Double taxation of legal entities in Slovenia

Double taxation of legal entities in Slovenia

Entrepreneurs who start their business in Slovenia are usually very curious about taxation in Slovenia. Mostly it is related to whether their company will pay tax in Slovenia or abroad. In this article, we are covering the double taxation of legal entities which can occur when paying out profit, dividends and interest.

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Double taxation in Slovenia of company profit

When a legal entity that is a Slovenian tax resident, makes a business profit in another country (usually as a branch office), the profit is a subject of double taxation only there. But only to the amount which the actual branch office generated. In accordance to the international agreements, the company can avoid double taxation through the method of deduction. It means that from the whole profit of the legal entity, you deduct the amount of tax you have already paid in the other country. Also, the legal entity has to ensure the confirmation of tax base abroad and provide proof of the tax they paid abroad.

An example of the calculation:

Profit of the branch office abroad: 5000€

Tax base: 5000€

Tax 19%: 950€

The tax paid abroad: 1000€

You do not have to pay additional amount of tax but there is also no tax refund, as the rate of the corporate income tax abroad is higher than in Slovenia.

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Double taxation of dividends

Dividends paid by a foreign company to a legal entity may be taxed in the country where the company is established. The rate depends on whether Slovenia has an agreement with this country or not. If there is no international agreement, the tax is paid upon payout in accordance with the applicable local legislation. Also, in Slovenia, a legal entity must declare the dividends received within the form “Calculation of corporate income tax”.

Where there is a valid contract preventing double taxation, the payment in the company’s country is usually from 5% to 10% (depending on the provisions of the agreement with the country concerned), upon proof that the legal entity is a tax resident of Slovenia. In this case, too, the legal entity must declare the dividends received via the same form and obtain a certificate of tax paid abroad. If the tax was levied abroad at a higher rate, the difference can only be reimbursed by claiming in that country.

Example of calculation:

Received dividend abroad: 10.000€

Tax base: 500€

Tax 19%: 95€

The tax paid abroad: 100€

There is no surcharge, but no refund either. Double taxation did not occur, but the tax paid abroad is higher than in Slovenia alone.

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