TAXATION OF INDIVIDUALS. Annual Income Tax Return

Transcription

1 REPUBLIC OF SLOVENIA MINISTRY OF FINANCE FINANCIAL ADMINISTRATION OF THE REPUBLIC OF SLOVENIA Šmartinska cesta 55, PO Box 631, 1001 Ljubljana, Slovenia T: F: E: gfu.fu@gov.si TAXATION OF INDIVIDUALS Annual Income Tax Return Questions & s 1 ST version, MARCH 2016

2 TABLE OF CONTENTS Question 1: How do I file the annual income tax return if I am a nonresident of Slovenia?... 3 Question 2: How do I file the annual tax return once I have become a resident of Slovenia? 3 Question 3: What is the personal income tax rate schedule in Slovenia?... 3 Question 4: Am I entitled to any personal tax allowances as a nonresident of Slovenia?... 3 Question 5: Am I entitled to any tax allowances as a nonresident of Slovenia if I am a resident of another EU or EEA Member State?... 4 Question 6: What tax allowances can be claimed by residents (and in very special case mentioned above nonresidents) of Slovenia under the Personal Income Tax Act?... 4 Question 7: What are personal tax allowances?... 5 Question 8: What are special personal tax allowances?... 5 Question 9: What is the deduction for voluntary additional pension insurance?... 6 Question 10: What are the family allowances?... 7 Question 11: What are the preliminary conditions that a person can be considered a dependent under the Personal Income Tax Act?... 7 Question 12: When is an immigrant worker who came to work to Slovenia temporarily entitled to claim the tax allowances?... 8 Question 13: Who is a dependent child under the Personal Income Tax Act in Slovenia?... 8 Question 14: Who are other dependent family members under the Personal Income Tax Act?... 9 Question 15: How am I taxed in Slovenia if I am sent to work to Slovenia from my employer in my home country (country of residence for tax purposes)? Question 16: Who pays social security contributions for me if I am sent to work to Slovenia from my employer in my home country? Question 17: How are dividends taxed in Slovenia? Question 18: How do nonresidents pay tax on dividends? Question 19: How do I claim a more favourable tax rate on dividends based on the Double Taxation Agreement (DTA)? Question 20: How is interest taxed in Slovenia if it is earned by a nonresident? Question 21: How is interest defined for tax purposes? Question 22: How do nonresidents pay tax on interest in Slovenia? Question 23: What is the EU Savings Directive? Question 24: How do I claim a more favourable tax rate on interest based on the Double Taxation Agreement (DTA)? Question 25: How are capital gains taxed in Slovenia? Question 26: How do nonresidents pay tax on capital gains in Slovenia? Question 27: How do nonresidents pay tax on capital gains from alienation of immovable property in Slovenia? Question 28: How do nonresidents pay tax on capital gains from alienation of financial capital (securities and ownership/equity shares and investment coupons) in Slovenia? Question 29: How do I obtain a notification for the purposes of claiming a tax credit of the already paid tax in Slovenia in my home country (county of residence for tax purposes)?

3 Question 1: How do I file the annual income tax return if I am a nonresident of Slovenia? If you are not a resident of Slovenia you do not need to file the tax return form and you do not receive the indicative calculation of personal income tax. The tax that is withheld by the payer of income or the tax that is settled as the advance tax payment counts as your final tax. Question 2: How do I file the annual tax return once I have become a resident of Slovenia? The indicative calculation of personal income tax is automatically generated and prepared by the Tax Administration of Slovenia for all residents from 2016 onwards. So, once you have become a resident of Slovenia the indicative calculation of personal income tax is sent to you by May 31 st at the latest for the previous tax year under the conditions mentioned above. In 15 days after this date the taxpayers are required to file a complaint if the data on the calculation do not match their own. The Tax Administration will treat your complaint as a tax return and assess the tax liability based on it. If the complaint is not filed the indicative calculation does not only serve as a substitute for the return anymore, but it actually becomes a tax return and an official tax assessment at the same time. If, for some reason, you did not receive the indicative calculation, but you earned taxable income in the previous tax year you are required to file the personal income tax return by 31 st of July of the current tax year for the previous tax year. Question 3: What is the personal income tax rate schedule in Slovenia? Annual personal income tax rate schedule in Slovenia used to be revalued each year depending on the annual rate of inflation. The schedule for the current tax year was published in December of the previous tax year by the Ministry of Finance. For the tax year 2016 the tax rate schedule is the following: When the Net Yearly Tax Base is in the Interval Income Tax in Euros amounts to From To ,34 16 % 8.021, , , % above 8.021, , , , % above , , , % above ,20 Net Yearly Tax Base is the gross income decreased by social security contributions and personal allowances. Question 4: Am I entitled to any personal tax allowances as a nonresident of Slovenia? 3

