Tax Guide for US Expats Living and Working in Slovenia
Who Is Liable For Income Taxes in Slovenia
Residents are subject to income tax on their world-wide income. Nonresidents are subject to income tax on income from sources in Slovenia. Employment income and income from the performance of services and business income are considered to be derived from sources in Slovenia if the employment, services and business are carried out in Slovenia. In addition, income is deemed to be derived from a source in Slovenia if it is paid or borne by a Slovenian tax resident.
An individual is considered to be resident for tax purposes in Slovenia if, during the fiscal year, he or she fulfills any of the following conditions:
- He or she has an officially registered permanent residence in Slovenia.
- His or her habitual abode or center of personal and economic interests is located in Slovenia.
- He or she is present in Slovenia for a total of more than 183 days.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. Employment income includes all income that a person receives from the employer or other person with respect to either past or present employment. Employment income includes salary, holiday bonus, fringe benefits and directors’ fees. Benefits provided to family members of employees are considered to be employees’ benefits.
Business income. Business income includes income derived from performance of business activities and income from individual business transactions. Taxable business income is the difference between gross business income and the expenses necessary to generate business income.
Income from agricultural activities and forestry. Income from primary agricultural and primary forestry activity is attributed to a person who has the right to use the land that is recorded in the land register as agricultural land or a forest (cadastral income).
The tax base for cadastral income is the deemed income from the land determined under the relevant regulations.
Income from property leases and from transfers of property rights. Income from property leases includes income from leases of immovable and movable property. In the determination of the tax base, standard costs of 40% are deducted from the income received. Instead of deducting standard costs, individuals may opt to deduct the actual costs for the maintenance of property to preserve its usable value. An advance payment of income tax equaling 25% of the tax base is payable.
Income from transfers of property rights includes income derived from the conveyance of the right to use the following:
- Material copyrights
- Material rights of the operator
- Inventions
- Appearance of a product
- Distinguishing signs
- Technical improvements
- Plans
- Formulas
- Methods
- Personal names
- Pseudonyms
- Images
To determine the tax base, income is reduced by 10% of standard costs unless the holder of the right is not its author, operator, or inventor. Standard costs are not recognized in the conveyance of the right to use a personal name, pseudonym or image. An advance payment of income tax equaling 25% of the tax base is payable.
Income from capital. Income from capital includes dividends, interest and capital gains.
Income from dividends includes dividends and other income derived from ownership of shares. Tax on dividends is also payable on the following:
- Hidden profit distributions
- Gains that are distributed with respect to debt securities
- Income received on the basis of profit sharing of mutual funds
Income similar to dividends, which is taxed in the same manner as dividends, includes income derived from sales of products and services at lower than market prices to shareholders and their family members and debt cancellations. A flat tax of 20% is imposed on dividends and is treated as final tax.
Interest income includes the following:
- Interest on loans, debt securities, bank deposits, deposits with savings banks and other similar financial claims • Income from life insurance policies
- Income from financial leases
- Interest income received by unit holders from mutual funds that make payments on the basis of income sharing Interest on deposits at banks and saving banks established in Slovenia or other European Union (EU) member states of up to €1,000 is not included in the tax base. Interest income is taxed at a flat rate of 20%.
An individual who is resident in a EU member state other than Slovenia is not subject to personal income tax on savings with a source in Slovenia to which the automated information exchange system between the EU member states applies.
Capital gains. Capital gains include the following:
- Gains from the disposal of immovable property regardless of whether the condition of the property is changed or unchanged at the time of disposal
- Gains from the disposal of securities and shares issued by companies and other entities
- Gains from investment coupons
The tax base for capital gains is the difference between the value of the capital at the time of disposal and the value of the capital at the time of acquisition. Standard costs are recognized for acquisition and disposal costs and reduce the tax base.
Capital gains are taxed at a flat tax rate of 20% with a reduction of the tax rate for every completed five-year period of ownership of the capital. As a result, the following are the tax rates:
- 15% after 5 years
- 10% after 10 years
- 5% after 15 years
- 0% after 20 years
Other income. Other income includes awards, gifts, prizes from prize drawings, student grants and similar items. An advance payment of income tax equaling 25% of the tax base is payable.
The 25% advance payment is withheld at source unless the payer of the income is a nonresident or an individual. In such cases, the recipient of the income must file a prepayment tax return.
Deductions. For 2011, residents may claim as deductions the following annual tax reliefs:
- General relief of €3,143.57 if no other residents claim dependent family member relief with respect to the taxpayer. If the annual tax base is lower than €11,965.20, the tax relief is increased to €4,205.74. If the annual tax base is lower than €10,342.80, the tax relief is further increased to €6,205.68.
