REPUBLIC OF SLOVENIA MINISTRY OF FINANCE

FINANCIAL ADMINISTRATION OF THE REPUBLIC OF SLOVENIA

Šmartinska cesta 55, PO Box 631, 1001 Ljubljana, Slovenia T: +386 1 478 38 00

F: +386 1 478 39 00

E: gfu.fu@gov.si

www.fu.gov.si

TAXATION OF INDIVIDUALS Advance tax payment

Questions & Answers

1ST version, MARCH 2016

2

TABLE OF CONTENTS

Question 1: Who has the liability for income tax in Slovenia? ................................................. 4 Question 2: How do I pay personal income tax in Slovenia? ................................................... 4 Question 3: What are my tax liabilities when I am employed in Slovenia as a nonresident?

How do I pay tax on income from employment based on the employment contract in

Slovenia? .................................................................................................................................. 5 Question 4: How do I pay tax on income from employment that I receive on the basis of

other contractual relationship and not on the basis of employment contract if I am a

nonresident? ............................................................................................................................. 6 Question 5: What is the procedure to enact the deduction of actual work-related itemized

expenses (i.e. expenses of commute, business travel and accommodation) from my tax

base in case of work on the basis of other contractual relationship? ...................................... 7 Question 6: Under what circumstances I will not be taxed on my income from employment in

Slovenia even though the source of income is determined to be in Slovenia?........................ 7 Question 7: How do I claim exemption from tax on income from employment based on the

Double Taxation Agreement (DTA)? ........................................................................................ 8 Question 8: How am I taxed in Slovenia as a nonresident artiste and a nonresident

sportswoman or sportsman when income is paid directly to me? ........................................... 9 Question 8.1: How do I make a request for the deduction of actual itemized expenses

instead of the standard expense? ....................................................................................... 9 Question 8.2: How can I claim the relief from withholding tax as a nonresident artiste and

a nonresident sportswoman or a sportsman according to the relevant Double Taxation

Agreement (DTA)? .............................................................................................................. 9

Question 9: What is the tax treatment of income earned by students through the Student

Services Office? ..................................................................................................................... 10 Question 10: How am I taxed, if I am a nonresident student working in Slovenia? What is the

special personal student allowance and are nonresident students also entitled to it? .......... 10 Question 11: What is the procedure of obtaining the authorization from the competent tax

authority for the special personal student allowance, if I am a nonresident of Slovenia? ..... 11 Question 12: What is the tax treatment of professors and researchers from abroad who

come to Slovenia to teach and do research? What income do professors and researchers

earn in Slovenia and how is it taxed? ..................................................................................... 11 Question 13: What are the conditions under which Slovenia grants exemption from taxation

of Slovenian source income of professors and researchers from abroad and how is it

claimed? ................................................................................................................................. 12 Question 14: Do I pay tax on income from small business that I own as a sole entrepreneur

or a self-employed person if I am a nonresident of Slovenia? ............................................... 13 Question 15: How do I pay tax on income from small business that I own as a sole

entrepreneur or a self-employed person if business is done in or through my business unit of

a nonresident (permanent establishment) in Slovenia? ......................................................... 13 Question 16: What is the special option to pay tax on income from small business that I own

as a sole entrepreneur or a self-employed person if business is done in or through my

business unit of a nonresident (permanent establishment) in Slovenia? ............................... 14 Answer ................................................................................................................................... 14 Question 17: How do I pay income tax from basic agricultural and forestry activities as a

nonresident in Slovenia? ........................................................................................................ 15 Question 18: How do I pay income tax from rent of property as a nonresident in Slovenia? 16 Question 19: How do I pay income tax on royalties as a nonresident in Slovenia? .............. 17

Question 19.1: What is the rate for the advance tax payments on royalties and how are

they collected? .................................................................................................................. 17 Question 19.2: How do I claim a more favourable tax rate on royalties based on the

Double Taxation Agreement (DTA)? ................................................................................. 17

3

Question 20: How do I pay income tax on other income as a nonresident in Slovenia? ....... 18 Question 20.1: What is the rate for the advance tax payments on other income and how

is it collected? .................................................................................................................... 18 Question 20.2: How do I claim an exemption from personal income tax on other income

based on the Double Taxation Agreement (DTA)? ........................................................... 19

4

Question 1: Who has the liability for income tax in Slovenia? Answer Generally income tax in Slovenia is levied on all Slovenian source income. However, the extent

of liability is determined by the residency status of a person or an entity for tax purposes. On top

of the Slovenian source income residents of Slovenia have a liability to pay income tax on all

their world income.

Question 2: How do I pay personal income tax in Slovenia? Answer Personal income tax in Slovenia is a tax imposed on the total income of the individual. It is paid

in two different ways.

First, personal income tax is withheld from payments to individuals. Tax is deducted from each

payment of income to an individual and has to be promptly remitted to the Financial

Administration of Slovenia. This is also referred to as the payroll tax and it is treated as an

advance payment of tax or as a prepayment of tax.

The tax withholding is done by the payer, who has the status of the payer of tax. Domestic legal

entities, a permanent establishment of a nonresident (i.e. a branch of a foreign company), sole

entrepreneurs (self-employed persons) and agents hold this status and have the obligation to

withhold and remit the tax when making the payment.

When income is paid or credited by an individual or a foreign entity, who cannot withhold and

does not have the obligation to withhold the tax due, the recipient or the payee must report the

income to the competent tax authority on the income specific tax return form and remit the tax

due. Tax remitted this way is treated as an advance tax payment.