4 No. You are not entitled to any personal tax allowances if you are a nonresident of Slovenia for tax purposes. The reason for this is that you are already entitled to allowances in your home country (your country of residence for tax purposes). Since you cannot claim any allowance it is not required that you file a tax return and the tax withheld by your employer or the payer of income is a final tax. However, there is an exception to this provision if you are a resident of another EU or EEA Member State and you earn income in Slovenia. More details are found in the answer to the question no. 5 below. Question 5: Am I entitled to any tax allowances as a nonresident of Slovenia if I am a resident of another EU or EEA Member State? There is a specific situation that under certain conditions allows nonresidents to be granted tax allowances when they earn income in Slovenia as stated in the Article 116 of the Slovenian Personal Income Tax Act. Nonresidents of Slovenia that earn income from employment, income from business (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 farming and forestry activities, income from royalties and certain other types of income (like prizes, rewards, stipends etc.) in Slovenia and are residents of an EU or EAA Member State can claim tax allowances. In order to be able to claim allowances however, they have to prove that the amount of all types of income combined that they have earned in Slovenia in a particular tax year represented at least 90% of all of their taxable income. Furthermore, they have to prove that income earned in Slovenia was exempt from taxation or was not taxed in their country of residence. The tax allowances can be claimed on the form filed with the competent tax authority in Slovenia by July 31 st of the current tax year for the previous tax year. Question 6: What tax allowances can be claimed by residents (and in very special case mentioned above nonresidents) of Slovenia under the Personal Income Tax Act? Slovenia s Personal Income Tax Act does not allow for itemizing actual deductions such as medical expenses, charitable contributions, etc. Instead every resident of Slovenia is entitled to the general tax allowance as long as nobody is claiming the family allowance for her/him. It is euro amount that reduces the amount of income on which you are taxed. The general allowance is adjusted in the year in which the coefficient of growth of consumer prices in the current year, compared to the past year, exceeds 1,03. 4

5 From the tax year of 2013 onwards it is shown in the following table: If the Overall Gross Income is in the Interval From General Tax Allowance in Euros to be deducted from Net Yearly Tax Base amounts to To , , , , , , ,70 Apart from the general tax allowance residents and above mentioned nonresidents (residents of an EU or EAA Member State) are entitled to personal allowances, special personal allowances, deduction for voluntary additional pension insurance and family allowances that further decrease the taxable amount. Self-employed persons can claim additional allowances that are mentioned in the answer to the question no. 15 in brochure Taxation of individuals, Advance tax payment. Question 7: What are personal tax allowances? Residents and nonresidents (under certain conditions that are mentioned in questions above) can claim the following personal allowances: - Disabled person s allowance (if you are a disabled person with 100% physical impairment proved by a decision of the competent authority, you are entitled to a deduction of an additional amount from the tax year of 2013 onwards this deduction amounts to ,84 euros. - Seniority allowance (once you reach the age of 65, you are entitled to a deduction of an additional amount in the tax year of 2013 it amounts to 1.421,35 euros). Seniority allowance will only be in use for the tax year of 2013, since it is being terminated in January The following personal allowances can be claimed up to the amount of tax assessed on each type of income received. - Allowance for recipients of pension and occupational pensions (a person who receives a pension based on compulsory pension and disability insurance is entitled to a deduction of 13.5% of the determined pension from the amount of tax they are required to pay) - Personal allowance for other special groups (persons who receive state honorary allowance from the state on the basis of their life achievements in art and other cultural fields and persons who receive allowance for disability are entitled to the following tax allowance - the same as above - a deduction of 13.5% of the determined amount of income from the amount of tax they are required to pay) Question 8: What are special personal tax allowances? Only residents (and nonresidens under certain conditions, mentioned above) can claim the following special personal allowances: - Allowance for independent artists (self-employed persons who work in the cultural field and who are registered with the Ministry of Culture are entitled to a deduction of 15% of their yearly 5

