The amendment to the Personal Income Tax Act (ZDoh-2T) was published in the Official Gazette of the Republic of Slovenia, no. 21/2019, as at 4 April 2019. It will come into force on 19 April 2019 and will be applicable already for the tax year 2019. Learn more about the adopted amendment below…
The National Assembly of the Republic of Slovenia is urgently processing the proposed amendment to the Personal Income Tax Act, which was approved by the Government of the Republic of Slovenia on 28th March 2019 and relieves holiday allowance from tax.
Announced Tax Reform Measures
The Ministry of Finance has announced the proposed measures of a 3-year Tax Reform. The fundamental goal is to support economy by reducing tax burdens imposed on labour.
The Ministry has announced the following measures, which have not yet been determined with certainty:
(1) Changes in Income Tax Brackets: The lowest progressive rate (16%) remains unchanged; the lowest threshold of the net annual tax base increases from EUR 8,021 to EUR 8,500. The 27% tax rate decreases to 26% and the tax base increases from EUR 20,400 to EUR 25,000. The tax rate of 34% decreases to 32% and the tax base increases from EUR 48,000 to EUR 50,000. Tax rates of 39% and 50% remain unchanged when the threshold for transition between the two highest tax brackets increases from EUR 70,907 to EUR 80,000.
(2) Income Tax Reliefs: increases from EUR 3,303 to 3,500 and the from EUR 6,520 to EUR 6,717.
(3) Taxation of Capital Gains: This taxation remains irrevocable (taxed cedularly); what shall change is the decrease of rate with years of participation in capital – the details of which are still unknown.
- Legal Entities: The Minister of Finance has announced higher taxation of legal entities. It is not yet known whether the corporate tax rate will increase or tax allowances will decrease.
- Property Taxation: Due to unregulated property records the new property tax will not be implemented, at least not for this and the next year.
The proposed measures are to be implemented gradually over the next two to three years.
Tax Relief of Holiday Allowance - Already Approved Measure
The Government of the Republic of Slovenia realized that the majority of employed persons in 2016 received a holiday allowance amounting to up to 70% of the average national salary. Up to this amount, holiday allowance is exempt from the payment of health and social security contributions.
The Employment Relationships Act stipulates that the employer shall pay to an employee, who has the right to the annual holiday, a holiday allowance in the amount that is at least equal to the minimum salary. In 2018, the minimum gross salary equalled EUR 842.79. Net amount of the paid holiday allowance depended on the employee’s tax bracket.
The proposed amendment to the Personal Income Tax Act stipulates that a holiday allowance up to 100% of the last published average national salary at the time of payment (currently approx. EUR 1,730 gross) shall not be included in the tax base. If the employee wishes that the exemption is not taken into account for prepayments of income tax, he/she shall notify the employer about his decision. If the holiday allowance is paid to the employee in several instalments, the eventual recalculations are made with the next or the last payment.
Tax relief of a holiday allowance shall apply to the holiday allowance received as of 1st January 2019. If the holiday allowance has already been paid to the employer before the proposed amendment enters into force, the tax authority will refund the prepayments of income tax ex officio, by issuing special decisions no later than 30th June 2019.