Taxes imposed on income remitted to the Financial Administration of Slovenia during the tax

year by withholding or on the basis of the return (advance tax payments) are included in the

annual indicative calculation of personal income tax prepared and sent by the Financial

Administration of Slovenia to the residents who earned taxable income in Slovenia by 15th of

June at the latest. The indicative calculation serves as the preview of the personal income tax

return. Taxpayers have the chance to dispute the indicative calculation 30 days from the date

when the calculation was sent to them by the Financial Administration of Slovenia. When

taxpayer’s data do not match the data in the calculation the taxpayers are required to file a

complaint. The complaint officially represents the taxpayer’s personal income tax return. The

Financial Administration of Slovenia issues the tax assessment on the basis of this return and

the tax liability has to be settled according to the assessment. If they do not dispute the

indicative calculation it officially becomes the taxpayer’s personal income tax return and at the

same time, the official tax assessment on the basis of which the tax liability has to be settled. If

the taxpayer did not receive the indicative calculation at all even though she/he earned taxable

income, she/he is required to file the personal income tax return by 31st of July of the current tax

year for the previous tax year.

Tax return takes into account all the social security contributions and different tax allowances

and settles the final tax. It is determined according to the tax rate schedule. Not all types of

personal income are included in the indicative calculation of the personal income tax though.

The types of income included in the indicative calculation of personal income tax are the

following:

- income from employment,

5

- income from business of sole entrepreneurs or self-employed persons (excluding the

special option for paying tax on income from small business that a person owns as a

sole entrepreneur or a self-employed person on the basis of revenues and standard

expenditures in the amount of 80% of the shown revenues):

- income from basic agricultural and forestry activities,

- income from royalties,

- other income like gifts, prizes etc.

The tax on these types or sources of personal income is being paid during the tax year either by

withholding or on the basis of a tax return. Both modes of tax settlement during the tax year are

treated as an advance tax payment. Taxes paid separately on each type or source of personal

income mentioned above during the tax year are aggregated at the end of the year and included

in the indicative calculation of the personal income tax in which the annual tax base is computed

after compulsory social security contributions and certain allowances are deducted. The annual

tax liability for the personal income of the taxpayer is determined. If the taxes paid during the

year as advance tax payments exceed the tax liability the taxpayer gets reimbursed for the

excess. If the taxes paid during the year as advance tax payments fall short of the annual tax

liability the taxpayer has to settle the difference.

The second way of paying personal income tax in Slovenia is paying tax at a flat rate by

withholding at the time of payment or on the basis of a tax return. Tax on income that is not

included in the indicative calculation of personal income tax and that is not aggregated on an

annual level is paid in this way. The tax remitted is final for both residents and nonresidents.

Capital income (dividends, interest and capital gains) plus income from rent of property and

income from business activities when the special option for paying tax on income from small

business that a person owns as a sole entrepreneur or a self-employed person on the basis of

revenues and standard expenditures in the amount of 80% of the shown revenues is elected is

subject to this system of taxation in Slovenia. It is paid at the flat rate of 25 %, except for the

income from business activities when the special option is elected where the tax is paid at the

flat rate of 25 %. Capital gains tax rate depends on the period of ownership of the capital in

question. It is reduced by 10 percentage points after the first 5 years of ownership to 15 % and it

is reduced by further 5 percentage points every next 5 years of ownership to 10 % (after 10

years of ownership), 5 % (after 15 years of ownership) and 0% (after 20 years of ownership).

Nonresidents of Slovenia do not receive the indicative calculation of personal income tax and

the tax withheld or reported and remitted during the year for them is final for all types of income.

Question 3: What are my tax liabilities when I am employed1 in Slovenia as a nonresident? How do I pay tax on income2 from employment based on the employment contract in Slovenia?

1 It is important to emphasize that employment in Slovenia can be effected in two main ways. An employee can either

sign an employment contract (employment relationship) with the employer or any other job contract (other contractual relationship). The employer usually uses the employment contract to offer a permanent job position to a candidate to do work on the main activities of the employer and the second one is used to offer a temporary position to do work on the employer’s supplemental, auxiliary or temporary activities. Income received on the basis of the employment relationship (employment contract) in Slovenia is treated differently and it is taxed according to a different set of rules than income received on the basis of the other contractual relationship (any other job contract).

2 Income from employment based on the employment contract consists of gross salary, gross compensation for

absence from work and any other kind of employment benefits or benefits in kind that an employer offers to or is required by law or by contract to compensate its employees with. Examples of such compensation are allowance for vacation, award for career jubilee, severance pay, solidarity payment, work-related expense reimbursement, any kind of bonuses for employees and their family members like take-home vehicles, tuition reimbursement, paid membership in associations or clubs etc., profit sharing based on the employment contract and any other specialized benefits.

6

Answer Nonresidents only pay tax on Slovenian source income (income they receive from sources in

Slovenia). Income from employment has a source in Slovenia if the work is carried on in

Slovenia OR it is paid or credited by the resident of Slovenia or by the business unit of a

nonresident (i.e. a branch of a foreign company). However, if Slovenia concluded a Double

Taxation Agreement (DTA) with your country of residence there might be exceptions to this rule

of the source of income and even when the source of income is determined to be in Slovenia it

is not taxed in Slovenia under certain conditions. They are further explained in answer to the

question no. 5 below.

