How to Calculate SP Tax and Contributions

By , 11 May 2018, 13:09 PM How to Slovenia
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Get ready for payments you will have to make once you start your own business. 

May 11, 2018

In this article we will make a short overview of the social contributions and income tax payments one should expect if opening an SP (sole proprietor) business in Slovenia, often referred to as self-employment.

There are two ways in which the tax basis (davčna osnova) can be estimated, depending on the type of SP one chooses upon registration at business register (AJPES). The first one is the ordinary type of SP, in which actual expenses are counted and subtracted from the gross income. Any profits are then taxed according to the rate for each particular income bracket, and general and particular tax credits can be applied.

The other one, called normiran SP (normative SP, from here on nSP), is much simpler in terms of book-keeping, as the tax basis is simply calculated at a fixed 80% rate of expenses and a 20% final tax you then pay on the remaining 20%, which counts as your profit. In other words, you will pay 20% on 20%, that is 4% tax on your entire income, no matter how low it might be, although the upper limit for an nSP is 50,000 EUR (annual), which is also the figure at which you become liable for value added tax (VAT, or davek na dodano vrednost, DDV, in Slovene).

It is often suggested that people with high expenses should opt for ordinary SP, while those with low expenses who mostly sell their services should opt for the nSP.

Furthermore, due to the fixed expense rate (80%) and fixed and final tax rate (4%), an nSP is also much easier when it comes to accounting, which is going to be the scope of this article. With some idea on the basics, an nSP can avoid nasty surprises when new calculations of their social security and tax bills land in their mail box after an usually successful business year.

Personal Income Tax for an nSP

As already mentioned, taxes are easy to compute for an nSP. There is a final 20% tax on profits from your services. As the rate of expenses are always set at 80%, income tax always applies to the remaining 20%. Since 20% of 20% is 4%, you can easily apply the 4% rate to your entire gross income and that’s it. No additional tax, but also no tax credit.

Social contributions

Social contributions consist of mandatory insurance policies that are usually divided between an employee and his employer, and are therefore covered entirely by a self-employed person on a monthly basis. These four contributions are:

- pension and disability insurance contributions (prispevki za pokojninsko in invalidsko zavarovanje): 15.50% (employee) + 8.85% (employer) = 24.35 % (SP)

- health insurance contributions (prispevki za zdravstveno zavarovanje): 6.36% (employee) + 6,56% (employer) + 0,53% (workplace acc. insur.) = 13,45% (SP)

- parental protection contributions (prispevki za starševsko varstvo): 0.10% (employee) + 0.10% (employer) = 0.20% (SP)

- employment insurance contribution (prispevki za zaposlovanje): 0.14% (employee) + 0.06% (employer) = 0.20% (SP)

All these percentage rates refer to your insurance base, so how is this measured?

Determining the insurance base and the initial discounts

Your insurance base is determined by your previous year’s profits and social contributions. If you have just registered your SP then the minimum social contributions which stand at 60% of the average national salary will apply:

tabela minimalni dohodki.jpg

Furthermore, first time business registers are eligible to the partial exemption from the payment of contributions for pension and disability insurance (PIZ). That is, a person who already had registered an SP account and subsequently closed it, is not eligible for this (PIZ contributions only) discount, which amounts to 50% in the first year and 30% in the second. Minimum social contributions in this case amount to 254.05 EUR in the first and 301.60 in the year that follows.

After the initial year, however, contributions will be calculated according to the sum of your taxable income and contributions payed in the previous year and if monthly average of that won’t exceed 60% of the average gross salary in Slovenia, you will continue to pay minimum contributions (and get the minimum pension out of it, once retired) if not, your contributions will be adjusted accordingly.

