative procedures. In this context, Slovenia proposed amendments to the local tax law in terms of corporate income tax (CIT), value added tax (VAT) and personal income tax. The common denominator for all is the support of green way of doing business through allowing VAT deduction on electric vehicles, their tax free private use and introduction of a new tax relief for companies that are switching to an environment friendly way of doing business. In addition, the tax relief for employment and practical work is to upgrade, certain expenses are to be recognized more favorably and quickly, and an increase of net employment income is being proposed through workforce unburden. Income from capital and rent is also to unburden from personal taxation point of view.

In the following we summarize the envisaged changes:

Corporate income tax

Main changes

Upgrade of current employment tax relief

• The scope of the current relief in amount of 45% of salary for the first 24 months of employment is being expanded to:
  • persons whose occupation is lacking on the labor market
  • persons under the age of 29 (previously 26) and over the age of 55
• Introduction of a higher tax relief for the first employment of a person under the age of 25 in amount of 55% of salary for the first 24 months of employment.

Significant increase in tax relief for practical work in course of professional education

• Increase from current 20% to 80% of the average monthly salary of employees in Slovenia for each month of practical work.

Increase of tax relief for donations 

• The maximum tax relief for donations is increased from current 0.3% of taxable income to 1%. Simultaneously, additional 0.2% is to include also donations paid for sports purposes, among the existing scope, and a new 3.8% additional allowance for donations paid to providers of the top sport program for investments in top sports is introduced.

Changes in reservations

• As per new regulation, provisions for pensions, jubilee awards and severance pay upon retirement which will be formed in the period from 1 January 2022 to 31 December 2026 will be 100% recognized as expense, currently 50%.
• Provisions for given guarantees, onerous contracts and reorganisations, remain recognized 50% as expense.

Introduction of a new tax relief for investment in transition to green and digital

• Companies that will invest in green and digital, i.e. energy efficiency, environment friendly transport and information technology, will be entitled to 40% of the invested amount as a tax relief.

Other changes

Tax deductible share of expenses for representation and costs of the supervisory board or other body that performs solely the function of supervision is increased from the current 50% to 60%.

Quicker recognition of receivable write-off

• The proposed change enables recognition of receivables write-off as tax deductible expense for all recognized receivables already in course of application of receivable in insolvency procedure, which is much quicker than is currently the case (on the basis of a final court decision on completed bankruptcy proceeding or on the basis of a final decision on confirmation of compulsory settlement).

Additional list of “tax havens” for taxation purposes

• In addition to the national list of “tax havens” countries the EU list will be used as well for in terms of corporate income taxation involving such countries.

Value Added Tax

Main changes

Introduction of a VAT deduction for electric vehicles

• The deduction applies to motor vehicles intended to carry out any activity which satisfy two conditions:
  • the motor vehicle is free of carbon dioxide (i.e. electric vehicle); and
  • the value of the motor vehicle, including VAT and other duties, does not exceed EUR 80,000.

Personal Income Tax

Main changes

Tax unburden of employment income

• Increase of general tax relief

Over the next five years, it is proposed to gradually increase the general tax relief by an additional EUR 1,000 per year. Thus, in 2022, instead of the current EUR 3,500 it will amount to EUR 4,500 and up to EUR 7,500 in 2025.

• Relief of high earning individuals by reducing the tax rate in the top tax bracket from 50% to 45%

Individuals with a tax base of over EUR 6,000 per month or over EUR 72,000 per year will be taxed 5% less than before.

• Motivation of employees through looser provisions related to company bonus payment

Company bonus payment is to be paid out in cash or in benefits in kind. Most of the conditions to attain less tax burdened bonus are annulled.

The possibility of a higher net payout is introduced by choosing more favorable tax-free amount. In general, the amount of tax-free part of the company bonus maintains at 100% of the average monthly salary of employees in Slovenia, while the novelty allows the possibility of tax-free company bonus of up to 100% of the average monthly salary of the employee, including salary compensations, for the last 12 months, if this option is more favorable.

• Reduction of benefit in kind for private use of personal electric vehicle to zero

Tax relief on capital income

• The personal income tax rate on capital income (interest, dividends and capital gains) is reduced from 27.5% to 25% and the ownership period after which personal income tax is not due on capital gains upon alienation is lowered to 15 years, instead of the current 20 years.

Tax relief on rental income

• The personal income tax rate on rental income is also reduced, however from 27.5% to 15%, as well as the percentage of flat-rate costs that reduce tax base from 15% to 10%.

Validity and application

Proposals for amendment to the tax acts are subject of consideration and therefore have not yet been adopted.

They shall enter into force on the fifteenth day after their publication in the Official Gazette of the Republic of Slovenia, and shall apply as of 1 January 2022.