Thinking beyond borders
Extended business travelers are likely to be taxed on employment income relating to their Slovenian work days.
A person’s liability to Slovenian tax is determined by his/her residence status. An individual is deemed to be a resident of Slovenia if his officially registered permanent address, habitual place or the center of his personal and economic interests is in Slovenia. In addition, any person who has been present in Slovenia in a tax year (calendar year) for more than 183 days in the aggregate is deemed to be a resident in that tax year. A non-resident of Slovenia is generally someone who spends less than 6 months in Slovenia and does not meet any of the above listed conditions.
The general rule is that a person who is a resident of Slovenia is taxable on his/her worldwide income, while non-residents are taxable on their income derived from sources in Slovenia. Extended business travelers are likely to be considered non-residents of Slovenia for tax purposes unless they enter Slovenia with the intention to remain in Slovenia for more than 6 months.
There is no minimum number of days that exempts the employee from the requirements to pay tax in Slovenia (from the source income). To the extent that the individual qualifies for relief in terms of the Income from Employment article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if the Slovenian entity is his/her economic employer.
For extended business travelers, the types of income that are generally taxed are employment income (including fringe benefits) and Slovenian sourced income.
Taxable income is taxed at progressive tax rates ranging from 16 to 50 percent.
The 2017 tax brackets are presented in the table below:
|Taxable income (EUR)||Tax||Rate on Excess|
Compulsory social security insurance schemes apply to the whole population, and all the employed people are included in the social security system. There are four social security insurance schemes: pension and disability insurance, health insurance, unemployment and maternity leave. Both, employers and employees, pay compulsory social security contributions. Employers withhold these contributions from salary payments and pay them together with their contributions every month as part of payroll accounting. The taxable basis for both, employer and employee, is the amount of the gross salary (including fringe benefits, holiday payment if it exceeds 70% of the average Slovenian gross salary for a previous month, remuneration, etc.). The social security contribution rate for employees is 22.1 percent and for employers 16.1 percent of the gross income.
During the year, tax is paid as advance payments. These advance payments are taken into account when calculating the final tax obligation in the annual tax return (except of income from capital, income from renting immoveable property and income from private entrepreneurs who opted to determine taxable basis with standard costs).
If a resident receives income by a foreign entity, a taxpayer is required to file a tax return and the tax advances are paid on the basis of the tax assessment issued by the tax authorities. Tax payments for non-residents are made on the basis of the tax return filed with the tax authorities or the tax is withheld by the payer of income. The tax paid is considered as a final tax.
Since 2008, the Slovenian tax authorities are obliged to generate an annual preliminary tax assessment from its own information to assess the tax and submit the tax assessment to the taxpayer. If the tax assessment has not been submitted to the taxpayer by 15 June of the current year, the taxpayer is obliged to file an annual tax return for the previous year by the end of July of the current year. The tax liability of the taxpayer should be assessed by the tax authorities by the end of October of the same year. Prior to 2008 taxpayers were required to file an annual tax return on the basis of which tax authorities issued annual tax assessment.
The employer is obliged to withhold advance tax payments when the salary is paid. Employers withhold social security contributions from gross salary and pay them every month as part of payroll accounting.
Citizens of certain countries need an entry visa (the list of those countries is published on the website of the Ministry of Foreign Affairs). Visas are issued by embassies of the Republic of Slovenia abroad. A visa must be applied for before the individual enters Slovenia.
In principle, EU-citizens do not need a working permit in Slovenia. Only registration of performance of services is required in case of assignments. However, citizens of non-EU countries are required to have a single/unified permit for work and residence. There are various types of permits, depending on the circumstances.
A foreign citizen may stay in Slovenia for 90 days in a period of 180 days without a single/unified permit (for the purposes other than work). If the period is longer, a single/unified permit should be obtained. In case the foreign citizen enters Slovenia for reason of work, the single/unified permit must be obtained before entering Slovenia. After arriving in Slovenia, a foreign citizen is required to register his/her accommodation (temporary address) at a competent local administrative unit.
Visas are issued by Embassies of the Republic of Slovenia abroad. A visa must be applied for before the individual enters Slovenia.
First single/unified permit is in general issued by Embassies of the Republic of Slovenia abroad. First single/unified permit must be applied for before the individual enters Slovenia. Further single/unified permits are issued by the Administrative units in Slovenia. The application for prolongation of single/unified permit must be filed before the expiry of the current one.
Fingerprints are required to obtain single/unified permit in Slovenia. The reason of visiting/staying in Slovenia must be proved by appropriate documents. Foreigners must have arranged health insurance covering the period of stay in Slovenia and suitable funds for living during their stay in Slovenia are required.
In addition to Slovenia’s domestic arrangements that provide relief from international double taxation, Slovenia has also entered into double taxation treaties with 58 countries to prevent double taxation and allow co-operation between Slovenia and overseas tax authorities in enforcing their respective tax laws.
There is a possibility that a permanent establishment (PE) could be created as a result of extended business travel, but this would be dependent on the type of services performed.
Value Added Tax (VAT) is payable on all supplies of goods and services, affected by a taxable person within the territory of Slovenia, on intra-community acquisitions and importation of goods. The standard VAT rate is 22 percent and reduced VAT rate is 9.5 percent (applies to goods and services specifically listed in the law).
In respect of transfer pricing Slovenia follows the Organization for Economic Co-operation and Development (OECD) model. Transfer pricing implications could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction (depends also on the nature and complexity of the services performed).
Slovenia has data privacy laws.
Slovenia does not restrict the flow of Slovenian or foreign currency into or out of the country. However, certain reporting obligations are imposed to control tax evasion and money laundering.
Non-deductible costs for assignees include contributions by the employer to pension plans not approved by the Slovenian Ministry of Labor and not registered with the Slovenian tax authorities. Such contributions shall be considered as a benefit in kind.
As businesses become increasingly global, we have witnessed a dramatic rise in the number of business travelers now working in foreign jurisdictions.