Below is a website which will help you predict your future net income, by calculating and deducting contributions, tax and other expenses you’d like to add to your planning. The website is only in Slovenian, so we will help with some instruction for nSPs and some basic translation. Note that when writing decimals in Slovenian, “,” is usually in place of a “.” in English. For link to the website below click here.

zacetna stran.jpg

Tick “mesečni znesek” for your average monthly gross income on the left and fill in the amount below. On the right, choose “Normiranec 2018”. Click “naprej”, to get to the next step, which is “prispevki” or contributions.

izracunprispevkov.jpg

Your contributions are based on previous year’s insurance base (zavarovalna osnova”. If it is your first year in SP, leave “0” in the first line. If not, write in the sum of your previous year’s taxable income (20% of your gross income) and all contributions you have payed including those, paid by the government (50% or 30% of your PIZ contributions). Ignore the rest and click “Naprej” (Next).

izracunspnormostalistroski.jpg

In this third part called “stroški”, you write in all possible additional expenses of your business such as transportation, accountant, etc. that you’d like to deduct from your net income. We were mostly interested in the amount of deductions that are obligations of a nSP to the state, so we marked all these with zeroes. Click “naprej” to get results on your estimated monthly net income (povprečni mesečni znesek NETO).

izracunspnormirancistroskikoncna.jpg

Good luck!

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  • The first significant increase in foreign vehicles driving on Slovenian roads before the main summer tourist season is during the Easter holidays.

    We are therefore expecting increased traffic at the end of this week from Austria and Italy in the direction of the border crossings with Croatia and from Italy to Hungary.

    Holidays in certain parts of Europe start on Thursday, 29 March; therefore, we may expect increased traffic from Austria in the direction of Croatia. On Thursday, we also expect heavy freight traffic and long waiting lines at the border crossings with Croatia.
     

    Roads will be heavily burdened on Friday, 30 March. Heavy congestions can be expected on the Lower Carniola motorway at Dobruška vas due to construction works.
     

    Due to the end of the holidays in most European countries, traffic will be significantly increased in the opposite direction on Monday, 2 April, and Tuesday, 3 April. 


    The electronic tolling system is being implemented on 1 April and short road closures are to be expected during the night.

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    You can view limitations in Slovenia and in neighbouring countries here.

    Expected construction works and road closures


    A2, Ljubljana - Obrežje

    A full road closure is expected in the Dobruška vas - Drnovo section until 21 May, which will be carried out in five stages. Traffic shall run on the other half of the motorway in both directions. Due to the full closure of the section, the Smednik junction will host temporary passage. Due to the closure of junction sections A and B at the Smednik junction (the expected start of the construction works is at the beginning of April), a detour will run on state-owned roads. The Zaloke jug rest area will be closed for the duration of the closure.

    A2, Ljubljana - Karavanke

    From Monday, 16 April to Thursday, 19 April from 8am to 4pm there will be maintenance works in the Karavanke tunnel.
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    A1. Ljubljana - Koper, H4, Vipavska dolina

    As part of adjusting the toll booths for the DarsGo system, there will be a full half hour closure of the Divača - Kozina section on Monday, 2 April between 12am and 1am due to the removal of the signalisation at the CP Videž gantry. There will be a short closure of the Gabrk - Sežana vzhod section on Tuesday, 3 April between 4am and 6am due to the removal of the signalisation at the CP Dane gantry. Traffic will also occasionally be hindered outside the listed dates.

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    Due to road patching works, traffic will be hindered at CP Vransko on Saturday, 31 March. 

    From Tuesday, 3 April to Saturday, 7 April, road patching works will commence on the A5 motorway at Vučja vas, Murska Sobota.
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    Prevention

    We are already seeing bikers on our roads and numerous national prevention initiatives to increase the safety of bikers are already taking place. The purpose of the initiatives is to make bikers aware of the importance of preparing appropriately at the start of the biker season, of wearing protective gear, of unexpected situations on the roads and of other participants in road traffic. More can be found at the link bikers.

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    Traffic information

    We suggest that you check the status of the roads using:
    - the website www.promet.si,
    - the PIC operator by dialling 1970 (the number is not free of charge) or the responder 080 22 44 (free of charge),
    - the mobile application DarsPromet+,
    - the social media (Twitter @promet_si and www.facebook.com/Vozimo.pametno),
    - the traffic information on radio stations.

    The Traffic Information Centre for Public Roadswishes you a pleasant and prudent drive.

     

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