If you enter into an employment contract with your employer as a nonresident and the income

you receive is determined to have a source in Slovenia as defined above, tax on income from

employment is withheld by your employer upon the calculation and payment of income and it is

final. If this is your main employer where you earn the majority share of all your income from

employment the rate at which the tax is withheld depends on the monthly amount of the net tax

rate schedule3 listed. It can be 16%, 27%, 41% or 50%. Income earned from your potential

other employers will be withheld at the rate of 25%. In case it is compulsory for you to be

integrated into the Slovenian system of social security (if you are from an EU Member State this

depends on the EU social security coordination rules and if not from EU this depends on the

bilateral treaty Slovenia may have concluded with your country of residence) your main

employer will also have to withhold social security contributions discussed in brochure Social

security contributions. At the time of withholding your main employer will deduct your social

security contributions from your gross income to determine your net tax base. To residents of

Slovenia possible allowances would also be deducted.

If your employer does not have the status of the payer of tax (for example an individual or a

foreign entity) and cannot withhold the tax in your name you have to file the following tax return

in fifteen days after the receipt of income as a nonresident: Tax return form for assessing

personal income prepayment from employment or income from other contractual relationship for

non-residents.

Based on the filed form the competent tax authority will issue a tax assessment that will set your

tax liability and according to which you will be required to pay the tax.

Question 4: How do I pay tax on income from employment that I receive on the basis of other contractual relationship and not on the basis of employment contract if I am a nonresident? Answer Nonresidents only pay tax on Slovenian source income. Income from employment has a source

in Slovenia if the work is carried on in Slovenia OR it is paid or credited by the resident or the

business unit of a nonresident (i.e. a branch of a foreign company) of Slovenia. However, if

Slovenia concluded a Double Taxation Agreement (DTA) with your country of residence there

might be exceptions to this rule of the source of income and even when the source of income is

determined to be in Slovenia it is not taxed in Slovenia under certain conditions. They are

further explained in the answer to the question no. 6 below.

3 Net tax rate schedule means tax rate schedule based on the net tax base. Net tax base is gross income decreased by

social security contributions and allowances or exemptions.

7

If you do not work on the basis of the employment contract, but work on the basis of other

contractual relationship and the income you receive is determined to have a source in Slovenia

as defined above, you will be taxed in Slovenia as a nonresident. Income you receive on this

basis decreased by 10% as a standard expense and for mandatory social security contributions

the employee is obligated to pay, based on special regulations, will represent your net tax base.

Apart from the standard expense you are also entitled to deduct your actual work-related

expenses (i.e. expenses of commute, business travel and accommodation) from your tax base

up to a legally set amount determined by the government decree. However, this deduction has

to be done through a special procedure and cannot be done automatically by your employer

upon the payment of income. The employer or payer of income is required to withhold a tax

upon the calculation and payment of income which is final for Nonresidents. The tax rate here is

universal and amounts to 25%. It does not depend on the amount of income and the tax rate

schedule.

If your employer or payer of income is an individual or a foreign entity who cannot withhold the

tax you have to file the following tax form in fifteen days after the receipt of income as a

nonresident: Tax return form for assessing personal income prepayment from employment or

income from other contractual relationship for non-residents.

Based on the filed form the competent tax authority will issue a tax assessment that will set your

tax liability and according to which you will be required to pay the tax.

Question 5: What is the procedure to enact the deduction of actual work-related itemized expenses (i.e. expenses of commute, business travel and accommodation) from my tax base in case of work on the basis of other contractual relationship? Answer The intention of this procedure is to ensure equal tax treatment of persons that have an

employment contract and persons that work on the basis of other contractual relationship. In

case of persons that work on the basis of the employment contract the employer can

automatically deduct work-related expenses (up to the amount set in the government decree)

that were paid to employees from their tax base.

Article 289 of the Tax Procedure Act therefore enables workers on the basis of other contractual

relationship to deduct actually incurred work-related itemized expenses from their tax base in

addition to the standard expense in the amount of 10% of income. Nonresidents can claim them

in fifteen days after the receipt of income on the following form if the tax is withheld by the

payer: REQUEST for tax base reduction for employment income (from other contractual

relationships) for the purpose of claiming reimbursement of actual expenses

If your employer or payer is an individual or a foreign entity who cannot withhold the tax and you

had to file the form mentioned in the answer to the question no. 4 above you are entitled to

claim such expenses in the form itself. In both cases you need to keep the bills to prove the

source and the cause of the expenses incurred in order to be allowed to deduct them.

Question 6: Under what circumstances I will not be taxed on my income from employment in Slovenia even though the source of income is determined to be in Slovenia?

8

Answer Answers to questions no. 3 and 4 explain that according to Slovenian tax legislation

nonresident’s income from employment is taxed in Slovenia when the source of such income is

determined to be in Slovenia. However, if DTA between Slovenia and your country of residence

is in place it can determine exceptions under which you will not be taxed in Slovenia. You have

to check a particular DTA to learn what exceptions are in place in your case. However, since

Slovenia follows the recommendations of OECD Model Tax Convention when negotiating DTAs

with other countries we can review Article 15 of the Model Tax Convention that determines the

exceptions. The article defines the conditions under which you will not be taxed in Slovenia

even if the source of your income from employment is in Slovenia.