6 revenues limited to euros from their tax base; however, to be entitled to this allowance a person must not conclude an employment contract and must not be doing business in any other field but cultural) - Allowance for independent journalists (self-employed and independent journalists that are registered with the Ministry of Culture are entitled to a deduction of 15% of their yearly revenues limited to euros from their tax base; however, to be entitled to this allowance a person must not conclude an employment contract and must not be doing business in any other field) - Allowance for independent professional sportsmen and sportswomen (self-employed sportsmen and sportswomen who are registered with the Ministry of Education and Sport are entitled to a deduction of 15% of their yearly revenues limited to euros from their tax base; however, to be entitled to this allowance a person must not conclude an employment contract and must not be doing business in any other field) - Student allowance (a person holding the status of a student, who goes to school aged 26 or less earning income only temporarily and on the basis of a voucher from the competent authority most common Student Services Office is entitled to a deduction of an additional amount. The allowance equals 75 % of the general tax allowance (2.477,03 euros from the year of 2013 onwards); furthermore students are also entitled to this allowance if they are aged 26 or more, but they enrolled in school before the age of 26, in this case the allowance can be claimed 6 years from the date they enrolled into an undergraduate program and 4 years from the date they enrolled into a graduate program). The student s allowance can be claimed only by residents or nonresidents 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. More information is available in the question no. 9 in brochure Taxation of individuals, Advance tax payment. - Allowance for daily migrant workers (a person who commutes to work across the border every day or at least once a week is entitled to a deduction of a predetermined amount from their yearly net tax base ,62 euros in 2013); additional conditions for this allowance are having a nonresident employer across the border, receiving income from employment and actually carrying out work across the border. The new tax reform adopted in 2013 abrogates the allowance for daily migrant workers from January The allowance is still in use for the tax year of Question 9: What is the deduction for voluntary additional pension insurance? Residents and above mentioned nonresidents (residents of an EU or EAA Member State) can claim the deduction for voluntary additional pension insurance in the amount of the insurance premium that they pay for themselves. In order to be entitled to claim the deduction, insurance premium has to be paid to the official pension plan provider with headquarters in Slovenia or any other EU Member State. The pension plan has to be approved by the competent authority and entered into a special register. The amount of insurance premium that can be claimed as a deduction is limited up to 24% of compulsory social security contributions for pension and disability insurance for the insured person or up to 5,844% of a pension when a person is paying the insurance from a pension, but this deduction is limited up to a certain amount (from the tax year of 2013 onwards this amount is 2.819,09 euros). 6

7 Question 10: What are the family allowances? Residents and nonresidents (under certain conditions that are mentioned in questions above), who take care of their family members can claim the following allowances to be deducted from their yearly net tax base: - FOR DEPENDENT CHILDREN allowances can be summarized in the following table: From the tax year of 2013 onwards Yearly allowance in euros For the first dependent child 2.436,92 For a dependent child that needs special care and protection 8.830,00 For the second dependent child 2.649,24 For the third dependent child 4.418,54 For the forth dependent child 6.187,85 For the fifth dependent child 7.957,14 For the sixth dependent child 7.957, ,30 Allowance for the seventh child and any other additional child is calculated by adding the amount of 1.769,30 euros to the amount of allowance for the previous child. - FOR EVERY OTHER DEPENDENT FAMILY MEMBER there is an allowance of a predetermined amount (from the tax year of 2013 onwards this amount is 2.436,92 euros). It is important to notice that a dependent for whom somebody else (most of the times parents, adoptive parents and spouses) has already claimed the family allowance will not be allowed to claim the general tax allowance from their own income that they might have earned or received. Question 11: What are the preliminary conditions that a person can be considered a dependent under the Personal Income Tax Act? In order for a person to be considered a dependent according to the Personal Income Tax Act she/he has to fulfill at least one of the following conditions apart from others described in the answers below: - she/he needs to have a permanent or temporary home in Slovenia, registered with local public authority OR - she/he has to be a citizen of the Republic of Slovenia OR - she/he has to be a citizen of the European Union OR - she/he has to be a resident of the country with which Slovenia has concluded a Double Taxation Agreement (DTA) 7

