On 4 May 2019, the amendments to the Personal Income Tax Act (ZDoh-2U) and the Pension and Disability Insurance Act (ZPIZ-2F) entered into force relieving taxation for the annual holiday leave pay. The amount of 100% of the average monthly salary of employees in Slovenia is not included in the tax base of income from employment and the basis for payment of social security contributions. This amends the previous regime according to which it was necessary to calculate personal income tax from the entire compensation and social security contributions if it was higher than 70% of the average salary.
The amendments are both from the perspective of the employer and from the point of view of the worker. The employer is obliged to deduct the withholding tax and contributions only in the part where the annual leave pay exceeds 100% of the average monthly salary. According to the Statistical Office of the Republic of Slovenia, the average monthly gross earnings amount to EUR 1,721.82. However, even if the employer paid the compensation only at the level of the minimum wage in accordance with the Employment Relationships Act, the worker will still receive at least EUR 886.63.
The amendment to the legislation is effective from 1 January 2019. Therefore, for payments carried out before 4 May 2019, the law provides for a special procedure for the repayment of overpaid advance payment of personal income tax, overpaid and deducted contributions (reimbursement to the employee) and excessively charged contributions (reimbursement to the employer). The repayment of these amounts will be carried out by a special decision by the Financial Administration of the Republic of Slovenia.
A tax or legal expert can advise you on the calculation and obligations regarding the payment of personal income tax from the annual leave pay.