You will be exempt from tax, if you satisfy the following condition:

- you do not exercise employment (you do not physically work) in Slovenia (Paragraph 1 Article 15),

Alternatively, you will be exempt, when you cumulatively satisfy all three of the following conditions:

- you are present in Slovenia for a period or periods not exceeding in the aggregate 183 days in any 12 month period commencing or ending in the fiscal year concerned (Paragraph 2 Article 15)

- the remuneration is paid by, or on behalf of, an employer who is not a resident of Slovenia (Paragraph 2 Article 15)

- the remuneration is not borne by a permanent establishment which your employer has in Slovenia (Paragraph 2 Article 15)

Question 7: How do I claim exemption from tax on income from employment based on the Double Taxation Agreement (DTA)? Answer Nonresidents can claim the exemption from taxation, if they satisfy conditions in their particular

DTA, which in most cases will be similar to those explained in the answer to the question no. 6

above.

The exemption provided for in the DTA can be claimed at the time of payment of income directly

through a special procedure or by an application for a refund of overpaid tax. In case there is no

payer of tax (to simplify this means your employer or payer is not a Slovenian legal entity or sole

entrepreneur), the tax cannot be withheld in the name of the recipient, so the recipient has to file

a Tax return form for assessing personal income tax prepayment for income from employment

or income from other contractual relationship for nonresidents and the benefits from the DTA

are claimed in the return itself.

Otherwise, the recipient (employee or payee) applies for exemption from the withholding tax

prior to the receipt of income. Application is made on the KIDO form - Annex no. 5 before the

income is paid.

Recipient of income from employment entitled to benefits from the relevant DTA files a filled out

KIDO form with her/his employer or payer, who sends it to the competent tax authority.

9

Whether the recipient is entitled to benefits or not has to be decided by the competent tax

authority. The employer is only authorized not to withhold a tax upon the official permission from

the competent tax authority.

Refund of the tax already withheld can be claimed by the recipient (beneficial owner) on the

basis of the written application KIDO form - Annex no.12 to the competent tax authority.

Question 8: How am I taxed in Slovenia as a nonresident artiste and a nonresident sportswoman or sportsman when income is paid directly to me? Answer Nonresident entertainers and sportswomen or sportsmen who perform in Slovenia and directly

receive income for their performance are taxed on such income with a withholding tax of 15%

according to the Article 68 of the Personal Income Tax Act. The tax base is determined by

actual income received decreased by 80% as a standard expense. If an artiste and a

sportswoman or a sportsman does not have a permanent establishment in Slovenia they can

claim actual expenses to be deducted from their income INSTEAD of the standard expense.

Question 8.1: How do I make a request for the deduction of actual itemized expenses instead of the standard expense? Answer To make such a request for the deduction of actual itemized expenses you have to file the

following form with the competent tax authority in 30 days after the income was paid or in 30

after the last payment if the income was being paid out in several parts according to Article

311.a of the Tax Procedure Act.

Question 8.2: How can I claim the relief from withholding tax as a nonresident artiste and a nonresident sportswoman or a sportsman according to the relevant Double Taxation Agreement (DTA)? Answer In certain DTAs Slovenia concluded with other countries there is a special provision that

provides for an exemption from taxation for entertainers and sportswomen or sportsmen in

certain circumstances. It usually states that entertainers and sportswomen or sportsmen who

come to perform to Slovenia on the basis of a special agreement, program of exchange or when

the performance is financed by the government of the resident country of the performer the

income they earn from their personal activities in such case shall be exempt from taxation in

Slovenia. This exemption can only be granted upon the permission of the competent tax

authority in Slovenia.

According to Article 260 of the Tax Procedure Act a nonresident entertainer and a sportswoman

or a sportsman entitled to the exemption in accordance with the relevant Double Taxation

Agreement (DTA) can apply for exemption from the withholding tax prior to the receipt of

income. Application is made on the KIDO form - Annex no.8.

10

Entertainer and a sportswoman or a sportsman entitled to the exemption from the relevant DTA

files a filled out KIDO Form with the payer of income, who sends it to the competent tax

authority.

Whether the taxpayer is entitled to the exemption or not has to be decided by the competent tax

authority. The payer of income is only authorized not to withhold the tax upon the official

permission from the competent tax authority.

When the income was already withheld and the benefits from the DTA apply in that particular

case the beneficial owner of income (an entertainer, a sportswoman or a sportsman) can apply

for a refund of the tax withheld by filing the KIDO form - Annex no. 12 with the competent tax

authority.

Question 9: What is the tax treatment of income earned by students through the Student Services Office? Answer Income that a student receives through Student Services Office is treated as work on the basis

of other contractual relationship (not work on the basis of the employment contract). This means

that Student Services Office is required to withhold the tax at source at the moment the

payment is made according to the tax rate of 25% taking into account a deduction of a standard

expense in the amount of 10% of the income paid. Students, residents of Slovenia have a

special tax benefit to which international students, nonresidents of Slovenia, are also entitled

under certain conditions. This benefit is described into further detail in an answer to the question

no. 10 below.

However, according to the Article 289 of the Tax Procedure Act students categorized as

working on the basis of other contractual relationship are also entitled to a refund of actual

itemized expenses related to work (i.e. expenses of commute, business travel and

accommodation), if they file a tax form.

In order to claim the expenses students must be able to prove the source and cause of expenses with saved bills.

Question 10: How am I taxed, if I am a nonresident student working in Slovenia? What is the special personal student allowance and are nonresident students also entitled to it?