- Senior citizens relief of €1,352.86 for individuals over the age of 65.
- Dependent family member relief of €2,319.50.
- Relief of €2,319.50 for the first, €2,521.59 for the second, €4,205.64 for the third, €5,889.70 for the fourth and €7,573.75 for the fifth dependent child.
- Relief of €8,404.56 for dependent children in need of special care.
- If certain conditions are met, relief of €16,808 for disabled persons with a severe physical disability.
- Relief of €3,143.57 for a student if no other residents claim dependent family member relief with respect to the taxpayer and if other conditions are met.
- Special relief of €7,211.57 is granted to daily migrants (cross-border workers) if certain conditions are met.
- For self-employed cultural workers or journalists earning annual income up to €25,000, a deduction equal to 15% of their annual income.
Nonresidents of Slovenia who are tax residents of other EU or European Economic Area (EEA) member states may apply the general relief, senior citizens relief and relief for dependent family members in their annual income tax return if they can demonstrate that at least 90% of their entire taxable income in a tax year is derived in Slovenia and if they can prove that the income was exempt from tax or not taxed in their country of residence.
Rates. Employees are subject to monthly employer withholding tax on salaries at rates ranging from 16% to 41%. Temporary workers are subject to a 25% withholding tax on income earned from the performance of work and services, reduced by 10% of standardized material costs. Payments on the basis of work contracts are subject to an additional tax at a rate of 25%, paid by the employer.
Individuals aggregate their active income (that is, employment income, business income, income from agricultural activities and forestry, rental income and income from transfer of property rights), apply the progressive tax rates below, subtract tax withheld and paid during the year and then pay any balance due or request a refund of any overpayment.
Relief for losses. Losses incurred by a private business may be carried forward for an unlimited number of years.
B. Other taxes
Inheritance and gift taxes. Resident individuals who inherit, or who receive as a gift, immovable or movable properties in are subject to tax. Movable property received is not subject to the tax if it does not exceed the value of €5,000.
The taxable value for inheritance or gift tax is the current market value of the property, less transaction costs and any liabilities attached to the property. The inheritance and gift tax rates depend on the taxable value of the property and on the beneficiary’s relationship to the deceased or donor.
Property tax. Resident individuals are subject to property tax on the following:
- Buildings, parts of buildings, apartments and garages, at rates from 0.1% to 1%
- Vacation and recreation facilities, at rates from 0.2% to 1.5%
- Business premises, unless used for manufacturing, at rates from 0.15% to 1.25%
The property tax is assessed on the value of immovable property. For residential property, 160 square meters are exempt from property tax. Property tax is payable quarterly.
Taxes on vessels. Taxes are imposed on vessels that are longer than five meters and satisfy one of the following additional conditions:
- It is entered in the boat/ship register for shipping on the sea and continental waters
- The owner of the vessel is a resident of Slovenia and the vessel fulfills the conditions to be registered as mentioned in the first item above, but it is not registered
- The owner is a resident of Slovenia and the vessel fulfills the conditions to be registered, but is not registered because the ship is already registered abroad
The vehicle taxes do not apply to vehicles performing only registered activities.
C. Social security
Slovenia imposes social security taxes to cover health insurance, pension and disability insurance, and unemployment insurance. Each month, employers and employees contribute amounts equal to the percentages of salary shown in the table below. No ceiling applies to the amount of salary subject to the contributions.
E. Tax treaties
Slovenia has entered into double tax treaties with the following countries.
Albania
Greece
Portugal
Austria
Hungary
Qatar (b)
Belgium
India
Romania
Bosnia- Herzegovina
Ireland
Russian Federation
Israel
Bulgaria
Italy
Serbia
Canada
Korea (South)
Montenegro (a)
China
Kuwait (b)
Singapore
Croatia
Latvia
Slovak Republic
Cyprus
Lithuania
Spain
Czech Republic
Luxembourg
Sweden
Denmark
Macedonia
Switzerland
Egypt (b)
Malta
Thailand
Estonia
Moldova
Turkey
Finland
Netherlands
Ukraine
France
Norway
United Kingdom
Germany
Poland
United States
(a) This treaty is no longer valid for Kosovo.
(b) This treaty has been ratified in Slovenia, but it is not yet effective.
To learn more about the history, culture, economy and other information about Slovenia
We have been preparing US income tax returns for US Citizens and permanent residents living in Slovenia for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Slovenia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Slovenia.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email