Applicable changes in tax legislation
The EU-UK Trade and Cooperation Agreement has entered into force
The European Union has completed the procedures for the adoption of a trade and cooperation agreement signed by the EU and the United Kingdom at the end of last December. The agreement formally entered into force on 1 May 2021, after the ratification instruments were exchanged on 30 April 2021. The indications of origin in Annex 7 in the Slovene language are now available for use for export to the United Kingdom, as the document no longer contains legal-linguistic errors. The agreement itself was published in the Official Journal of the EU, L 149, 30 April 2021.
Reduction of the tax on women's menstrual aids to 9.5% VAT rate
Sanitary pads, tampons, and some other menstrual hygiene items are going to be taxed with a 9,5% VAT rate from 3 May 2021. According to the amendment of the Value Added Tax (VAT) Act, the 9.5% VAT rate is charged for menstrual hygiene products, and no longer 22%. According to the calculations of the Young forum and the Women's forum SD, a female in Slovenia is expected to spend an average of 70 to 100 Euros a year on hygiene products.
New regulation on packaging and packaging waste
The Decree on Packaging and Packaging Waste, adopted in the Environmental Protection Act (ZVO-1J) abolishes the quantitative threshold for placing packaging on the market, so all companies and all sole proprietors who place or import packaged goods on the Slovenian market.
The new regulation brings:
- abolition of the quantitative threshold of 15 tonnes of packaging placed annually on the market in Slovenia for the occurrence of the obligation to pay the costs of packaging waste management, and
- introduction of the possibility of paying a lump sum for those producers who place less than 1,000 kg of packaging on the market in Slovenia annually.
Companies and sole proprietors must arrange their entry in the register of producers by 24 May 2020. By 1 July 2021, it is then necessary to arrange records on the placing of packaging on the market of the Republic of Slovenia. Quarterly reporting is also prescribed. The first quarterly reporting will be on 30 October 2021.
Proposal for amendments to tax legislation
Recent changes in the European Union for companies operating in the B2C e-commerce sector
The One-Stop Shop (OSS) is an electronic portal that businesses can use to meet their VAT obligations in e-commerce in the European Union (EU) to consumers, effective from 1 July 2021.
The OSS portal simplifies up to 95% of VAT obligations for online retailers and electronic interfaces across the EU and enables electronic VAT registration in a single EU Member State for all distance selling goods within the EU and for B2C services. The portal also enables the registration and payment of due VAT for all supplies of goods and services in one electronic quarterly invoice. An additional advantage is working with the tax administration of your Member State in your language, regardless of whether the sale of the company is outside the borders of the home country. If the taxed person or supplier does not come from the EU and is a B2C service provider, then such a person or supplier under a non-union OSS scheme.
From 1 July 2021, all supplies of goods to B2C customers in the EU should in principle be taxed at the place of destination. Their origin, whether in the EU or outside the EU, will no longer matter.
What is changing for online retailers and electronic interfaces on the issue involving VAT?
Currently, EU companies selling goods within the EU above a certain threshold (€ 35,000 or € 100,000, depending on the Member State) must register and pay VAT in another Member State to customers in another EU Member State. From 1 July 2021, this rule will be abolished and replaced by a new EU-wide threshold of € 10,000. Below this new threshold, national VAT rules (including the SME exemption scheme) may continue to apply to cross-border sales. If the company's sales exceed this threshold, then the company is liable for VAT in the Member State in which their customers are located. Above this threshold, companies will be able to easily register in the new OSS portal, where they will register and pay VAT.
From 1 July 2021, if the electronic interface sells goods at a distance by a seller not established in the EU to a buyer in the EU, the electronic interface is the seller and is responsible for paying VAT. To register and pay this VAT, the electronic interface will be easily registered in a special electronic system called One-Stop Shop (OSS).
Upgrading the tax system, amendments to the laws on corporate income tax, personal income tax and value-added tax
The tax changes are intended to relieve taxpayers and contribute to a faster recovery from the pandemic. The amendments to the laws on corporate income tax and personal income tax are expected to come into force on 1 January 2022, except the provisions of the Value Added Tax Act, which will come into force on 1 July 2021.
With the amendment of the Value Added Tax Act, which enters into force on 1 July 2021, the delivery of the invoice in paper form will no longer be mandatory but will be handed over to the buyer at his request. It should be emphasized that the issuance of an invoice will remain mandatory. Also, farmers will no longer be compulsory taxpayers in the future. Until now, taxpayers that have had more than 7,500 euros in turnover were compulsory taxpayers, with the amendment of the law the threshold for mandatory entry of farmers into the VAT system is abolished, while maintaining the possibility of claiming a flat-rate compensation and voluntary entry into the VAT system.
The proposed amendment enables, among other things, the application of a VAT deduction also for personal motor vehicles for the performance of activities, namely for vehicles without carbon dioxide emissions. It also allows greater flexibility for the tax authority to clarify the VAT calculation fields that taxpayers must submit through the eDavki system. Also, taxpayers will no longer have to submit a list of invoices received and issued at the time of the first VAT return.
The proposed amendment to the Personal Income Tax Act brings the introduction of senior relief, exemption from personal income tax on income from survivors' pensions and income, etc. The proposed amendment also gradually increases the general relief from 3,500 euros to 7,500 euros by 2025. In the fifth income tax bracket, there is a change in the tax rate, which is reduced from 50 to 45 percent. Whereby the reliefs and the net annual tax bases on the personal income tax scale would be reconciled with inflation. The rental income tax is expected to be reduced to 15 percent. The personal income tax rate on interest, dividends and profits is expected to fall from 27.5 percent to 25 percent, with capital being tax-free upon disposal after 15 years of ownership.