Answer Resident students who work in Slovenia pay their income tax the same way as other employees

employed on the basis of other contractual relationship. However, for reasons of their special

status as students having a need to support their studies, they are subject to a more favourable

treatment for purposes of the withholding tax by the Student Services Office.

The exception of students compared to other employees is that the Student Services Office only

withholds the tax when income of more than 400 euros is paid out at once. This is also called a

special personal student allowance according to Slovenian Personal Income Tax Act. However,

if they earn more than the set amount that is dependent on the general annual tax allowance

per year they pay tax according to the tax rate schedule.

11

Nonresident students can be treated the same way, if a special provision was included into the

Double Taxation Agreement (DTA) concluded between their country of residence and Slovenia

that allows for such a benefit. If this is the case, the Student Services Office does not withhold

tax for income of 400 or less per payment as long as the total payment does not exceed the

limit set on the annual basis. The benefit is limited to 75 % of the annual amount of the general

tax allowance (2.477,03 euros from the year of 2013 onwards). From that amount on, the tax

has to be regularly withheld by the Student Services Office as described in the answer to the

question no. 16 above. This benefit is only granted to nonresident students upon the

authorization of the tax authority on the basis of a special form that they have to file with the

competent tax authority. Procedure is described in the answer to the following question.

Question 11: What is the procedure of obtaining the authorization from the competent tax authority for the special personal student allowance, if I am a nonresident of Slovenia?

Answer You can apply to take advantage of the benefit by presenting a filled out KIDO form - Annex no.

4 to the Student Services Office (Študentski servis) or any other authorized agency that files it

with the competent tax authority and obtains the permission to apply the benefit prior to the

payment of income.

If the tax is withheld at the source of income without regard to the benefit, you are entitled to be

refunded for the amount of tax, when you file KIDO form - Annex no. 12 with the competent tax

authority.

Question 12: What is the tax treatment of professors and researchers from abroad who come to Slovenia to teach and do research? What income do professors and researchers earn in Slovenia and how is it taxed? Answer It is common that Slovenian universities or other institutions that offer tertiary education and

research institutions hire professors and research fellows from abroad. They are nonresidents

of Slovenia for tax purposes and are therefore required to pay taxes only on Slovenian source

income.

According to Article 8, 9 and 10 of the Personal Income Tax Act their income has a source in

Slovenia when the services for which a professor or researcher is paid were performed in

Slovenia OR if the income is paid by or if it represented an expense to a Slovenian legal entity

(in most cases Slovenian university or other research institution). This is also true when

universities participate in various EU or international projects and pay their professors or

researchers from abroad with funds received from such projects.

Income of professors and researchers from abroad is in most cases treated in Slovenia as

income from employment (either based on the employment contract or any other job contract).

The tax treatment of such income is described into further detail in answers to the questions no.

3 (employment contract) and no. 4 (any other job contract or other contractual relationship).

Since in practice institutions or payers of income often conclude a scholarship contract with

professors or researchers who combine studies at a Slovenian university or institution of higher

education with teaching and doing research or participating in EU research projects it is

12

important to emphasize that in most cases such income is not treated as a scholarship4 for tax

purposes despite the name. It is in fact treated as income from employment.

Sometimes income of professors and researchers can also be treated as income from business

if they do research or give lectures as a part of their independent personal activities as

nonresident sole entrepreneurs or self-employed persons.

Certain DTAs that Slovenia concluded with countries with which it wants to encourage the

cooperation in the field of education and science include a special article about professors and

researchers. This article provides for the exemption from taxation of the Slovenian source

income of professors and researches from abroad under certain conditions.

Question 13: What are the conditions under which Slovenia grants exemption from taxation of Slovenian source income of professors and researchers from abroad and how is it claimed? Answer If a particular DTA includes a special article about professors and researchers their income from

employment or business will be treated according to the provisions of this specialized article

and not according to the article that deals with income from employment or income from

business a professor or a researcher received in Slovenia.

Such article usually provides for an exemption from taxation of the Slovenian source income of

professors and researchers from abroad earned by their activities of teaching and doing

research at the university or some other educational institution. Any additional income received

for providing consulting services to private companies or any other organization that is not an

educational institution will not be treated in accordance with this specialized article and will not

be exempt from taxation. Also, income that researchers and professors receive from royalties

for patents or copyrights etc. will not be treated according to this specialized article, but it will be

treated in accordance with articles that deal with this type of income. Royalties are dealt with in

the Article 12 of the OECD Model Tax Convention.

Professors and researchers earning income from teaching or doing research in Slovenia are

entitled to exemption provided for in this specialized article if they satisfy the conditions set forth

in the article of the particular DTA. These conditions may differ from one DTA to another.

However, there is a set of conditions that are usually included in the article that we can review

here. They are:

status of residence before arriving to Slovenia (a professor or researcher must be a

resident of another country immediately prior to their arrival to Slovenia to teach or do

research)

invitation of the distinguished university or other distinguished educational or research

institution

time limit of the entitlement to exemption (usually 2 years from the arrival of the

professor or researcher to Slovenia)

4 For tax purposes scholarship is defined in the Article 25 of the Personal Income Tax Act and includes

remuneration paid to a person who is a full-time student (in school or at the university or any other institution of higher education) in connection to her/his studies or training effected in accordance with special provisions. It is paid from a state budget or a fund financed from the budget. It also includes remuneration paid by a foreign country, international organization or any other educational, cultural or research institution, except for allowance received as a substitute for the lost income or any remuneration connected to work or providing services.