8 Question 12: When is an immigrant worker who came to work to Slovenia temporarily entitled to claim the tax allowances? Immigrant workers who came to Slovenia temporarily have to become residents of Slovenia for tax purposes in order to be entitled to allowances. They can also claim the majority of allowances if they are nonresidents of Slovenia, but they are residents of EU/EEA country and they earn at least 90 % of all their taxable income in Slovenia. More details about this special case are described in the answer to the question no. 5 and 6. Family allowance for dependents who stayed in immigrant workers home countries however, can only be claimed by those workers whose dependents satisfy the conditions described in answers below, who are citizens of the EU or who are residents of the country with which Slovenia has concluded a DTA, because these agreements enable for the exchange of information which confirms that dependents actually fulfill the conditions under which the allowance for them can be claimed. Question 13: Who is a dependent child under the Personal Income Tax Act in Slovenia? Dependent child of a taxpayer is: - a child up to 18 years of age - a child up to 26 years of age, but under the following conditions: goes to high school or university continuously or with up to a year of deferral or interruption, not employed, does not have her/his own source income or her/his income is lower than the amount of the allowance for every other dependent family member from the year of 2013 onwards this is 2.436,92 euros). Her/his own income is all income covered by the Personal Income Tax Act except for family pension, income earned holding the status of a student, stipend, family rents and certain social security transfers like child addition, addition for a big family, addition for special care and protection, unemployment benefit and parenting addition at birth. - a child more than 26 years of age if she/he satisfies the conditions mentioned above and if she/he enrolls in school before the age of 26 years; she/he is a dependent for the period of 6 years after the day of enrollment into an undergraduate program and for 4 years after the day of enrollment into a graduate program - a child above 18 years of age if she/he is unemployed, if she/he lives with her/his parents and if she/he is registered with the Employment Service of Slovenia without her/his own source of income or her/his income is lower than the amount of the allowance for every other dependent family member from the year of 2013 onwards this is 2.436,92 euros). In this case her/his own income is all income covered by the Personal Income Tax Act. - a child that is entitled to addition for special care and protection in accordance with the Parental Protection and Family Benefit Act - a child that is entitled to addition for help and service in accordance with the Pension and Disability Insurance Act 8

9 The allowance explained in the last two points above can be claimed for children up to 18 years of age or up to 26 years of age if they continue attending school and even past this age if their school program on a higher education level lasts for more than 5 or 6 years. If they could not finish their education on time due to illness or injury allowance for them can also be extended past 26 years of age limited to the period in which the schooling was allowed to be postponed. - a child that is in accordance with the Act Concerning Social Care of Mentally and Physically Handicapped Persons unfit to work without age limitation A child is a taxpayer s own child, adoptive child, stepchild or a child of a taxpayer s common law partner and in certain circumstances a grandchild (if the taxpayer is entitled to an allowance for the child s parents or on the basis of a court ruling) and any other children if a taxpayer takes care of them on the basis of a court ruling. Question 14: Who are other dependent family members under the Personal Income Tax Act? Dependent family member of a taxpayer is: - a spouse 1 who is not employed, does not have a business and does not have her/his own source of income or is such income less than the amount of the allowance for other dependent family member from the year of 2013 onwards 2.436,92 euros; own sources of income means all types of income covered by the Personal Income Tax Act - a divorced spouse if in accordance with a court ruling or an agreement adopted under the Marriage and Family Relations Act a taxpayer is obliged to pay alimony to her/his divorced spouse - parents or adoptive parents of a taxpayer if they do not have their own sources of income or if such income is less than the amount of the allowance for other dependent family member from the year of 2013 onwards this is 2.436,92 euros - if they live with a taxpayer in a common household or if they live in an institution that provides social care and protection (retirement home) and a taxpayer pays the bill for it; parents and adoptive parents of a taxpayer s spouse under the same conditions as mentioned above if the spouse is not obliged to pay personal income tax under the Personal Income Tax Act. Own sources of income means all types of income covered by the Personal Income Tax Act - member of a farming household, if a taxpayer s primary source of income is the income from basic agricultural and forestry activities, if such a member contributes to this income with her/his work and does not have her/his own sources of income or such income is less than the amount of the allowance for other dependent family member from the year of 2013 onwards this is 2.436,92 euros; under the condition that this member s children, spouse, parents or adoptive parents do not claim an allowance for this person; own sources of income means all types of income covered by the Personal Income Tax Act. 1 Spouse as it is defined in the Personal Income Tax Act is a person who is married to a taxpayer AND a taxpayer's common-law partner as it is defined in the Marriage and Family Relations Act. 9

