Taxation Ltd – what are the differences?
Companies typically pay taxes on profits. However, some types pay different rates. This article explores the basic taxation information for limited liability company (Ltd). In any case, Ltd is the most famous type of company in Slovenia! In essence, the corporate income tax rate (ZDDPO-2) on profits for Ltd is 19%. Similar to sole proprietorships (s.p.), the taxation of Ltd bases on deductible expenses. Given this, there are conditions that make such taxation possible. For instance, if the Ltd has a total turnover of €300,000 in two consecutive tax periods, it switches to the classic taxation of profits in the third year, i.e. by taking into account the actual costs. Regardless which taxation method it chooses, the Companies Act and the Slovenian Accounting Standards oblige all companies to keep books of account using the double-entry bookkeeping system.
Does this help you? Do you plan to open an Ltd in Slovenia? Do you own a Ltd and want to immigrate your business in Slovenia? Don’t hesitate! Slovenia is very business friendly country! And guess what? DATA is here to assist you through the entire company registration process! Just call us on +386 40 530 718 (Viber/WhatsApp) and we will be happy to help you!
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Actual costs
To add on, companies that have a high level of costs and expenses in their business, or have a high level of investment or R&D activity, generally choose to tax the Ltd on the basis of the profit (or potential loss). In this case, in addition to reducing the tax base for costs and expenses, they also have the possibility to claim tax deductions which also have an impact on tax. As a result, when you register the company, you determine the tax treatment on the basis of your assumptions and preferences. Before the first tax return (in March for the previous year), you can change the tax treatment (form deductible to normal and vice versa).
Example: taxation of Ltd (one insured employee with minimum salary) at actual cost
Annual Calculation in EUR:
- revenue/sales – €72.000,00
- costs and other expenditure – €25.862,59
- bank charges – €500,00
- salaries* – €18.074,59
- accounting – €2.288,00
- other operation expenses – €5.000,00
- operation profit – €46.137,41
- tax base – €46.137,41
- tax 19% – €8.766,11
* minimum gross salary and allowances of €150, plus an annual minimum allowance
Profit distribution to owner (tax resident in Slovenia) under normal tax treatment:
- net profit (after tax) – €37,371,30
- Dividend tax (25%) – €9.342,83
- net transfer to owner – €28.028,48
In general, the rate of tax for taxing a Ltd is 19%, regardless of the method of taxation chosen. Moreover, when a dividend is paid, the tax is also determined by the Income Tax Act (Zdoh-2) and is withheld at 25 per cent or according to the income tax scale – if the individual so chooses (cedular or synthetic).
Are you an owner of an Ltd? Do you find this helpful? In either case, these are basic information that both old and entrepreneurs are interested in. Why? Logically, because they are subject to change occasionally. Take the case of income tax. Besides the basic conditions, in reality there are a lot of exemptions. Do you know which are they? Generally, incomes are taxable. However, not all of them. Why? Well, that depends on the type of activities and especially the type of company! Last but not least, check this article if you want to find more about the costs of opening a company in Slovenia!
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Deductible expenditure
If they qualify, companies can choose and calculate the tax on the Ltd by taking into account deductible expenses of 80% of revenue. In general, regardless of the method of taxation you choose, you must keep the accounts in compliance with the rules. In essence, the taxation of a Ltd depends on whether or not the Ltd has at least one full-time employee for at least 5 months within the tax period. Essentially, then the maximum amount of deductible expenditure is €80,000. In other case, it is only €40,000. However, the average of the receipts over two consecutive years must not go over €150,000. Provided that, we will now illuminate an example.
Example: taxation of Ltd (without employees) at deductible expenditure
Annual Calculation in EUR:
- revenue/sales – €72.000,00
- costs and other expenditure – €7.788,00
- bank charges – €500,00
- accounting – €2.288,00
- other operation expenses – €5.000,00
- operation profit – €64.212,00
- deductible expenditure (max) – €40.000,00
- tax base – €32.000,00
- tax 19% – €6.080,00
Profit distribution to owner (tax resident in Slovenia) – “deductible Ltd“
- net profit (after tax) – €58.132,00
- Dividend tax (25%) – €14.533,00
- net transfer to owner – €43.599,00
Don’t forget to check out our free salary calculator!
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Last but not least, DATA helps new and established entrepreneurs grow their businesses in Slovenia for more than 30 years. Also, we provide quality business, accounting, and legal services! In spite of that, we are aware that having own business is not easy, that is why we try to ease your work as much as possible! Start your new year ambitiously! Contact us and get in touch with our experts! So, if you want to follow our work and be updated on the latest changes related to company registration in Slovenia, follow our Facebook profile!
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