How to navigate the world of taxes in Slovenia: personal income tax, VAT and taxes for entrepreneurs

General definition of income (income tax)

Personal income tax is a tax on the income of natural persons (individuals). The logic of personal income tax is: the higher the income, the more tax the person pays (progressive rates, except for some "schedular" incomes, which have a fixed rate). The Personal Income Tax Act (ZDoh-2) determines which types of income are taxed and according to what rules:

• income from employment (salaries, holiday pay, bonuses)
• income from activities (private limited company, other self-employed activities)
• income from capital (interest, dividends, capital gains)
• income from renting out property
• other income (e.g. certain payments to individuals)

Income from activities for sole proprietors

Income from activity (ZDoh-2, Article 46) is income earned from independent, self-employed and permanent activity, regardless of formal status or legal basis. This includes sole proprietors (SP) and other natural persons with an activity (lawyers, notaries, journalists, private individuals, etc.).

For sole proprietors, this means the following in practice:

• Taxation is always income from activities – this is one of the subtypes of personal income tax.
• Income from activity = income from activity – recognized expenses (actual or standard)

Two main arrangements for determining the tax base:

A) Actual expenditure established

• Income = Revenues – Actual Expenses
• Taxpayers keep books and records (double-entry or simple accounting)
• The tax base is based on actual profit.
• The tax base may be further reduced by social security contributions.

B) Standardized expenses (flat rate system)

• A certain percentage of standard costs is recognized from revenue, the remainder is the tax base.
• Standardized expenses are recognized automatically, regardless of actual costs.
• Taxation is simpler, suitable for smaller, low-cost activities

Income from the activity is then taxed according to the rules of ZDoh-2 (advance payments during the year, final settlement).

Value Added Tax (VAT)

VAT is an indirect tax on consumption, paid by the final consumer, and merely collected and remitted to the state by the business operator. It is regulated by the Value Added Tax Act (ZDDV-1).

Basic characteristics of VAT

• The payer on the invoice is the taxable person (company/society), the actual burden is borne by the final consumer - VAT is an indirect tax.
• A company that is in the VAT system charges VAT on issued invoices and has the right to deduct input VAT from purchases.

VAT rates in Slovenia

• 22% – general rate
• 9.5% – reduced rate (food, water, medicine, books, overnight stays, energy, etc.)
• 5% – special reduced rate for certain specific supplies (the range is subject to change with amendments to the ZDDV-1)

Entry into the VAT system:

• From 1 January 2025, the threshold for mandatory entry into the VAT system has increased to EUR 60,000 of annual taxable turnover, with certain rules up to EUR 66,000.
• Voluntary registration: possible at any time (e.g. due to cooperation with taxpayers in the EU, input VAT deductions).

Types of taxes in Slovenia

A) Direct taxes (paid directly on the income or assets of an individual or company)

• Income tax (personal income tax)
• Corporate income tax (CIT)
• Property tax (e.g. real estate tax, compensation for the use of building land, inheritance and gift tax)

B) Indirect taxes (paid through the price of goods and services - the state collects them through companies that are intermediaries)

• VAT – key indirect tax (general tax on consumption).
• Excise duties (on energy products, tobacco, alcohol)
• Customs duties and certain environmental duties, taxes, etc.

C) Local taxes and duties

• NUSZ (compensation for the use of building land)
• Tourist tax
• Municipal contribution (not a tax, it is parafiscal revenue)

Author: Danijela Uran, RRA Koroška doo – SPOT Consulting Koroška