Contributions and Interviews
Changes of Slovenian tax legislation
07. 05. 2021
mag. Janja Ovsenik
A public hearing on changes of tax legislation, to help the economy recover from the pandemic, has come to an end.
The subject matter of the Government of the Republic of Slovenia's proposal foresees changes in personal income tax, corporate income tax, and value-added tax legislation. The proposal was submitted to Parliament on April 16. and if accepted the amendments of personal income tax and corporate income tax will come into force on January 1, 2022. The VAT changes are expected to enter into force mainly on 1 July of this year and 1 July of the following year, as regards the amendments related to the transposition of Directive 2019/2235/EU. See details below.
Changes in personal income tax
The general tax relief for all taxpayers is planned to gradually increase from the current 3500 to7500 EUR, until 2025.
According to proposed changes, general tax relief would increase next year to 4500 EUR, which would result in the increase of the net salaries by 160 EUR for the year for those who receive the minimum salary. Correspondingly, those that receive average wages could expect their net salaries to increase by 260 EUR per year. Furthermore, when the general tax relief rises to 7500 € in 2025, the recipients of minimum wages can expect their net salaries to increase by 640 EUR per year. Similarly, those that receive average wages can expect their net salaries to increase by 1000 EUR per year.
The amendment also brings changes to the progressive tax rate. Particularly, the part of income corresponding to the highest tax bracket will be taxed with a rate of 45%, instead of currently 50%.
The tax rate to be applied on income from interest, dividends, and capital gains is supposed to decrease from 27,5 to 25%. Likewise, the tax rate for rental income should decrease to 15%. Consequently, lump-sum costs deducted from the tax base of rental income are expected to be reduced from 15 to 10%.
Currently, dividends, interest, rental income and capital gains are taxed cedularly, i.e. taxes paid are final. Following the proposed change, the taxpayers can decide his/her income from the capital the annual taxable income and therefore tax it at progressive tax rates. Finally, the capital gain should be tax-exempt after elapse of 15 years, instead of 20 years before the amendment.
Changes in corporate income tax
The proposed amendments to the Corporate Income Tax Act further expand on existing tax reliefs, with an emphasis on donations and new employment. There is also a novelty in the proposal, which provides for tax relief on investments that contribute to sustainability or digitalization efforts. This tax relief would be equal to 40% of the invested amount.
Changes in value-added tax
The proposal introduces deduction of VAT for the purchase of electric vehicles used for the pursuit of a business activity, if the total value of the electric vehicle does not exceed EUR 80 000. Another upcoming change is the eliminated threshold for mandatory entry of farmers into the VAT system. Lastly, the amendment is planned to make issuing of paper invoices obligatory only if they are explicitly requested.
In conclusion, the proposal provides for tax and administrative relief in the fields of personal income tax, corporate income tax, and value-added tax. The relief is expected to boost competition, incentivize investments, relieve taxpayers of administrative burden and help the overall economic recovery.