10 Question 15: How am I taxed in Slovenia if I am sent to work to Slovenia from my employer in my home country (country of residence for tax purposes)? If the employer from your home country sends you to work to Slovenia for a limited period of time (less than 183 days) and Slovenia has concluded a Double Taxation Agreement (DTA) with your home country it is unlikely you will have to pay income taxes here. The right of the country to tax you where the work is being carried out and the income is earned (source country) is usually limited by the Article 15 of most DTAs Slovenia has concluded with other countries. List and texts of DTAs Slovenia concluded with other countries can be found here. According to this article the following conditions have to be met to prevent the source country to tax you even if you carry out work there: - Presence in Slovenia for less than 183 days (approx. half a year) in any 12-month period commencing or ending in the tax year concerned, - Your employer is not a resident of Slovenia, - Income is not paid out by the employer s permanent establishment in Slovenia. It has to be emphasized that this is only the general text of the OECD Model Tax Convention and you have to check the exact text of the DTA in question to verify the conditions set in it. If you satisfy all these conditions, you will not be taxed in Slovenia on your earned income as a sent worker. However, once one of the conditions is not met Slovenia has the right to impose tax on your income from employment. Question 16: Who pays social security contributions for me if I am sent to work to Slovenia from my employer in my home country? According to the Article 12 of the Regulation no. 883/2004 on the coordination on social security systems posted workers continue to be subject to the legislation of the Member State in which their employer normally carries out its activities as long as the anticipated duration of work in a host country does not exceed 24 months and the person sent is not meant to replace another person. Therefore, if you are sent to work to Slovenia from the employer in your home country for a period of less than 2 years you will not have to pay social security contributions in Slovenia. Accordingly, you will claim your social security benefits in your home country and not in Slovenia. However, according to Article 41, paragraph 2 of the Personal Income Tax Act you will be able to deduct the amount of social security contributions paid in the country in which you are included in the social security system from your tax base in Slovenia (if liable to tax). The deduction can be made if the contributions paid abroad are comparable to the compulsory contributions in Slovenia and if they are paid into a fund recognized for tax purposes in the country in which they are being levied. Additional conditions for the deduction are that a person was not a resident of Slovenia immediately before entering Slovenia to perform work here and that the contributions were already being paid into the fund before entering Slovenia. 10