13

source of income (sometimes the exemption is only provided when the professor or

researcher is paid from foreign funds)

teaching and research is done for the public benefit (not for private use)

number of times a person can take advantage of this exemption (determines that a

person can only be exempt from taxation once, for example only first two years since

she/he arrived to Slovenia).

The procedure of claiming the exemption is the following. A professor or a researcher entitled to

the exemption in accordance with the relevant Double Taxation Agreement (DTA) can apply for

exemption of the withholding tax prior to the receipt of income. Application is made on the KIDO

form - Annex no. 7.

A professor or a researcher entitled to the exemption from the relevant DTA files a filled out KIDO Form with the payer of income, who sends it to the competent tax authority.

Whether the taxpayer is entitled to the exemption or not has to be decided by the competent tax authority. The payer of income is only authorized not to withhold the tax upon the official permission from the competent tax authority.

When the income was already withheld and the benefits from the DTA apply in that particular

case the beneficial owner of the income (a professor or a researcher) can apply for a refund of

the tax withheld by filing the KIDO form - Annex no. 12 with the competent tax authority.

Question 14: Do I pay tax on income from small business that I own as a sole entrepreneur or a self-employed person if I am a nonresident of Slovenia? Answer If you own a business abroad and you do business in Slovenia, which means you are not a

resident of Slovenia, you do not pay tax in Slovenia when you earn income for services

provided in Slovenia, if you satisfy the following conditions:

your business does not qualify as a business unit of a nonresident (permanent

establishment) in Slovenia,

you are not present in Slovenia for more than 183 days in any period of 12 months

you do not earn the types of income which are subject to withholding tax in Slovenia,

such as dividends, interest, royalties, rents, any compensation to artistes and

sportsmen for their performance and any payments to persons in countries with the

general average nominal profit tax rate of less than 12.5%.

When is it considered that you do business in or through the business unit of a nonresident in

Slovenia can be found in answers to the questions in brochure Taxation of business unit or

permanent establishment of the foreign enterprises, Corporation tax. Apart from that, income

arising from property that is held by your business in Slovenia including the alienation of a

business unit as a whole also qualifies as doing business in or through a business unit of a

nonresident in Slovenia. What types of income are subject to withholding tax can be found in

answers to the questions in brochure Taxation of foreign enterprises, Withholding tax .

Question 15: How do I pay tax on income from small business that I own as a sole entrepreneur or a self-employed person if business is done in or through my business unit of a nonresident (permanent establishment) in Slovenia?

14

Answer There are two procedures to pay personal income tax as a sole entrepreneur in Slovenia. The

first one is explained here and the second one is discussed in the answer to the following

question.

The first procedure is straightforward and includes filing a specifically designed income tax

return for sole entrepreneurs with the competent tax authority by 31st of March of the current

year for the previous tax year. This deadline changes when there are special circumstances5.

On the basis of this return the business owners determine their annual tax liability and calculate

the advance tax payment they will pay periodically in the following year (monthly if the advance

tax payment is more than 400 euros total and every three months if the advance tax payment

is less than 400 euros total). Advance tax payments are calculated according to the net tax rate

schedule6. The tax rate schedule are 16%, 27%, 41% and 50%. When calculating the tax base

for the advance tax payments businesses can also apply certain allowances, the most important

of which are allowance for research and development (R&D) investment expenses, equipment

and intangible property investment expenses, donations and allowance for additional

employment, thereby reducing their advance tax payments.

Tax on the types of income that are subject to withholding according to the Article 68 of the

Personal Income Tax Act can still be calculated and paid by the payer upon the payment of

income. The types of income subject to withholding are discussed in the answer to the question

in brochure, Taxation of foreign enterprises, Withholding tax. Such withheld tax is entered in the

income tax return for sole entrepreneurs and deducted from the tax liability according to the

Article 300 of the Tax Procedure Act.

As a nonresident the advance tax payments that you pay on the basis of the tax return are

considered a final tax. You do not receive the indicative calculation of personal income tax.

Question 16: What is the special option to pay tax on income from small business that I own as a sole entrepreneur or a self-employed person if business is done in or through my business unit of a nonresident (permanent establishment) in Slovenia? Answer The special option for paying tax on income from small business that a person owns as a sole

entrepreneur or a self-employed person is a simplified way of taxation of small businesses

which are only starting to operate or businesses with the small scale of operations, generating

revenues (determined according to accounting standards) that did not exceed 50.000 euros in

the previous tax year.

Therefore, the owner can choose to pay the tax on the basis of revenues and standard

expenditures in the amount of 80% of the revenues if the revenue (determined according to

accounting standards) of a business does not surpass the amount of 50.000 euros in the

previous tax year and if certain additional conditions aimed at preventing possible cases of tax

5 Special circumstances represent one of the following situations: the bankruptcy procedure, change of

legal status, the closure of business etc. For information on the deadline for filing the return in such cases you should consult the competent tax authority.

6 Net tax rate schedule means schedule based on the net tax base. Net tax base is gross income

decreased by social security contributions and allowances or exemptions.

15

avoidance in situations of start-up of a business or changing the legal form of a business are

met.

Sole entrepreneur has to inform the competent tax authority about the decision to elect this tax

treatment in the current tax year by submitting a prescribed form by 31st of March of the current

year for the previous tax year.

