Major tax reform on the horizon

On the 1st of August, the Ministry of Finance submitted for public debate and inter-ministerial discussion draft amendments to four tax laws, namely the Personal Income Tax Act (ZDoh-2), the Tax Procedure Act (ZDavP-2), the Excise Duty Act (ZTro-1), and the Financial Administration Act (ZFU). The deadline for public comments and responses expires on 19th of August.

The Ministry of Finance wants to repeal the “mini-tax reform” of the previous Slovenian Government and introduce certain legal corrections, while keeping some of the reliefs and allowances in place. At the same time, a more comprehensive tax reform is in the making, which the Ministry of Finance intends to send out for public debate early next year, and to enter into force in 2024.

The proposed amendments and additions to ZDoh-2 introduce the following main measures:

  • the amount of the general allowance is set at EUR 5,000 and the gradual increase to EUR 7,500 is abolished;
  • the total income up to which a resident is entitled to an additional general allowance on top of the general allowance is increased;
  • a reduction in the tax base on income from employment for taxable persons up to the age of 26 or 29;
  • the tax rate in the last 5th income tax bracket is from the current 45% increased to 50%;
  • the mechanism for automatically reconciling the amounts of allowances and the net annual tax bases is abolished;
  • for 2023, there is no adjustment of allowances and net annual tax bases;
  • introducing a condition that performance-related pay is paid no more than twice in a calendar year and removing the possibility of tax-favoured treatment for performance-related income of 100% of an employee’s average salary;
  • introducing a a condition for entry into, or existence in, a normalised expenditure system in relation to the compulsory pension and invalidity insurance of the taxable person or of a person employed by the taxable person, and extends the period of continuous membership of the insurance;
  • the taxation of rental income is reintroduced;
  • reintroduction of taxation of the value of shares paid out on the disposal of shares in the context of the acquisition of the company’s own shares (except where the company acquires its own shares on a regulated market) as dividends.

The main solutions of the proposed amendments to ZDavP-2 are:

  • extension of the automatic exchange of information between Member States, additions to the joint agreement procedure and proper transposition of the EU Tax Dispute Settlement Mechanisms Directive;
  • the introduction of reporting obligations for operators of digital platforms;
  • disclosure of certain information to a beneficiary who needs it to comply with an obligation;
  • the taxable person will not need a qualified digital certificate to receive documents from the eDavki portal; and
  • the income tax return is no longer limited to one year.

The proposed amendments and additions to the ZTro-1 concern the direct exemption from excise duties for the purchase of fuel for agricultural and forestry machinery, while the proposed amendments and additions to the ZFU concern the appointment of directors of the financial offices, the method of decision-making, the assignment of a procedure to another inspector for management and decision-making, the withdrawal of the inspector’s powers, and the financial investigation.

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