11 Question 17: How are dividends taxed in Slovenia? Dividends and any other income based on the ownership share that individuals receive in Slovenia are taxed at the flat rate of 25% at the time of payment. Being a type of capital income they are not included in the indicative calculation of the personal income tax, where the tax is settled on the annual basis. Question 18: How do nonresidents pay tax on dividends? Nonresidents only pay tax on Slovenian source dividends. Dividends have a source in Slovenia when they are paid or credited by a resident of Slovenia or by a business unit of a nonresident situated in Slovenia (i.e. a branch of a foreign company). The liability of withholding the tax on dividends and other income based on the ownership share lies with the Slovenian entity (also known as the payer of tax) that calculates the amount of dividends and pays them out. Nonresidents might be subject to a more favourable tax rate on dividends, if the country of their residence concluded a Double Taxation Agreement (DTA) with Slovenia and if such an agreement allows for a lower tax rate on dividends or no tax at all. To determine your tax liability you have to check a particular DTA. Question 19: How do I claim a more favourable tax rate on dividends based on the Double Taxation Agreement (DTA)? Nonresidents can claim more favourable tax treatment from the DTA at the time of the payment of income directly through a special procedure or they can claim a refund of overpaid tax. A recipient (beneficial owner) of dividends 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. 1 before the income is paid. Taxpayer entitled to benefits from the relevant DTA (beneficial owner) files a filled out Annex no.1 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 of income is only authorized not to withhold the tax or to withhold the tax at a lower rate upon the official permission from the competent tax authority. Refund of the tax withheld can be claimed up to the difference between the full amount withheld and the amount required by the relevant DTA. In case the taxpayer was exempt from tax according to the DTA the full amount of withheld tax is refunded. Claim of the refund can be made on the basis of the written application KIDO form - Annex no. 9 to the competent tax authority. 11

12 Question 20: How is interest taxed in Slovenia if it is earned by a nonresident? Generally, income received in the form of interest by individuals in Slovenia is taxed at the flat rate of 25% at the time of payment. Being a type of capital income they are not included in the indicative calculation of the personal income tax, where the tax is settled on the annual basis. However, for nonresidents the following is important. If Slovenia concluded a DTA with your country of residence, the rate at which the tax on interest 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. Residents of Slovenia are entitled to a deduction of 1,000 euros from their tax base of income in the form of interest received from money deposits held in Slovenian or in EU based banks and certain other savings institutions. This is why they have to file the income tax return for this type of interest to the competent tax authority by February 28 th of the current tax year for the previous tax year. Question 21: How is interest defined for tax purposes? Interest defined in the Personal Income Tax Act includes interest from loans, interest from bonds, interest from money deposits held in banks and certain other savings institutions, other similar financial claims to debtors, income from financial leasing, income from life insurance and income obtained on the basis of the distribution of investment fund proceeds in the form of interest. Furthermore, the concept of interest is broadened to include any compensation that cannot be classified as the repayment of principal and that is received on the basis of a financial relationship creating a debt claim, i.e. bonuses, discounts, premiums, risk compensation etc. Additionally, income from life insurance also includes income from additional pension insurance not based on the registered pension plan and income from voluntary pension insurance. Interest from bonds also includes interest from bonds that can be exchanged for equity. The following types of interest are explicitly excluded from taxation by the Personal Income Tax Act: interest arising from overpaid taxes or social security contributions, interest accrued on checking/current/transactional accounts and interest from life insurance in case of death. Interest from life insurance policy that satisfies all of the following conditions: it does not allow for the payment of the insured amount at least 10 years after buying the policy, the buyer of insurance and insured person are the same person and the demand for payment of the insured amount is not made earlier than 10 years after the purchase of the policy. Furthermore, interest from a savings contract included into the national real estate savings scheme concluded for a period of at least 5 years from which a person does not withdraw, 50% of interest on bonds obtained by people entitled to a compensation in accordance with the Denationalization Act and interest on participation in the common reserve funds of apartment/condominium buildings are also excluded from taxation. 12

