Income Tax in Slovenia - We Assist Foreign Investors
Income Tax in SloveniaUpdated on Saturday 31st July 2021
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The income tax in Slovenia is a type of tax that is charged on the income of individuals and corporate entities. The Slovenia income tax is charged on various types of incomes, as well as on parts of incomes, which can be from direct or indirect income.
One must also know that the income tax can be charged on the worldwide income of an entity, meaning that the tax is applied to the income obtained by the respective entity from global sources (other jurisdictions than Slovenia) or only for the income obtained at a national level.
If you are a natural person who obtains income from various sources in Slovenia (employment, rental activities, etc.) you are considered to be liable for taxation. The Slovenia income tax is charged for companies as well, at different rates than the ones applied to natural persons. For tax advice on the income tax regulations, we invite you to address to our team of Slovenian lawyers.
What are the general rules on the Slovenia income tax?
The implementation of the rules regarding the Slovenia income tax falls under the supervision of the Financial Administration, where taxable entities have to pay their taxes at the end of the financial year. In Slovenia, starting with 2005, Slovenian residents are liable for their personal income tax charged on a worldwide level.
This means that a person can become liable for the Slovenia income tax regardless of the source of the income and the location of the capital. Foreigners who obtain a taxable income in Slovenia will become liable for taxation in Slovenia for the income that they have obtained here from various sources of taxable income, such as salaries, real estate, properties and others.
The legal framework for the taxation of the income is also influenced by the double tax treaties signed by the Slovenian authorities with the institutions of other partner countries and, if you are a foreigner, the sources of income liable to taxation as well as the rates at which you will be taxed can be influenced based on the regulations established within a treaty. If there isn’t a double tax treaty signed with your institutions of your tax residency country, other tax rules will apply and our team of Slovenian lawyers can assist you.
What are the Slovenia income tax rates?
The taxes rates at which the income of an entity are charged in Slovenia vary based on the nature of the entity, as well as on the chargeable income. There are two main categories of Slovenia income tax rates, one referring to the taxation of corporate income, and the other, on the taxation of the income of natural persons. The tax rates are as follows:
- the Slovenia income tax rate charged on the corporate income is of 19%;
- for the taxation of natural persons, the tax is charged on a progressive system and the lowest tax rate is of 16%, charged for an income of maximum EUR 8,500;
- a tax rate of 26% is applied for an income of minimum EUR 8,500 and maximum EUR 25,000;
- income of EUR 25,000 – EUR 50,000 is taxed at a rate of 33%;
- persons gaining an income of minimum EUR 50,000 and maximum EUR 72,000 are charged at a rate of 39%;
- any income with a value above EUR 72,000 is charged at a rate of 50%.
What other type of income qualifies for the Slovenia income tax?
The tax law in Slovenia establishes the types of income that are charged with the income tax, as well as the international tax treaties to which Slovenia adhered to. Our law firm in Slovenia can present the current legal framework to those interested in this subject.
Currently, one has to know that the Slovenia income tax is also applied to capital gains, a type of income which is charged at the standard rate of 19%, as long as the capital gains are related to corporate entities. With regards to the taxation of capital gains other rules and taxes can apply depending on the tax residency of the company, if a merger is involved and other legal situations, which can be presented by our lawyers in Slovenia.
If you refer to capital gains obtained by natural persons, the tax will be charged at the standard rate of 27.5%. The same tax rate is applied on the income of a natural person obtained from interest, dividends and rental income. However, persons and entities which are the beneficiaries of the provisions of the double tax treaties which are in force in this country will benefit from lower tax rates.
What is the Slovenia income tax charged to businesses?
The obligation to pay taxes in Slovenia is imposed to businesses as well, as they develop commercial operations that are taxed following different tax rules. The tax charged to businesses is known as the corporate income tax, which is currently applied at the standard rate of 19%. This tax is charged to companies which are incorporated in Slovenia and which are required to pay corporate taxes.
For instance, a legal entity that can be set up here is the sole trader, but the tax system applied in this case will not follow the corporate tax system, as there isn’t any distinction between the company’s owner and the business. The corporate income tax is also applied to foreign companies which expand on the Slovenian market and which operate through subsidiaries, branch offices or through any other type of permanent establishment.
Still, investors have to be aware that the Slovenia income tax will be applied based on the nature of the entity – for instance, branch offices will be charged with the income tax, but only for the company’s income obtained from activities in Slovenia; thus, the foreign company will be liable to the payment of the Slovenia income tax only for its local operations and not for the global income of the business.
Investors interested in opening a business in Slovenia should know that the Slovenia income tax applicable to business can be charged at a rate of 0% in the case of certain activities – here, we mention pension funds, investment funds and insurance companies; however, this can be applied in certain legal situations that can be presented by our Slovenian law firm.
Another important aspects regarding this subject is that certain activities are fully exempted rom the payment of this tax and this is the case of various non-profit entities, such as: associations, foundations, charitable organizations and similar entities. Please mind that even if the Slovenia income tax charged for corporate entities will not apply, such entities will still be liable for the payment of various taxes.
A component of the Slovenia income tax charged to companies is the tonnage tax. The tonnage tax is a substitute of the corporate income tax and it can be applied solely to companies that develop maritime transportation and international shipping. The tax system applied in this case is a progressive one and it is based on the net tonnage of the cargo. The following system applies:
- the tax is calculated per 100 net tonnes per day;
- for the first 1,000 tonnes, the tax is calculated at a rate of EUR 0.9/day per 100 tonnes;
- the next 1,001 to 10,000, the tax is calculated at a rate of EUR 0.67/day per 100 tonnes;
- a tax of EUR 0.4/day per 100 tonnes is applied for 10,001 to 25,000 tonnes;
- any cargo above 25,000 tonnes is charged with EUR 0.2/day per 100 tonnes.
Investors operating in the shipping industry can either opt to pay the corporate income tax or the tonnage tax; those who want to start a business activity in this field or those involved in shipping operations can address to our team of Slovenian lawyers for more details on how this tax is applied.
The Slovenia income tax system also takes into consideration withholding taxes. In Slovenia, the withholding taxes are charged for a variety of incomes, such as the income from dividends, interest, royalties or technical services. The rates at which such taxes are applied are generally the same regardless of the residency of the company (the tax law distinguishes between Slovenian tax residents and foreign entities).
However, when we refer to foreign entities, the tax rates can vary depending on whether the respective countries are part of a double tax treaty that was signed in Slovenia. If so, specific taxes can be stipulated; if you need tax advice regarding the manner in which withholding taxes are charged in this country, our Slovenian law firm remains at your disposal.
The law further distinguishes on the nature of the entity that receives the respective income – here, tax rates will be applied differently when the recipient is a natural person and when the recipient is a company. Slovenian residents and foreign residents (who are natural persons) will be charged at the same rates for the income to which withholding taxes are charged.
With regards to recipient corporate structures, local companies will not be imposed with withholding taxes, while foreign companies will. The Slovenia income tax law can prescribe additional types of taxes; for tax consultancy services and more details on the tax system applicable here, our Slovenian law firm is ready to assist you.
The taxes charged on the taxation of dividends and interest are generally taxed at a rate of 15%. The same applies for the taxation of royalties. If you need additional information on the Slovenia income tax regime, we invite you to contact our Slovenian law firm.