STA, 28 March, 2019 - The government adopted on Thursday legislative changes raising the threshold for exemption of annual holiday allowance from income tax and social security contributions. The measure will be applied this year, but only for holiday allowance up to the average national monthly wage.

"We've kept the promise and adopted the changes to the laws on pension and disability insurance and on income tax to exempt the holiday allowance of taxes as early as in 2019," the government wrote on Twitter.

"Every euro that employers spend on holiday allowance will be transferred to the employees, the state has given up income tax and contributions," Finance Minister Andrej Bertoncelj said.

Income tax and social security contributions will still have to be paid on the amount of holiday allowance exceeding the average monthly wage. At the moment, holiday allowance in the amount of 70% of the average monthly wages is exempt.

Slovenian employers are required by law to pay holiday allowance, while taxation in practice puts a soft ceiling on the amounts since taxes eat away at a large share of any allowance beyond what is tax exempt.

The benchmark will be data by Slovenia's Statistics Office, which publishes wage statistics on a monthly basis.

The latest available data is for January, when the average monthly gross wage stood at 1,729 euro and the average net wage at 1,116 euro.

The measure is designed to cut labour taxes and raise the disposable income of the workers who receive higher annual holiday allowance than the minimum wage - which is the lowest amount of holiday allowance the employer can pay out.

The government says this should improve Slovenia's competitive advantage, stimulate consumption and encourage companies to pay out more generous holiday allowances.

This is the first in a series of tax measures the government announced recently.

Last week, the Economic and Social Council, the country's main social dialogue forum, agreed this measure should be implemented as soon as possible, whereas the other measures will be subject to negotiations.

Bertoncelj said the government had kept its promise to sort this out as soon as possible. He expects the National Assembly will rush the bill as well since the government has proposed it be fast-tracked.

The Finance Ministry expects that the bill will reduce tax revenue by roughly EUR 90m annually, while the contributions shortfall is expected to amount to no more than EUR 2.4m.

All our stories on taxes in Slovenia are here

STA, 1 March 2019 - Peter Vilfan resigned as state secretary in charge of sports at the prime minister's office on Friday, following over a month of speculation that he evaded taxes. In his resignation, Vilfan once again denied being audited by the Financial Administration (FURS) or being issued a fine.

Prime Minister Marjan Šarec responded by saying that he accepted Vilfan's resignation.

In mid-January news portal Požareport said that Vilfan, a former basketball player, had been receiving sizeable payments from two TV stations for serving as basketball commentator.

Požareport said that the public TV Slovenija and commercial media company ProPlus paid the fees to Vilfan's own sports association and that he cooked the books to avoid tens of thousands of euro in taxes.

Vilfan on the other hand said that he had been paid about EUR 1,500 a month, while the figures circulated in the public were much higher.

Moreover, in late February the weekly Reporter said that Vilfan had been fined by FURS, which he denied immediately.

"Let me assure the public that neither I nor my association have been in any offence proceedings, and we have not been issued any decision or fine by FURS," Vilfan said in his letter of resignation forwarded to the media by the Pensioners' Party (DeSUS), of which he is a member.

In his response last week, Vilfan said that "the association filed a report on its own with FURS" and that they "are jointly examining a period of several years for possible accounting errors or irregularities".

DeSUS confirmed today that the review was concluded on Monday and the certain accounting irregularities had been discovered.

The party's president Karl Erjavec said he regretted the developments but respected Vilfan's decision.

Vilfan announced he was leaving politics for good. He was first elected to parliament as a member of Positive Slovenija of Ljubljana Mayor Zoran Janković in 2011, defecting to the Alenka Bratušek Party (SAB) after a split in 2014.

After being reelected MP in 2014, he joined the Pensioners' Party (DeSUS) in 2015, serving out his term until 2018 but he did not get re-elected in the June 2018 election. Instead, he was appointed state secretary at the PM's office.

He also commented matches when he served as an MP between 2011 and 2018, having being granted the permit by parliament.

A member of the Yugoslav national team that won the 1978 FIBA World Championship, Vilfan commented the 2017 EuroBasket matches for ProPlus channels POP TV and Kanal A under a similar arrangement as with RTV Slovenija.

Vilfan's resignation comes two days after Šarec accepted the resignation of Environment Minister Jure Leben, the third member of his cabinet leaving the government which was sworn in in September 2018.

Mladina: Proposed tax reform would mainly benefit the rich

STA, 1 March 2019 - The latest editorial of the left-leaning weekly Mladina tears apart the Finance Ministry's tax reform proposal as yet another taxation tweak to primarily benefits the rich.

