Applicable changes in tax legislation
Inclusion in a special VEM arrangement (OSS) via the eDavki website
From 10 June 2021 onwards, taxpayers may submit an application for inclusion in the special VEM regime (special Union regime, special non-Union regime and import regime). The forms can be found in the section “Special arrangements for telecommunications services, broadcasting services or electronic services on the eDavki portal. Each individual arrangement has its own registration form, namely the EU scheme, the non-EU scheme, the import scheme and the intermediaries for the import scheme.
VAT treatment of orders arriving after July 1, 2021 when then new E-commerce rules start to apply
Orders that were placed before July 1, 2021, but arriving later than July 1, 2021, will be subject to new VAT rules. This means that goods valued less than 22 EUR will be charged with the VAT rate of the country of residence and possibly even custom fees.
The exemption from customs duties on goods worth up to EUR 150 will still apply after July 1, 2021. This ensures that goods imported outside the EU do not have a VAT advantage over goods purchased within the EU.
Benefits of the Import One Stop Shop (IOSS)
The main benefits of the IOSS are simplified VAT compliance, improved e-commerce experience, and more efficient imports. Drop shippers can meet the delivery times aka have fewer delays when shipping goods because the low-value goods (valued at no more than €150) using IOSS will be subject to an expedited customs process. Correspondingly, drop shippers will have to provide a valid IOSS VAT ID to the courier. The IOSS applies to the low-valued goods that are being sold to consumers in the EU and located outside of the EU at the time of sale.
With the IOSS, companies can make a single registration into IOSS and submit one IOSS VAT return for all the goods they ship to the EU countries. IOSS states that it is mandatory to account for the VAT at the point of sale. This means that the items must be sold with VAT included (customer is charged with local VAT).
VAT liability of marketplace in European Union
Marketplace is involved in a supply when:
- it is involved in authorizing the payment,
- it is involved in the delivery of the product or
- it sets the terms of the supply either directly or indirectly.
The marketplace is liable for collecting and paying the VAT if the goods imported into the EU with a shipment value below EUR 150 are being sold to EU customers via the online marketplace or if sales of goods by a non-EU e-commerce seller are made via an online marketplace. In case the goods are dispatched in value over EUR 150 or the goods are sold by a supplier not established in the EU the marketplace is not liable to collect and pay VAT, but the seller is the one who will collect VAT from the final client and transfer that VAT amount to the relevant tax authority.
When the marketplace is liable for the payment of VAT, the supplier will make an exempt sale to the marketplace, and afterward the marketplace will charge and collect VAT from the final client. This is important information for marketplaces like Amazon, eBay, etc.
Amendments to the regulation on the tax treatment of reimbursements of expenses and other income from employment
On 14 July 2021, at a session, the Government of the Republic of Slovenia adopted amendments to the Decree on the Tax Treatment of Reimbursements of Expenses and Other Employment Income.
Under the new amendment, the amount up to which reimbursement of transport costs to and from work is not included in the tax base is EUR 0.18 for each full kilometer of distance between normal residence and place of work, for those who do not have the possibility of public transport and cross-border migrant workers. It also eliminates the determination of the tax-free minimum amount, taking into account attendance at work in an individual month, and the determination of the tax-free work in the amount of a registered non-transferable monthly ticket for public transport upon presentation of proof of purchase.
Reimbursement of costs for transport to and from work is not included in the tax base of employment income up to a maximum of EUR 140 per month, even if the amount of tax-free work would be determined in compliance with Article 3 (1) of the Decree (distance and value 0.18 EUR per kilometer), lower. The conditions for the tax-free amount with an individual employer are at least one day of presence at work and at least one kilometer from the place of residence to the place of work.
For public workers involved in the agreement between employers and public sector unions, the new regulation for the reimbursement of transport costs to and from work will come into force in July 2021. For other employees, the new regulation for reimbursement of transport costs to and from work will apply in September 2021, until then the Regulation valid until this recent amendment is still in force.
The Decree published in the Official Gazette of the Republic of Slovenia (No. 104/21) of 1 July 2021 introduces changes to payments to apprentices for compulsory practical work. Apprentices' incomes are not supposed to be included in the tax base of employment income according to the year of schooling up to the amounts determined as the minimum amount of the apprenticeship award by the law governing apprenticeships. Amendments under the new regulation will enter into force on the day when the harmonized amounts of the minimum amounts of apprenticeship awards are published in accordance with the law governing apprenticeships, before which date the older regulation will apply.
