SLOVENIA Law and Practice Contributed by: Blaž Ogorevc, Miha Štravs and Blaž Murko, Odvetniki Šelih & partnerji, o.p., d.o.o.
8.4 Income Tax Withholding for Foreign Investors Foreign investors are subject to special rules on income taxation in Slovenia. Income tax may be withheld, but this is not automatic and depends on various factors such as tax treaties between countries, the type of income and the status of the investor. Natural persons are obliged to pay tax on rental income, which is payable by the landlord. The rate is 25% from the income from renting out real estate, reduced by standard costs of 10% or actual costs. If a natural person rents out real estate as a business activity, these incomes can be considered as income from the activity, which go into the tax base for the annual assessment of income tax. Natural persons also pay tax on capital gains in connection with the disposal of real estate. The law provides for several exemptions, the most important being disposal after 15 years of own - ership. Even otherwise, the tax rate, which first amounts to 25% of the difference between the value of the capital at the time of disposal and the value of the capital at the time of acquisi - tion, decreases over the years of ownership, ie, it amounts to 20% after five years of ownership and 15% after ten years of ownership. Meanwhile, legal entities pay corporate income tax (CIT), which amounts to 19% of their profits. A 15% CIT withholding is provided for rent income if paid to a non-resident stemming from real estate located in Slovenia, unless the lease is provided by the business unit of the non-res - ident in Slovenia, in which case it is paid to this business unit.
making the transaction tax neutral. Conversely, if the parties opt into VAT treatment of the trans - action, the reverse charge system applies. The general VAT rate is 22%. A lower VAT rate of 9.5% is applied to supplies of apartments, hous - ing and other buildings intended for permanent residence, and parts of buildings, if they are part of social policy. If VAT is not payable on the sale and purchase of real estate, real estate transactions are subject to real estate transaction tax (see 2.10 Taxes Applicable to a Transaction ). 8.2 Mitigation of Tax Liability There are no methods which could be used to mitigate tax liability on acquisitions of large real estate portfolios. 8.3 Municipal Taxes There is no annual tax specific to the holding of business premises. However, payment of an (annual) compensation for the use of building land is required. This compensation is generally payable in respect of the following areas: • towns and settlements of urban character; • areas designated for residential and other complex construction; • areas for which a spatial implementation plan has been adopted; and • other areas equipped with water and electric - ity utility networks. The exact areas for which the compensation should be paid, the criteria for determining the amount of compensation and the applicable exemption are determined at the municipality level. The person liable for payment of this com - pensation is generally the direct user of the land or building or part of the building.
818 CHAMBERS.COM
Powered by FlippingBook