Winter Allowance and Sole Proprietors using Flat-Rate Expenses: Key Tax Changes as of 2026

The amended tax legislation entering into force in 2026 not only introduces a new entitlement to the winter allowance but also brings a significant shift in the regime of sole proprietors applying lump-sum expenses (“normiranci”). While the public closely followed last year’s adoption of the Personal Income Tax Act amendment (ZDoh-2AB), which lowered the thresholds for entering and remaining in the regime, the new Winter Allowance Act and the Act on the Reform of the Determination of the Tax Base Considering Lump-Sum Expenses (ZPZR) introduce additional changes to the existing framework.

This legislative reform primarily provides relief in terms of the conditions for remaining in the lump-sum expense regime; however, it also introduces several other important novelties, which are presented below for full-time sole proprietors using flat-rate expenses and part-time sole proprietors using flat-rate expenses.

New Thresholds for Exit from the Lump-Sum Expense Regime

The most important change for many sole proprietors is the adjustment of the revenue threshold that triggers mandatory exit from the lump-sum expense regime. Legislation adopted at the end of 2024 drastically reduced this threshold, causing significant uncertainty. The new Act (ZPZR) sets the limit for fully insured sole proprietors—those covered by compulsory social insurance for at least nine consecutive months—to an average of EUR 120,000 over the two immediately preceding tax years.

This means that if your total business revenue in two consecutive preceding tax years does not exceed the average of EUR 120,000, you retain the right to determine your tax base using lump-sum expenses, provided you meet the condition of full insurance coverage (continuous self-employment for at least nine months in the year).

For taxpayers who do not meet the full insurance condition (part-time sole proprietors using flat-rate expenses), the threshold is lower: the average revenue of the two immediately preceding years must not exceed EUR 50,000.

For other taxpayers who fall into neither of the above categories (e.g., full-time sole proprietor in one year, part-time in the next), the applicable threshold is an average of EUR 85,000 in revenue over the two preceding years.

Another novelty is that when calculating the average revenue over the last two consecutive years, a year in which the taxpayer did not engage in the activity is included and counted as having generated zero revenue. As a result, taxpayers who exceed the allowed average already in their first year of business will have to exit the lump-sum regime immediately after that first year.

Example:
A taxpayer starts operating on 1 July 2025 and generates EUR 105,000 in revenue that year. Because the taxpayer will not meet the condition of being insured on the basis of self-employment for at least nine consecutive months in 2025, they may still apply for lump-sum expenses for 2025. However, they must exit the regime in 2026, since revenue for 2024 is deemed to be zero, and their two-year average (0 + 105,000 = 105,000 ÷2 = 52,500) exceeds the allowed threshold for part time sole proprietor of EUR 50,000.

New Thresholds for Entry into the Lump-Sum Expense Regime

As of 2026, the revenue conditions for entering the lump-sum regime change. A “popoldanec” who wishes to move from actual-expense accounting to lump-sum expenses may do so if revenue in the preceding year does not exceed EUR 50,000, increased from the previous EUR 30,000. Entry is also possible if revenue in the preceding year does not exceed EUR 120,000 (previously EUR 60,000), provided the taxpayer was compulsorily insured as a full-time self-employed person for at least nine consecutive months.

Five-Year Waiting Period for Re-Entry

One of the key novelties is the introduction of a five-year waiting period for re-entry into the lump-sum regime. The tax year in which the activity ceases is not counted in the five-year period. Transitional provisions stipulate that this rule applies to all cessations of activity and exits from the regime occurring on or after 1 January 2026.

Therefore, if a taxpayer ceases activity or exits the regime in 2025 or earlier, they may return to the lump-sum system already in 2026 if they meet the revenue conditions. However, if the business closes in 2026, re-entry will not be possible until 2032.

Modified Tax Rate Schedule: Introduction of Progressive Taxation

Another major change is moving away from a single flat tax rate for all revenue. Previously, income tax was assessed at a rate of 20% on the tax base, which equals 20% of revenue after considering 80% lump-sum expenses. The new Act introduces a progressive tax scale, differentiated for full-time and part-time sole proprietors using flat-rate expenses.

For full-time sole proprietors using flat-rate expenses (self-employed individuals with compulsory full-time insurance for at least nine consecutive months):

• For a tax base up to EUR 72,000: tax rate remains 20%.
• For the portion of the tax base exceeding EUR 72,000 the tax rate increases to 35%: total income tax amounts to EUR 14,400 plus 35% on the excess above EUR 72,000.

For part-time sole proprietors using flat-rate expenses (those not meeting the full-insurance requirement):

• For a tax base up to EUR 33,000: tax rate remains 20%.
• For the portion of the tax base exceeding EUR 33,000 the tax rate increases to 35%: total income tax amounts to EUR 6,600 plus 35% on the excess above EUR 33,000.

Practical Example for 2026

A full-time sole proprietor in 2026, insured for full-time work for at least nine consecutive months, earns EUR 120,000 in revenue. Lump-sum expenses under Article 59 of ZDoh-2 are calculated and recognized as 80% of revenue up to EUR 60,000, or EUR 48,000. No additional lump-sum expenses are recognised on revenue above EUR 60,000. Total recognised lump-sum expenses therefore amount to EUR 48,000.

The tax base is calculated as the difference between revenue and recognized expenses. The calculation results in a total of 72,000. The income tax is then calculated using the progressive tax rate schedule. Please note that 20% of €72,000 is €14,400. There is no taxable excess above EUR 72,000, so no additional tax applies.

What Happens to Taxpayers Already in the Regime in 2025?

For the 2025 tax year, the existing rules for determining the tax base and tax rates continue to apply. However, a key change is that the earlier mandatory-exit rule no longer applies in 2026. This means that sole proprietors using flat-rate expenses who would have been required to exit under the previous legislation may remain in the regime in 2026 if they meet the new conditions based on the average revenue for 2024 and 2025.

Is the Lump-Sum Expense Regime Still Beneficial for You?

To determine whether the lump-sum regime remains advantageous, an individualized assessment is necessary. The status of sole proprietor using flat-rate expenses is evolving to encompass more than just simplicity and a fixed cost.

For these and other tax-law matters, our tax expert Lucijan Klemenčič is available to ensure that your business remains optimised and compliant with the latest, rapidly evolving tax regulations.