13 Question 22: How do nonresidents pay tax on interest in Slovenia? Nonresidents only pay tax on the Slovenian source interest defined in the answer to the question no. 21 above. Apart from the source limitation nonresidents also do not pay tax on interest from securities that were issued by the state (the Republic of Slovenia) and on interest from bonds issued by an enterprise incorporated under the law of Slovenia (except bonds issued in accordance with the Denationalization Act) subject to two conditions: bonds do not carry the option to exchange them for equity and they are traded in an organized market in EU Member State or in OECD Member State. Interest has a source in Slovenia when they are paid or credited by a resident company or entity of Slovenia or by a business unit of a nonresident (i.e. a branch of a foreign company) of Slovenia. When the payer of interest has the status of the payer of tax (to simplify this usually means a legal entity, sole entrepreneur, a business unit of a nonresident a branch of a foreign company in Slovenia or an agent) it is required to withhold the tax on interest in the name of the recipient. If there is no payer of tax who would withhold the tax in the name of the recipient, the recipients themselves have to file the Interest tax return with the competent tax authority by February 28 th of the current tax year for the previous tax year. Taxation of savings income in the form of interest payments in Slovenia and in other EU Member States is dealt with the Council Directive 2003/48/EC ( EU Savings Directive ). The aim of this Directive is for this type of income to be taxed effectively in the country of the beneficial owner s residence. The provisions of the Directive were implemented in Slovenian tax legislation through Article 33 of the Personal Income Tax Act and Article 347 of the Tax Procedure Act, where the savings income in the form of interest payments is defined. Nonresidents from EU Member States will therefore not be taxed on such interest in Slovenia. However, Slovenia will have to report such income that nonresidents from EU Member States received in Slovenia to the tax authorities of their country of residence. Question 23: What is the EU Savings Directive? This directive was adopted with the purpose of effectively taxing the savings income in the form of interest payments in the beneficial owner s country of residence. It provides for the system of automatic exchange of information on interest payments among EU countries (the exchange of data is due on June 30 th each tax year for the previous tax year) the purpose of which is to insure that EU taxpayers report their savings income in the form of interest payments to the tax administrations of their own country of residence. In order for the aims of the Directive to be achieved some non-eu countries like Switzerland and dependent or associated territories of EU countries overseas concluded agreements with the EU regarding the interest payments to provide for tax withholding or exchange of information on interest. Question 24: How do I claim a more favourable tax rate on interest based on the Double Taxation Agreement (DTA)? Nonresidents can claim more favourable tax treatment from the DTA at the time of the 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 the tax cannot be withheld in the name of the recipient and the 13

14 recipient has to file a tax return (found on the link provided above in answer to question no. 22) and the benefits from the DTA are claimed in the return itself. A recipient (beneficial owner) of interest can apply for a relief or an exemption from the withholding tax prior to the receipt of income. Application is made on the KIDO form - Annex no. 2 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 of income is only authorized not to withhold the tax or to withhold the tax at a lower rate upon the official permission from the competent tax authority. Refund of the tax withheld can be claimed 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 withheld tax is refunded. Claim of the refund can be made on the basis of the written application to the competent tax authority. It is made on the KIDO form - Annex no. 10. Question 25: How are capital gains taxed in Slovenia? Capital gains in Slovenia are taxed at the flat rate of 25% at the time of payment. Capital gains are capital income and they are not included in the indicative calculation of the personal income tax, where the tax is settled on the annual basis. The rate is lowered after every 5 years of ownership of the capital. So, the rate after 5 years of ownership is 15%, after 10 years it is 10%, after 15 years it is 5% and after 20 years the rate is 0%. Capital gains refer to gains earned by alienation of immovable property and financial capital (securities, ownership or equity shares and investment coupons). However, for nonresidents the following is important. If Slovenia concluded a DTA with your country of residence, the rate at which the tax on capital gains 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 26: How do nonresidents pay tax on capital gains in Slovenia? Nonresidents only pay tax on the Slovenian source capital gains. Capital gains earned from alienation of immovable property have a source in Slovenia when immovable property is situated in Slovenia or when gains are derived from alienation of ownership share deriving more than 50% of its value directly or indirectly from immovable property situated in Slovenia. Capital gains earned from alienation of securities, ownership shares and investment coupons have a source in Slovenia when securities and ownership shares are issued by the state, the Bank of Slovenia, the municipalities or any entity incorporated under the law of Slovenia or when the investment fund managing the alienated investment coupons is formed or established under the law of Slovenia. 14