Only two years have passed since the last changes that brought the biggest tax burden reduction and greatest gains for those who already have high wages.

While Prime Minister Marjan Šarec now stands to gain almost EUR 1,000 a year, his predecessor Miro Carar saw his wage rise by EUR 2,000 net at the annual level or to EUR 3,457 net a month, effective on 1 January 2017.

The argument keeps repeating - "we are doing this because of those who are the most productive", editor-in-chief Grega Repovž says, labelling this as despicable deceit by those working for the benefit of their own class.

It is true that high wages are taxed more in Slovenia, but on the other hand property is not subject to any serious taxation and the bulk of the income of the wealthiest stems from property.

Meanwhile, the taxation of the average wages of those in whose name the wealthiest would get even more after this reform is comparable to that in similar countries in Europe and is for instance lower than in Austria, Repovž says in the editorial entitled New Tax Cuts for the Rich.

At the same, the government is shying away from a real estate tax or from heavier taxation of those letting out several apartments, while it has also avoided reforming the compulsory health insurance system that continues to channel large sums of public money to private insurers.

This is an arrogant and offensive tax reform proposal that benefits the wealthy and should be withdrawn, Repovž says, adding PM Šarec dismissed the wrong minister this week.

Demokracija: Why does media ignore warnings on government spending?

STA, 28 February 2019 - In its latest commentary, the right-leaning weekly Demokracija is flabbergasted by the fact that a majority of the Slovenian media dedicated almost no attention to the warnings from the Fiscal Council that the general government expenditure planned for 2019 should be EUR 270m lower.

The warning about the need for the country to preserve a structural balance in compliance with the fiscal rule was buried quickly, ending up somewhere "on the dark side of the internet", editor-in-chief Jože Biščak says.

Is the expansive fiscal policy, which could cause a headache in the autumn, really a marginal topic, he wonders. It obviously is, as the media are busy "inflating the popularity of the prime minister," he adds in the commentary entitled It's Good to Be Marjan Šarec.

Šarec is really happy because, as the global economic situation is getting increasingly unpredictable, and forecasts more pessimistic than optimistic, the media do not bother him with questions about what to do if the economic growth happens to be lower than expected.

The fear of the 2008 crisis repeating has made the smart countries (Germany, Norway) start accumulating surpluses and creating reserves, while others are reducing general government debt (Estonia, the Czech Republic).

The only solution for the Slovenian government, if it wants to keep the public sector in the current size and meet the obligations given to the sector "either blindfolded or drunk on power", will be to increase the already high taxes.

The problem is not in taxes themselves, but what you get in return. According to an analysis by the Quality of Government Institute, Slovenia belongs to the countries which spend much, while giving back little to the citizens.

All our posts in this series can be found here

STA, 26 February 2019 - The Finance Ministry has drawn up changes to tax legislation, reducing taxes on labour on the one hand and increasing the capital tax on the other. It hopes that lower taxes on labour will boost spending and economic growth. Most of the changes would step into force in 2020.

Finance Minister Andrej Bertoncelj told the press in Ljubljana on Tuesday that the main goal of the reform was to increase net revenue of those employed to make the Slovenian labour market more competitive internationally.

This is to be achieved with changes to income tax brackets. The draft changes envisage moving the brackets up, reducing the tax rate for certain brackets, and increasing tax incentives.

The ministry expects this to have the biggest effect on the third income bracket, which the minister said affected the "most productive" part of the society. He said both the proposals of employers and trade unions had been taken into account in the changes.

If only the general tax incentive is taken into account, the net revenue of employees with minimum wage would go up by EUR 32, of those receiving average wage by EUR 144 and of those receiving two average wages by EUR 670 a year.

The taxes on the annual holiday allowance would be reduced. As so far, the allowance in the amount of up to average gross pay would not be taxed, but under the new proposal no social contributions would need to be paid from it either. Currently only the allowance that matches 70% of the average gross pay is exempt from contributions.

This means that the employee would receive the entire amount paid out by the company if it did not exceed average gross pay. The ministry would like this to be implemented this year.

For performance bonuses, the ceiling for being except from tax, which currently stands at 100% of average gross pay, would be raised to 150% in 2020. In 2021, it would be pushed to 175% and in 2022 to 200% of average gross pay.

The ministry believes this would cut the budget revenue by some EUR 270m a year. This is to be offset by an increase in corporate tax in 2020, 2021 and 2022 by one percentage point from 19% to 22%.