Owners that satisfy the conditions and elect this way of taxation are not entitled to allowances.

They are not required to keep standard accounting documents on file, but they have to keep two

kinds of records: the record on issued bookkeeping documents (this mostly includes bills), from

which the amount of income earned is evident and the record of assets.

Such a taxpayer has to file a specific tax return form to the competent tax authority by 31st of

March of the current year for the previous tax year. Again this deadline changes when there are

special circumstances as discussed in the answer to the previous question. On the basis of this

return the business owners determine their annual tax liability and calculate the advance tax

payments they will pay periodically in the following year (monthly if the advance tax payment is

more than 400 euros total and every three months if the advance tax payment is less than 400

euros total).

Income from small business is taxed at the flat rate of 20 % when election for tax treatment

described above is made. The annual personal income tax liability of the taxpayer is determined

on the basis of the tax return. If the tax paid during the year in the form of advance tax

payments exceeds the annual tax liability the taxpayer gets reimbursed for the excess. If the tax

paid during the year falls short of the annual tax liability the taxpayer has to settle the difference.

Question 17: How do I pay income tax from basic agricultural and forestry activities as a nonresident in Slovenia? Answer Tax on income from basic agricultural and forestry activity has to be paid by an individual,

member of a farm household, performing basic agricultural and forestry activities, if the income

of the household as a whole reaches 200 euros or more.

Person performing basic agricultural and forestry activities (liable to pay the tax) in a tax year is

defined as the person who:

owns, leases or uses farmland or a forest on a cut-off date – June 30th,

is entered into the register of beehives as a beekeeper on a cut-off date – June 30th,

received other income related to basic agricultural and forestry activities (for example

subsidies and other state aid).

Income from basic agricultural and forestry activities includes:

presumptive estimation of income from agricultural production if the produce and wood

would have been sold on the market (also known as the cadastral income),

presumptive estimation of income from honey and beeswax production and other

primary bee products (honey comb, royal jelly, bee pollen, raw propolis and honey bee

venom or apitoxin) and estimation of income from the sale of bee colonies, bee swarms

and queens on a beehive,

other income related to such activities (mainly agricultural subsidies and other state

aid).

16

Tax on income from basic agricultural and forestry activities for a nonresident is set by the tax

assessment based on activities from agriculture, issued by the Financial Administration of

Slovenia by March 30th of the current tax year for the previous tax year. It is paid as an advance

tax payment and the tax rate is 16 % for nonresidents. Tax paid as an advance tax payment is

final for nonresidents.

This tax assessment also includes the settlement of the advance tax payments from agricultural

subsidies that are paid by withholding. The tax assessment takes into account the advance tax

payments from these subsidies paid during the year.

Advance tax payments from agricultural subsidies are paid by the payer of subsidies that holds

the status of the payer of tax. The payer is required to calculate and withhold the tax at the time

of payment of subsidies according to the following rates:

10 % from tax base, if the payment is more than 200 euros

0 % from tax base, if the payment is equal to or less than 200 euros.

Question 18: How do I pay income tax from rent of property as a nonresident in Slovenia? Answer If you are a nonresident of Slovenia and you own a real estate, equipment, a vehicle or a

camper van situated in Slovenia that you are lending to others on the basis of a lending contract

OR the rent is paid or credited by the resident or the business unit of a nonresident (i.e. a

branch of a foreign company) of Slovenia, you are taxed on such rent since this income has the

source in Slovenia.

Tax on income from rent can be paid by withholding or on the basis of a tax return. If the person

who pays the rent has the status of the payer of tax (legal entity, a business unit of a

nonresident – for example a branch of a foreign company in Slovenia, sole entrepreneur or

agent) the payer is required to withhold the tax in the name of the recipient at the time of

payment.

However, if the person who pays the rent is an individual or a foreign entity who cannot withhold

the tax, the requirement to pay the tax lies with the recipients of the rent. They must file the

personal income Tax return form for assessing personal income tax for income from renting out

property for rent by the 28th of February of the current year for the previous tax year.

Tax base is determined by the amount of the rent lowered either by the standard expense in the

amount of 10% of the received rent or by the actual expenses of maintaining the property’s

value (“actual expenses”) that have to be proven by receipts addressed to the name of the

taxpayer. The taxpayer can opt for either one of these options.

In order to claim the reduction of the tax base by actual expenses instead of the standard

expense in the amount of 10 % of the received rent the taxpayer has to make a special request

by the 15th of January of the current year for the previous tax year. The request is made on a

form - Request for tax base reduction for income from renting property for the purpose of

claiming costs of property maintenance, which preserves the usable value of property.

Personal income tax on income from the rent of property is paid at the flat rate of 25 % by both

residents and nonresidents and tax paid this way is final.

17

Question 19: How do I pay income tax on royalties as a nonresident in Slovenia? Answer Nonresidents pay tax on Slovenian source royalties. Royalties have a source in Slovenia when

they are paid or credited by a resident or the business unit of a nonresident (i.e. a branch of a

foreign company) of Slovenia.

Tax on royalties in Slovenia is withheld by the payer of royalties, when the payer has the status

of the payer of tax (a legal entity, a business unit of a nonresident – for example a branch of a

foreign company in Slovenia, a sole entrepreneur or an agent) or through the personal income

tax return (when the payer does not hold the status of the payer of tax), specific to the type of

income – royalties – filed with the competent tax authority after the income is received. Tax

assessed on the basis of such a return is treated as the advance tax payment. If you are a

nonresident this is also a final tax.