15 The procedure of paying a tax on capital gains depends on the type of the capital in question. The procedures are therefore summarized in answers to the following questions. Question 27: How do nonresidents pay tax on capital gains from alienation of immovable property in Slovenia? s Nonresidents only pay tax on capital gains from alienation of immovable property that is situated in Slovenia. The tax on capital gains from alienation of immovable property is only levied on gains from alienated immovable property that was obtained by the taxpayer after 1 January 2002 according to the provision of the Article 153 of the Personal Income Tax Act. Article 13 in connection with the Article 6 of the most Double Taxation Agreements (DTAs) Slovenia concluded with other countries gives the right to taxation of capital gains from immovable property to the source country (country where the property is situated). However, you have to check a particular DTA if this is true in your case. Capital gains from alienation of immovable property are determined by the difference in value of property at the time of alienating the property and at the time of obtaining the property. The value of property in both cases is set by the amount in the sales contract or in the purchase contract or in any other contract. However, for tax purposes the amount in the contract will not be valid if it does not reflect the market value of the property. Value at the time of alienating the property can be decreased by the expenses for maintenance or investments that a taxpayer obtaining the property had to pay, by the amount of inheritance and gift tax, by the expenses of the official evaluation of the property not more than 188 euros and the standard expense in the amount of 1% of the value at the time of alienating the property. Value at the time of obtaining the property can be increased by those same expenses. Capital loss resulting from the alienation of one type of capital in a tax year can decrease the taxable amount of the capital gains from alienation of another type of capital until the tax base reaches zero. In certain cases the tax liability can be postponed at the time of alienation. Also, taxpayers are exempt from the tax on capital gains from the alienation of a condominium/apartment or of a house with the pertaining property when they have actually lived in it for at least 3 years before the alienation. There is no exemption for the property or a part of the property that was used for business and there is no exemption for the property that was leased. Tax on alienation of immovable property is paid on the basis of the tax return that has to be filed with the competent tax authority in 15 days after the alienation occurs. The date of alienation is determined by the act of signing the contract or any other legal act (for example court ruling). The competent tax authority confirms that the tax on capital gains from alienation of immovable property was paid by the seal on the contract. If the alienation was exempt from tax (for example if the owner alienated it after 20 years of ownership) the competent tax authority also confirms the exemption by the seal on the contract. Only after the seal from the competent tax authority is obtained the owner can enter the property in the Land Register of Slovenia which secures to the owner the legal protection of rights arising from the property. Question 28: How do nonresidents pay tax on capital gains from alienation of financial capital (securities and ownership/equity shares and investment coupons) in Slovenia? 15

16 Even if nonresidents alienate Slovenian source financial capital they are not required to pay the tax on capital gains earned by this alienation, unless the alienated security or equity share represented a majority share in an entity (defined in the Slovenian Personal Income Tax Act as 10% of voting rights or 10% share in a capital or in a particular class of securities that a legal entity issued directly or indirectly through an associated enterprise) in the period of 5 years before the alienation. Capital gains from alienation of financial capital are determined in the same manner as capital gains from the alienation of immovable property described in the answer to the question no. 27 above. Furthermore, capital loss resulting from the alienation of one type of capital in a tax year can decrease the taxable amount of the capital gains from alienation of another type of capital until the tax base reaches zero. Certain very specific alienations of the capital are not taxed and in certain cases the tax liability can be postponed at the time of alienation. Taxpayers are exempt from taxation of capital gains in the following cases. They are exempt at the first alienation of shares or investment coupons obtained in the process of denationalization, at the alienation of securities and at the alienation of a share obtained on the basis of venture capital investment. A nonresident that alienated a majority share is required to file a tax return in 15 days after the alienation of capital. If there were more alienations of capital in the previous tax year a nonresident can report them in a joint tax return filed with the competent tax authority by 28 th of February of the current tax year for the previous tax year. The return must be filed in an electronic form when there are more than 10 alienations in the previous year, this applies for tax refund until The return must be filed in an electronic form when there are more than 10 transactions in the previous year, for tax refund for 2016 onwards. However, if a DTA between Slovenia and a country of residence of the owner of alienated financial capital exists they can claim relief or exemption from such income to be taxed in Slovenia in a return itself. Question 29: How do I obtain a notification for the purposes of claiming a tax credit of the already paid tax in Slovenia in my home country (county of residence for tax purposes)? If you are a nonresident of Slovenia and you received income which was taxed in Slovenia in accordance with the law and the relevant DTA and you want to claim already remitted amount of tax that you have paid in Slovenia as a tax credit in your own country of residence the competent tax authority in Slovenia can issue a notification stating how much tax has already been paid in Slovenia upon request. 16