Compulsory solidarity contribution and solidarity working Saturday

Recently, the National Assembly of the Republic of Slovenia adopted the Law on Intervention Measures to Eliminate the Consequences of Floods and Landslides of August 2023 (ZIUOPZP), which, among others, introduces a compulsory solidarity contribution for 2023 and 2024 and the possibility to organize a solidarity working Saturday.

Compulsory levy: solidarity contribution

Article 102 of the ZIUOPZP temporarily introduces a compulsory solidarity contribution for the years 2023 and 2024 to finance reconstruction of Slovenia after floods and landslides.

a) Persons liable to the solidarity contribution

Solidarity contribution shall apply to:

− individuals, who qualify as Slovenian residents for income tax purposes;
− legal entities, which are subject to corporate income tax (DDPO), however with exception for non-profit organisations.

b) Basis for the contribution (individuals)

The basis for the contribution amounts to the annual gross income included in the aggregated annual income tax base less tax-deductible expenses. Business performance bonus is also considered, although it is exempt from income tax.

For purposes of the contribution, the following is also considered:

• business income and in particular, business income before any deduction for tax losses and tax allowances; and
• gross income, which is taxed separately at flat rates, and in particular, interest, dividends, capital gains and rental income, less tax deductible expenses.

Individuals, whose income does not exceed 35 % of the average salary, are exempt from the contribution.

c) Basis for the contribution (legal entities)

The basis for the contribution corresponds to the corporate income tax base, but before any reduction for tax losses and tax allowances.

d) Contribution rates and payment methods

The contribution rate for individuals is 0.3 %, except for business income. The contribution rate for legal persons and individuals on business income amounts to 0.8 %.

The compulsory solidarity contribution on individuals is assessed by the Tax Administration (FURS) in course of the annual income tax assessment. FURS assesses the solidarity contribution on the income not included in the annual income tax in a notice issued by 31 December 2024 and 31 December 2025.

For legal entities, the solidarity contribution must be calculated in a self-assessment procedure within the same deadlines as for and together with the calculation of the corporate income tax.

Solidarity Working Saturday

In order to provide part of the funds for purposes of mitigating the damage caused by floods and landslides, an employer may, after prior consultation with a trade union, works council or directly with employees, organize one working Saturday in 2023 and one working Saturday in 2024 as a Solidarity Working Saturdays.

The employee’s contribution to the Slovenian Reconstruction Fund is the amount of the net salary earned on the Solidarity Working Saturday. The employer’s contribution to the Slovenian Reconstruction Fund is equal to the employee contribution.

The employer must calculate the employee’s and employer’s contribution to the Slovenian Reconstruction Fund in a special form/statement in the month, following the Solidarity Working Saturday.

The employee and the employer contributions are considered when calculating the compulsory solidarity contribution, by reducing the solidarity contribution for already paid amounts in course of the Solidarity Working Saturday.

Proposal on amendments to the Corporate Income Tax Act (amendment CITA-2S)

The Ministry of Finance has further published a proposal on amendments to the Corporate Income Tax Act (amendment to CITA-2S), which, among others, includes the following:

• the definition of a permanent establishment (PE) for non-residents shallbe extended in order to prevent artificial avoidance of the PE status as addressed by BEPS Action 7;
• the Interest Limitation Rule of Article 4 of the ATAD Directive shall be implemented into domestic laws. According to this rule, only the excess borrowing costs up to the amount higher than the following, is recognised as tax-deductible expense for related parties:
  • 30 % of the taxpayer profit before interest, tax, depreciation, and amortisation; or
  • EUR 1,000,000.

The Interest Limitation Rule shall co-exist with the thin capitalization rule (Art. 32 of CITA-2) and the rule on recognized interest rate (Art 19 of CITA-2). In other words, the Interest Limitation Rule will also have to be considered when assessing tax deductible interest.

According to the proposal, the amendments shall apply as from 1 January 2024. The proposal however needs to be approved by the National Assembly. It is also possible that further amendments and changes to the proposal would be added during the legislative process.