Tax News, December 2022

In the December issue of tax news, we would like to inform you about the upcoming deadline for reporting of certain type of control data for personal income tax and about the beneficial tax regime of gifting employees’ children in December. In addition, we focus on the current changes in personal income tax legislation and on extended instructions for completing VAT returns.

DO NOT MISS: UPCOMING DEADLINES

The deadline for reporting of certain type of control data for personal income tax expires on 31 December 2022. All income payors must submit a file with control data via eTax portal for special tax relief for dependent family members (VIRVDC), used in 2022. The file should contain details of all special reliefs used for any taxpayer for whom you paid employment type income, pension, or other income in accordance with Article 105 of the Personal Income Tax Act.

BENEFITS – SPECIAL TAX TREATMENT IN DECEMBER

In December employers have the option of special gifting employees’ children under beneficial tax regime. Namely, a gift, given to employee’s child up to 15 years of age, is not included in employee’s tax base, as long as the value of the gift does not exceed EUR 42. This refers to employees’ biological children, adopted children or children of cohabiting or same-sex partners.

NOVELTIES OF THE AMENDMENT OF PERSONAL INCOME TAX ACT (ZDoh-2AA)

On 28 November 2022, the Slovenian Parliament adopted the proposed changes and amendments to the Personal Income Tax Act (hereinafter PITA), which are set in force as of 1 January 2023.

We summarize the main changes and amendments of the Act below. We note that the changes have not yet been published in Official Gazette and that summary below is prepared based on publicly available information and documents.

Change in the general tax relief

In accordance with the currently valid Act, the annual general tax relief for year 2022 is set at EUR 4,500, with foreseen gradual increase of the general tax relief up to EUR 7,500, which would be effective in 2025. The adopted change abolishes the gradual increase of the general tax relief and fixes the amount of the relief at EUR 5,000.

Changes in the amount of income for additional general relief

The new Act provides an increase in the total income up to which a tax resident is entitled to additional general tax relief alongside general tax relief. The threshold is increased to EUR 16,000.

Special relief for young

In accordance with the adopted changes to Act, special relief for young is introduced. Up to and including the year in which the individual reaches the age of 29, a reduction in his/her employment income tax base to EUR 1,300 per tax year, is confirmed. The relief is then granted proportionally according to the number of months of employment in each tax year, considering each full month of employment.

Method of reconciliation of reliefs and net annual tax base amounts

The changes eliminate the mechanism of automatic adjustment of the amount of tax relief and net annual tax bases. For 2023 the adjustment of tax relief and net annual tax bases will not be carried out. This way, the tax relief amounts, and the net annual tax bases will be adjusted in the same way as was in place for the tax years from 2014 to 2021.

Increase of marginal tax rate

Tax rate in the top income tax bracket is increasing from current 45% to 50%.

Compensation for using own funds when working from home

Regulations for determining tax-free amount of compensation for the use of one’s own funds when working from home is changing. Compensation, provided that work from home is organized according to regulations governing employment relationship and is determined by special provisions, collective agreement or employers’ internal acts, will not be included in income tax base from employment income up to 0,20% of last known average annual salary of employees in Republic of Slovenia, calculated per month, for each day of work performed from home.

Part of the salary related to business performance

In accordance with the newly adopted amendment the more favorable tax treatment of part of the salary related to business performance can be applied at most twice a year, while the possibility of more favorable tax treatment of such payments at 100% of the average salary of the employee is removed. Thereby, the beneficial tax treatment of the salary related to business performance remains in place, however limited to 100% of the average monthly salary of employees in Republic of Slovenia.

Taxation of business income considering standardized costs

The changes set a condition for entry into, or staying included into the system of standardized costs, which is linked to the social insurance of the individual or of a person employed by this individual and extends the period of continuous inclusion in the social insurance. According to the adopted changes, the condition will be fulfilled if the taxpayer is included in the system continuously for at least nine months full-time on the basis of self-employment or has an employee who is included in the system on the basis of this employment relationship continuously for at least 9 months full-time. Thus, the condition of continuous inclusion in the social insurance is extended from five months to nine months.

The amount of costs recognized when determining tax base in the system of standardized costs is also changing. In case taxpayer meets the mandatory insurance condition (self-employment or full-time employment for at least 9 months continuously), recognized standard costs are reduced from 80% to 40%, if taxpayer generates EUR 50,000 or more  revenue.

Accordingly, the tax base and standardized costs are recognized in as per the table below:

In case the taxpayer does not meet the mandatory insurance conditions, recognition of the standardized costs at 80% for up to EUR 12,500 of generated revenue and at 40% for revenue from EUR 12,500 up to a maximum of EUR 50,000, is adopted

Accordingly, the tax base and standardized costs are recognized as per the table below:

Personal income tax rate on rental income

The tax rate for income from renting out real estate is being increased from the current 15% to 25%, while the amount of standardized cost that taxpayer can claim remains the same, at 10%.

Disposal of own shares

According to the amended Act, the disposal of shares in the context of the acquisition of own shares of the company, except in the case when the company acquires its own shares on the organized market, is considered as dividend income and not as capital gain. The aforementioned tax treatment was already in effect before 1 January 2022.

Elimination of the possibility on deciding to include income from renting out property and income from capital in the annual tax base

The possibility for the taxpayer to decide on the inclusion of rental income and capital income in the annual tax base is eliminated which means they will be taxed separately only.

Tax relief for dependent family members

The changes in Act are also introducing new provision on the amount of tax relief for dependent family members for tax years 2023 and 2024:

1. for the first dependent child, EUR 2,698 per tax year, or
2. for a dependent child in need of special care, EUR 9,777 per tax year,
3. for each additional dependent family member, EUR 2,698 per tax year.

In addition, in 2023 and 2024 tax relief for dependent family members would be increased at least:

1. by EUR 235, for a second dependent child, (total: EUR 2,933)
2. by EUR 2,194, for a third dependent child, (total: EUR 4,892)
3. by EUR 4,153, for a fourth dependent child, (total: EUR 6,851)
4. by EUR 6,112, for a fifth dependent child, (total: EUR 8,810)
5. by EUR 1,959, for the sixth and all subsequent dependent children, depending on the amount of the tax relief for the previous dependent child.

Donating part of personal income tax

Tax residents will now be able to allocate up to 1% of their personal income tax for donation towards registered beneficiaries of donations.

EXTENDED INSTRUCTIONS FOR COMPLETING VAT RETURNS

If you were in a dilemma or wondered when the submission deadline for VAT return and recapitulative statement (i.e., EC Sales List) is, if the 20th day of the month falls on a holiday or weekend, the Slovenian Tax Authority has extended its instructions for completing VAT returns.

Namely, while Article 88 of the Slovenian VAT Act stipulates that a taxable person has to submit VAT return with the Slovenian Tax Authority by the last business day of the month following the expiry of the tax period, in case of recapitulative statements it is not stipulated that the deadline falls on the business day. VAT Act only determines that a taxable person who carries out intra-EU transactions has to submit a recapitulative statement and VAT return by the 20th day of the month following the expiry of the tax period.

In accordance with the Tax Procedure Act, extended instructions for completing VAT returns in case of the expiry of the submission deadline when the taxpayer must also submit a recapitulative statement now stipulate that the deadline (for submission of VAT return and recapitulative statement) is the first following business day if the 20th day of the month is a non-working day.