Slovenia’s New Law on Corporate Income Tax was published in the Official Gazette on 16 November 2006 and will be valid from 1 January 2007. Main changes in the new law are:
Clear definition of entities which are subjects to corporate income tax. These entities are local legal and foreign legal entities; foreign entities without legal personality, including contracts of partnership, societas, which are not subjects to individual income tax. Residents are obliged to pay tax on all income with source in Slovenia and outside Slovenia. Nonresidents are obliged to pay tax only to income with source in Slovenia.
Slovenia sourced income is also treated: a profit from selling of a nonresident’s branch in Slovenia and all payments for services to entities from non EU countries with tax rate on corporate income of 12,5 percent or lower.
Exemption from taxes is prescribed for non profitable entities. In spite of the exemption such entities are obliged to pay tax on profitable activities. Definition of profitable and non profitable activities will be prescribed in the by-law.
Profit tax base will be more precisely calculated when compared to yearly business result than it is according to currently valid legislation. Incomes and expenses, which were already included in tax source in previous years, are not included into tax base once again.
Tax base is in comparison with currently valid legislation changed: Dividends and other shares in profit as well as capital gain income are exempted from the tax base.
Transfer of business activities, change of capital shares, mergers and splits of companies are regulated according to EU regulation and comply with EU directive 90/434/EGS. The law defines also hidden reserves and their disclosure in tax report.
Tax relief is possible for investments into research and development activities, for employment of disabled persons, freewill retirement insurance and particular donations.
General tax rate is decreased from 25 percent to 20 percent. This decrease will be implemented step by step starting from 23 percent in the year 2007, 22 percent in 2008, 21 percent in 2009 and ending on 20 percent in 2010. Interest on government fixed income securities are not going to be taxed.
Withholding tax rate is decreased from 25 percent to 15 percent. The Law implements EU directive 90/435/EGS and EU directive 2003/49/EC relating to taxation of dividends and interest between mother and daughter companies from EU countries.
Dividends and income similar to dividends are more clearly defined. Hidden payment of profit is also treated as income similar to dividends. Withholding tax is according to the new law not calculated on interest which banks are paying to other banks or financial institutions.