Question 19.1: What is the rate for the advance tax payments on royalties and how are they collected? Answer The tax rate is 25 % and the tax payments are calculated from the tax base equal to the receipt

of any income that is defined as a royalty decreased by the standard expense in the amount of

10 % of the royalties received. Deduction of the standard expense can only be made under the

following two conditions:

- owner of any rights for which the royalties are paid is also the author (for example,

deduction of expenses does not apply when the author of a copyright has sold it to

another person and does not own those rights anymore)

- royalties are not paid for the use of, or the right to use of, personal name, pseudonym

or image

When the payers of royalties are individuals or foreign entities, which means they cannot

withhold the tax, a recipient has to file the Tax return form for assessing personal income tax

prepayment for income from property right transfer with the competent tax authority in 15 days

after the receipt of such income.

However, if Slovenia concluded a DTA with your country of residence, the rate at which the tax

on royalties is levied to nonresidents can be lower or there might be no tax at all. To determine

your tax liability you have to check a particular DTA.

Question 19.2: How do I claim a more favourable tax rate on royalties based on the Double Taxation Agreement (DTA)? Answer Nonresidents can claim more favourable tax treatment from the DTA at the time of payment of

income directly through a special procedure or they can claim a refund of overpaid tax. In case

there is no payer of tax and the tax cannot be withheld in the name of the recipient, the recipient

has to file a Tax return form for assessing personal income tax prepayment for income from

property right transfer and the benefits from the DTA are claimed in the return itself.

18

A recipient (beneficial owner) of royalties can apply for a relief or exemption from the

withholding tax prior to the receipt of income. Application is made on the KIDO form - Annex no.

3 before the income is paid.

Taxpayer entitled to benefits from the relevant DTA (beneficial owner) files a filled out KIDO

Form with the payer of income, who sends it to the competent tax authority.

Whether the taxpayer is entitled to benefits or not has to be decided by the competent tax

authority. The payer is only authorized not to withhold the tax or withhold the tax at a lower rate

upon the official permission from the competent tax authority.

Refund of the tax already withheld can be claimed by the beneficial owner up to the difference

between the full amount withheld and the amount required by the DTA. In case the taxpayer

was exempt from tax according to the DTA the full amount of the withheld tax is refunded. Claim

of the refund can be made on the basis of the written application KIDO form - Annex no. 11 to

the competent tax authority.

Question 20: How do I pay income tax on other income as a nonresident in Slovenia? Answer All forms of income that are not specifically mentioned in answers to any of the questions, for

example rewards, gifts, prize money in games other than the games of chance (these are dealt

with provisions of a different law – not personal income tax act), scholarships, different sorts of

benefits, any compensation received by a volunteer in accordance with the Volunteering Act,

etc. qualify as other income. Nonresidents are only taxed on Slovenian source income, so they

are only taxed on other income that is paid or credited by a resident or the business unit of a

nonresident (i.e. a branch of a foreign company) of Slovenia. There are several exemptions

from taxation of other income in special cases provided for in the Personal Income Tax Act.

Such examples of exempted other income include limited reimbursements of expenses,

scholarships under certain conditions, awards for special achievements etc.

Question 20.1: What is the rate for the advance tax payments on other income and how is it collected? Answer The rate of the advance tax payments is 25 %. In the case of a nonresident this is also a final

tax.

However, if a Double Taxation Agreement (DTA) was concluded between Slovenia and your

country of residence the provision of such an agreement might determine the right of taxation of

other income exclusively to the country of residence. In such a case you will not be required to

pay tax on other income in Slovenia. It is necessary to check provisions of a particular DTA to

determine your tax liability.

If the payer holds the status of the payer of tax (legal person, sole entrepreneur, a business unit

of a nonresident – for example a branch of a foreign company in Slovenia or an agent), it has

the responsibility to withhold the tax and the payer settles the tax liability in the name of the

recipient. However, if the payer is an individual or a foreign entity who cannot withhold the tax,

the nonresident taxpayer alone has the responsibility to pay the tax by filing Tax return form for

19

assessing personal income tax prepayment for other income. It has to be filed in 15 days after

the receipt of income.

Question 20.2: How do I claim an exemption from personal income tax on other income based on the Double Taxation Agreement (DTA)? Answer Nonresidents can claim more favourable tax treatment from the DTA at the time of payment of

income directly through a special procedure or they can claim a refund of overpaid tax. In case

there is no payer of tax and the tax cannot be withheld in the name of the recipient, the recipient

has to file Tax return form for assessing personal income tax prepayment for other income and

the benefits from the DTA are claimed in the return itself.

A recipient (beneficial owner) of other income can apply for a relief or exemption from the

withholding tax prior to the receipt of income. Application is made on the KIDO form - Annex

no. 8 before the income is paid or credited.

Taxpayer entitled to benefits from the relevant DTA (beneficial owner) files a filled out KIDO

Form with the payer, who sends it to the competent tax authority.

Whether the taxpayer is entitled to benefits or not has to be decided by the competent tax

authority. The payer is only authorized not to withhold the tax upon the official permission from

the competent tax authority.

Claim of the refund can be made by the beneficial owner of the income on the basis of the

written application KIDO form - Annex no. 12 to the competent tax authority.