The Corporate Income Tax Act proposes tax reliefs with an emphasis on new employment, the implementation of practical work and professional education, donations, and a new relief for investments in the green and digital transition.
Bill on Amendments to the Excise Duties Act (ZTro-1A)
The Finance Committee of the National Assembly recently gave its consent to the proposed amendment to the Excise Duty Act. The amendment itself harmonizes Slovenian legislation in the field of excise duties with EU directives. The bill adds the obligation to submit applications for excise duty refunds in electronic form via the information system of the tax authority. From 1 January 2022, the obligation to file a refund of excise duty in electronic form will apply. In 2019, only 25% of all claims were filed electronically, according to Financial Administration of the Republic of Slovenia (FURS). The condition for the use of the E-TROD information system is an acquired tax number, so for legal entities from another Member State of the Union or a member state of the European Free Trade Association, which do not have a Slovenian tax number, this change will not apply. In the law, Article 72 of ZTro-1, in the exempt use of ethyl alcohol, production processes are added if the final product does not contain alcohol.
In addition, the amendment proposes the determination of excise duty on all types of liquids for electronic cigarettes by amending Article 85 of ZTro-1, regardless of whether they contain nicotine or not. The excise duty itself is based on the volume of the liquid and would amount to € 0.08 per millimetre of filler. The amount of excise duty includes comments from public hearings and amounts set by the other EU Member States. The proposal further mentions a reduction in the excise duty to EUR 0 for natural gas for the propulsion of vehicles by the end of 2025, to encourage the use of natural gas in transport.
More details can be found in the following document.
Extension of corona measures
Extension of salary compensation due to higher force and quarantine until 30 June 2021
The Government of the Republic of Slovenia has extended the reimbursement of wages due to force higher force and quarantine until 30 June 2021. The amount of compensation remains unchanged and amounts to 80% of the monthly salary of the average employee in the last three months. During this period, employers are entitled to a refund of the full amount of compensation paid to employees. Employers must apply for reimbursement no later than 8 days after the start of absence from work.
Extension of Anti-COVID-19 measures for entrepreneurs and businesses
Extension of the acquisition of extraordinary assistance in the form of monthly basic income, the reimbursement of lost income due to quarantine or childcare, as well as the measure of partial reimbursement of uncovered fixed costs is made until 30 June 2021.
Tax Authorities’ opinion
In April last year, the Financial Administration of the Republic of Slovenia (FURS) published on its website a position on the tax treatment of exemptions from social security contributions for standardized persons, which differs from the previous practice. The case concerns natural persons with an activity - standardized persons to whom contributions are paid by the state (eg self-employed in culture) or other standardized entrepreneurs who were exempted from social security contributions on the basis of anti-Covid measures for the period March-May 2020.
"This is a position according to which contributions paid by the state are not exempt from the tax return for taxable persons. For taxpayers who are insured as self-employed persons, the exemption of contributions is realized through the determination of the tax base. This is the profit that is determined as the difference between actual revenue and actual or standardized expenditure incurred in connection with the pursuit of the activity, " FURS said in a statement.
They add that based on the accounting operation of recognizing expenses from paid contributions paid by the state, no profit is generated from recognized revenues, thus realizing the exemption from point 9 of Article 20 of ZDoh-2. Regarding the taxpayer's expenses, which determines the tax base by considering standardized expenses, it is considered that the taxpayer has decided to determine or recognize all expenses at a flat rate, regardless of the actual type and amount of accrued expenses, including calculated social security contributions. Contributions are therefore not exempt from the tax return, but the exemption is realized through the recognition of income and expenses in the business books.
"The mentioned position is no longer valid for the assessment year 2020," they warned. The position of FURS remains the same, but because it was formulated and published last year, the old position, which is more favourable for taxpayers, will still apply to the assessment year 2020. "The position explained above must therefore be taken into account when submitting tax returns for 2021, which means that in tax returns submitted for 2020, exempt contributions can be exempted from the tax return."
Taxpayers who have already submitted annual tax returns for 2020 (the deadline was April 30) will be able to resubmit the return as an adjustment in the “eDavki” system. In this adjustment, exempt contributions will have to be exempted from revenue in point 2.6 of the DDD-DDD calculation. In this case, the submission of a correction of the statement is not mandatory (it is voluntary), but it certainly brings a more favourable tax treatment.
Waiving VAT and customs duties on vital medical equipment
The European Commission has decided in April 2020 to suspend VAT and customs duties from third countries on protective equipment, monitors, pumps, testing kits, medical devices (ventilators), etc. This decision was made to help European Union Members to ease additional financial costs due to the coronavirus pandemic. The current provisions were prolonged on 19 April 2021 and are due to expire on 31 December 2021. It is important to know that a decision from the Commission is required, to grant relief upon request of a Member State. The VAT and duty-free importation apply to charitable or philanthropic organizations approved by the Member States and state organizations.
VAT relief for COVID-19 vaccines and COVID-19 testing kits
On 7 December the decision was made by the EU Member states to put in place a temporary Value-Added Tax (VAT) exemption for COVID-19 vaccines and COVID-19 testing kits being sold to hospitals, medical practitioners, and individuals until the end of 2022 or until an agreement is reached on the Commission's pending proposal for new rules on VAT rates.