Current tax incentives for R&D investment would be preserved, but the effective tax rate for a company could not be lower than 5%. The average effective tax rate currently stands between 12% and 13%, Bertoncelj said.

Changes to capital gains tax

The schedular taxation of certain revenue (capital tax, interest and dividends, and revenue from rents) would stay the same, while the tax rate would be raised from 25% to 30%.

Capital gains tax would still be lowered with time, but to a much lesser extent. While currently it drops to 15% after five years of ownership, to 10% after 10 years, to 5% after 15 years and to 0% after 20 years, now it would stand at 30% for the first 10 years and remain at 15% after 10 years.

In total, these changes would increase budget revenue by EUR 110m a year. The remaining EUR 160m needed to cover the gap would be brought in through more efficient tax collection, and the fight against tax fraud, grey economy and social fraud.

According to the ministry, this is how much measures in these fields brought in last year.

Bertoncelj said he had already presented the blueprint of the tax reform to the coalition informally and was currently presenting it to deputy groups. The coalition is to discuss the proposal at its meeting on 12 March.

The changes are also to be debated by the Economic and Social Council, an industrial relations forum.

The ZSSS confederation of trade unions as well as the Chamber of Craft and Small Business (OZS) and the Chamber of Commerce and Industry (GZS) expressed satisfaction with the ministry's proposal.

In its response the ZSSS noted that it had been fighting for lower labour taxes and higher taxation for the capital, while the OZS underlined it was against a higher corporate income tax. A similar position was also voiced by the GZS.

STA, 19 February 2019 - Contrary to previous announcements, the Finance Ministry has now said it will be impossible to introduce the new real estate tax in 2020 as planned because data on some types of property remain faulty.

"Even though much has been done in recent years, not all the registries have been put in order to such an extent as to remove obstacles to the introduction of the real estate tax," the ministry told the STA.

The new tax, which is to replace the current levy for the use of building land, property tax and forest road fee, has been years in the making and put off several times because of its unpopularity.

An earlier attempt at introducing such a tax failed in 2014 after the Constitutional Court quashed the property appraisal act, which was to underpin the new system.

"The biggest obstacle to the real estate tax at the moment is that data on actual use of land for public roads and public railway infrastructure will probably not be available in time," the ministry said.

It specified that the most problematic issue was data on municipal public roads.

One problem could be if such plots were to be exempt from tax, considering that a large section of such infrastructure is still located on privately held land.

The Finance Ministry has been encouraging municipalities to do their part of the job in terms of these data, because receipts from the real estate tax would be their source of revenue.

"All obstacles to introducing the real estate tax will have been removed once these data have been put in order as well," the ministry said, adding that this was the job of the ministries of environment and infrastructure.

Earlier this month, the newspaper Dnevnik reported that compiling a census of 1,200 kilometres of rail tracks and 39,000 kilometres of state and municipal roads did not begin until recently, mainly due to delays at the Infrastructure Ministry.

The legislation for the registering of the actual use of land for public roads and railway infrastructure was adopted in February 2018 and the appertaining rules only just before the end of 2018.

The census of plots of land with state roads is to be completed by June, but the problem is said to be the 32,000 kilometres of local roads which local officials do not think will be completed in less than two to three years.

All our stories on real estate in Slovenia can be found here

STA, 24 October 2018 - The Financial Administration (FURS) has processed the data on international bank accounts of Slovenian citizens it had received by the end of September 2017 from the countries signatories of the relevant OECD agreement from 2014, and has issued on this basis a total of EUR 3.6m in tax requests. 

STA, 23 October 2018 - The Finance Ministry has produced a blueprint for the new real estate tax, suggesting that a 0.1% tax rate for residential properties and 0.6% for other buildings. 

STA, 1 October 2018 - The Financial Administration (FURS), which announced stepped up measures targeting a surge in undeclared vacation rentals at the end of last year, issued a total of EUR 237,000 in fines and charged EUR 230,000 in additional tax by the end of August. 

STA, 27 September - Prime Minister Marjan Šarec told managers gathered for their annual conference in Portorož that his government cared about the economy. "Our doors will always be open to you," he said, appealing for dialogue. 

STA, 5 September - The trend of declining tax debt in Slovenia continued for the fourth year in a row in 2017, when it dropped by a further 4% to EUR 1.27bn by the end of last year, according to a report confirmed by the government at Wednesday's correspondence session. Tax debt is the amount of tax that should be paid, but isn't.