On 11 March 2022, the National Assembly adopted The Act Amending the Personal Income Tax Act (ZDoh-2Z), which entered into force on 22 March 2022, however applies as of 1 January 2022, which means that the determination of tax liability in accordance with the new rules can also be applied retroactively.
The Amendment to the Personal Income Tax Act introduces a number of novelties, namely:
1. Employment income relief
a) increase in the general relief
The Amendment relieves the tax burden on labour income by gradually increasing the general relief, which will rise from EUR 3,500 EUR to 7,500 by 2025. In 2022 it will amount to EUR 4,500, in 2023 to EUR 5,500, in 2024 to EUR 6,500 and in 2025 to EUR 7,500. The Amendment thus results in a higher net salary with the same gross salary.
After the end of the transitional period, from 2026 onwards the amount of the general relief will be adjusted in line with the consumer price index.
b) changes to the income tax scale
The Amendment reduces the rate of taxation in the highest fifth income tax class from the current 50 % to 45 %.
For 2022, the tax bases will be adjusted to the consumer price index and the income tax amounts will be calculated accordingly.
c) change in the tax treatment of business performance pay
The tax treatment of business performance pay is also changing, as it is no longer treated as part of salary for business performance. According to the Amendment, it may be paid in cash or in kind, once or several times a year, and is non-taxable up to amount of 100 % of the average monthly salary of employees in Slovenia, or up to 100 % of the average monthly salary of the employee, including salary compensation, paid during the last 12 months by the employer, if this will is more favourable for the employee.
d) exceptions or advantages in the valuation of bonuses and their inclusion in the tax base
One of the changes introduced by the Amendment to promote the green transition is the reduction of the value of the bonus for electric motor vehicles to zero.
The Amendment also introduces a change in the valuation of the bonus in case of purchase or acquisition of shares in an employer’s company. Under the Amendment, if an employer (a company) grants an employee the right to purchase or acquire shares in that company or its parent company, the value of the bonus is 65 % of the value, under the condition that the employment relationship has lasted more than one year up to the date of the exercise of the right and that no business performance pay benefits are claimed in respect of that bonus.
e) change in the tax treatment of the severance payment
With regard to the treatment of severance pay not included in the tax base, in accordance with the Amendment to the Personal Income Tax Act, severance pay under other laws (not only under the Employment Act) whose grounds for dismissal or termination of the employment contract are comparable to those in the Employment Act are treated in the same way.
2. Capital and rental income relief
The Amendment also brings changes to the taxation of capital income. It lowers the rate of income tax on capital gains (interest, dividends and capital gains) from 27.5 % to 25 % and shortens the holding period, whereby no income tax is payable on capital gains realised on a disposal after 15 years of holding the capital, instead of 20 years.
In addition, as from 1 January 2022, the value of shares paid out in the event of a disposal of shares in the context of the acquisition of the company’s own shares will no longer be taxed as a dividend.
The rate of income tax on rental income is also reduced, namely from 27.5 % to 15 %. The percentage of standardised costs to be recognised in determining the taxable amount of rental income is also reduced, namely from 15 % to 10 %.
3. Modification of the tax relief for employment and new tax relief for employing young people entering employment for the first time
The Amendment promotes the employment of young people by loosening the conditions for the tax relief for employment.
According to The Amendment, a taxable person who newly employs a person under the age of 29 or over the age of 55, or who employs a person in an occupation for which there is a shortage of jobseekers on the market (such shortage is defined in a list, established by regulation by the Minister responsible for labour), who has not been employed by the taxable person or its related person in the last 24 months, may benefit from a reduction of the taxable person’s taxable income equal to 45 % of such person’s wages for a 24-month period. However, if the taxable person employs a person under the age of 25 who is employed for the first time, he may benefit from a reduction of the taxable amount equal to 55 % of such person’s salary, also for a period of 24 months.
4. Other provisions
In addition to the relief of income from employment, capital income and rental income, and changes to the tax relief for employment, the Amendment to the Personal Income Tax Act also introduces other important changes, namely:
- exemption from income tax on family pensions under the law regulating pension and invalidity insurance,
- exemption from income tax on payments to pre-school children, primary school pupils, high school pupils or students from the school fund,
- the exclusion of exempt social security contributions from tax deductible revenue and expenditure,
- an increase of the tax relief on performing practical work within professional education from 20 % to 80 % of the average monthly salary of employees in Slovenia for each month in which the individual performs practical work within professional education,
- a new tax relief for investment in digital transformation and green transition of 40 % of qualifying investments,
- changes to the tax relief for donations, which is increased to 1 % of the taxable income of the taxpayer in the tax year, and extending the possibility of claiming an additional reduction of the tax base with a higher amount of the tax relief which can be claimed for sporting purposes in addition to cultural purposes and protection against natural and other disasters,
- a new tax relief for donations to top-level sport programme providers for investments in top-level sport of 3.8 % of the taxable income of the taxable person’s tax period,
- a relief for the elderly and a relief for voluntary services in the field of protection, rescue and assistance, both amounting to 1.500 EUR,
- tax relief for individuals with a status of a high school pupil or student in a fixed amount of 3.500 EUR,
- the possibility of changing the rate of advance payment of income tax on pensions or occupational pensions paid by an employer other than the main employer.