The arrangement according to which the reimbursement of transport costs to work is included in the tax base of income from the employee's employment is maintained if the employee has the right to use the official vehicle for private purposes and the employer also provides him with fuel for such use of the official vehicle. The arrangement for employees earning income from employment from abroad is also maintained, namely the cost of transport to and from work is not included in the tax base up to EUR 0.18 for each full kilometer of distance between normal residence and place of work for each day of presence at work, if the place of performance of work is at least one kilometer away from the employee's residence.
Proposal for amendments to tax legislation
Acceptance of PKP 9 proposal by the Slovenian government
On 17 June 2021, at its session, the government adopted the Bill on Intervention Measures to Assist the Economy and Tourism in Mitigating the Consequences of the Covid-19 Epidemic - ZIUPGT. The proposal was also approved by.Slovenian Parlament.
The proposal proposes the issuance of new tourist vouchers in the amount of EUR 50 for children and EUR 100 for adults in 2021, state funding of the annual recourse in the amount of the minimum wage for tourism, catering, sports, and cultural activities, and reimbursement of 25% of eligible costs to the film and audio-visual industry. The proposal also again intends to extend the measure of reimbursement of part-time wage compensation until 30 September 2021. Lastly, the government also included agricultural activity, ski operators, and SPA’s in the proposal.
The National Assembly adopted an amendment to the law on cross-border provision of services
On July 9, 2021, the National Assembly approved an amendment to the law on cross-border provision of services. The main change concerns the transposition of the principle of applying the same rules on remuneration for the work done by posted workers as it applies to local workers. The principle is transposed from European legislation. It is also mandatory to respect the principle of equal treatment in the case where the cross-border service is provided by posted workers employed by the employer to provide work and to limit long periods of posting. The amendment to the law also eliminates some disproportionate measures pointed out by the European Commission.
The package of financial laws was adopted by the National Assembly's Finance Committee
On July 10, 2021, the National Assembly Committee on Finance supported the proposals of three financial laws. The Market in Financial Instruments Act, the Act on the prudential supervision of investment companies and the Mortgage and Municipal Bond Act, which transpose European directives into Slovenian law. The National Assembly will shortly decide on proposed amendments to the laws.
The proposed amendment to the Mortgage and Municipal Bond Act transposes the provisions of European regulations in the field of issuing covered bonds and public supervision of covered bonds. The main change concerns the unification of the structural characteristics of covered bonds as securities in EU Member States. This amendment gives the Securities Market Agency special supervisory powers.
The proposed amendment to the Act on the prudential supervision of investment firms will independently determine the prudential requirements of investment firms, in accordance with the transposed provisions of the European directive. The proposed amendment to the Market in Financial Instruments Act transposes the European directive into Slovenian law, which is part of the European Commission's comprehensive strategy for economic recovery after the pandemic with the help of capital markets.
Changes in European Union
The European Commission intends to set up an observatory against tax abuse
The European Commission has announced the establishment of a European Tax Observatory, a new research institution to help combat tax evasion, tax avoidance, and aggressive tax planning. The observatory is an initiative of the European Parliament and is to be led by Professor Gabriel Zucman. The Tax Observatory will be funded by the European Union, while the Observatory would support the development of EU legislation, through research, analysis, and data exchange. The Observatory's mission is to become a "source of new ideas" to combat tax evasion and to become an international anchorage for the study of taxes in a globalized world.
The European Commission is preparing a proposal for new EU revenue streams
In the proposal, it is planned to create three new revenue streams a digital levy, a carbon border adjustment mechanism, and the EU Emissions Trading System that would help to repay the joint debt caused by borrowing to finance the recovery fund of the EU. This proposal addresses the taxation of multinational companies, to ensure they pay their fair share of taxes, which is in line with the G7 agreement on global tax reform and fights against climate change.
G7 finance ministers and central bank governors have agreed to set a global minimum corporate tax rate of 15%
The G7 countries (France, Germany, Italy, United Kingdom, USA, Canada, and Japan) have endorsed on a deal that sets the global minimum corporate rate of 15%. Additionally, the tax rate of profits would no longer be determined by the physical presence of the corporations, but it would consider the reallocation of taxing rights, which is an answer to taxation of the dominant cross-border multinationals like Amazon and Google. The US Secretary of Treasury Janet Yallen has called these actions the means to end the “race to the bottom”, where countries were competing to offer the most appealing corporate tax rate. OECD has performed a study that showed the average corporate tax rate settled at 21,4% in 2018, which is 45-50% less than in the 1980s. The deal that G7 agreed on, still needs to be discussed in more detail and it probably will take many years before it comes into effect. The EU would collect 50 billion EUR more in 2021 if the minimum corporate tax rate would be in place, as said by the new EU Tax Observatory. Countries in Europe that currently have tax rates on corporate income below 15% are Hungary (9%), Bulgaria (10%), Ireland (12,5%), and Cyprus (12,5%). Hungary has already expressed dissatisfaction with such an agreement.
Court of Justice of the European Union (ECJ) new tax cases
The person holding the goods intended for delivery in another Member State is the person liable to pay the excise duty
On June 10, 2021, the Court of Justice of the European Union ruled in Case C‑279/19 (The Commissioners for Her Majesty’s Revenue and Customs v WR,), which dealt with the question of liability of charging the excise duty to the person when they are transported to another Member State.
A self-employed worker that drove a heavy goods vehicle by WR was stopped on September 6, 2013, when he arrived at Dover Docks in the United Kingdom by the UK Border Agency. The goods transported in the vehicle were subject to excise duty. The goods were sent from the tax warehouse in Germany to the tax warehouse in the United Kingdom. The WR has given the UK Border Agency agents a note based on the Convention on the Contract for the International Carriage of Goods by Road. It was stated in the CMR note in line with Article 21 of Directive 2008/118 that the goods at issue were covered by an electronic administrative document containing an administrative reference code. However, the agents found out that the CMR note had already been used for separate delivery of beer for the same tax warehouse in the United Kingdom. The WR was fined EUR 5.700 as well as charged an amount of EUR 26.400 EUR of excise duty.
The Court ruled that “Article 33(3) of Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC must be interpreted as meaning that a person who transports, on behalf of others, excise goods to another Member State, and who is in physical possession of those goods at the moment when they have become chargeable to the corresponding excise duty, is liable for that excise duty, under that provision, even if that person has no right to or interest in those goods and is not aware that they are subject to excise duty or, if so aware, is not aware that they have become chargeable to the corresponding excise duty.”
Tax work and use of the software provided to investment fund management companies are VAT exempted under certain conditions
On June 17, 2021, the Court of Justice of the European Union ruled in joined cases C‑58/20 and C‑59/20, (K (C‑58/20), DBKAG (C‑59/20) v Finanzamt Österreich, formerly Finanzamt Linz,), which dealt with the interpreting art. 135(1)(g) in two different cases. Article 135 states that the Member States shall exempt the following transactions: (g) the management of special investment funds as defined by the Member States.
The K case (C‑58/20) discusses a third-party supplier that provided tax-related services to ensure the correct taxation of yields for investors (unit-holders of an investment fund) which should be made based on legally required information in accordance with the national law, in order for them to comply with their tax obligations.
The second case DBKAG (C‑59/20) considers the IT specialist risk management software availability used for calculations essential for the risk management and performance measurement of an investment fund. The software is specifically tailored to investment fund and runs within the company. The software allows the company to perform risk management obligations in automatically with minimum intervention from its employees who are limited to providing market information only.
The Court of Justice of the European Union examined both cases and presented the criteria which the services must meet to benefit from the VAT exemption.
Firstly, the services must, viewed broadly, form a distinct, complete service, although they are not required to be wholly outsourced. For example, in the case of the tax services, the fund or management company retains the ultimate responsibility for reviewing and acting on the information provided while the delegation is limited to the computation provision of data. In the case of the software, the management company’s employees must provide the market information.
Secondly, the services must qualify as specific and essential ones (i.e. they must fulfil functions specific and essential to the management of funds) and have an intrinsic link with the fund management activity. Regarding the tax services, the Court emphasized that services necessary for any type of investment would not fall under the exemption. With respect to the risk management software, the Court stated that the sole circumstance that a service is fully performed in an electronic manner does not preclude the application of an exemption.
The Court did not explicitly rule that these two services could be VAT exempt; rather that the conditions of application could be. Ultimately, the Austrian Federal Tribunal is responsible to verify that the conditions for exemption are met. It is important to mention, that the CJEU’s judgment is relevant for assets managers that purchase specific administrative services from abroad and for the parties that provide those services to assets managers.