Profit distribution in companies in Slovenia/EU

Profit distribution in companies in Slovenia EU

Profit distribution in companies  in Slovenia will be different in 2022

Companies that do business in Slovenia and make profit will experience some changes in 2022. Why? The profit distribution will change. This is because the lower tax rates will apply. Now, a 27,5% rate is in place. But in the year 2022, it will fall to only 25%. We are still waiting for the Official Gazette of Slovenia to publish this change.

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What is profit?

Do you know what is profit? The Companies Act (ZGD) holds the definition of profit. There it says that each partner gets the right to participate in the profit. Of course, they also take part when there is a loss. At the end of each financial year, you check how much shares each owner has. You do that on the basis of the annual financial statements.

In accordance with Slovenian Accounting Standards (SAS2016), the profit is a positive result when, in general, revenues are higher than expenses.  A company or an institute may do profit distribution for various purposes.

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Personal income tax and profit distribution

In accordance with the decision that the company takes, it prepares the calculation of the profit. By the end of this year, individuals pay tax on dividends they receive. Now, it is 27.5%. This is the so-called cedular taxation. This type of income is not a part of the annual personal income tax, according to the scale. Instead, you pay tax on them only once. The payer, the company, upon transfer of the dividend, deducts the tax and pays it directly to FURS. And then they pay the difference to the partner. A natural person does not have to declare income in the annual personal income tax return for the payment of profit.

What about profit distribution to people outside of Slovenia? Here, you need to observe the valid convention. This is to avoid the double taxation between Slovenia and the other country. If a foreign natural person wishes to claim lower taxation, they must submit a certified KIDO form. the other option is to give a certificate of tax residency of another country to the Financial office in Slovenia. Our accountants will be happy to help you in the process.

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What about profit distribution to another company?

Does the process change if you pay profit to a company? When the owner of the company is another company, the taxation depends on the location of the office of the company. If a Slovenian company gets the dividends, the payment is not taxed upon transfer. This is because both companies are taxed in Slovenia with the same tax law. But if it is a foreign company, you need to know whether it is from a country inside the EU or outside the EU. If the company is in one of the EU Member States, you do not deduct tax for the distribution of profits. So, you pay no tax in Slovenia.

It is different when the recipient is a company operating outside of the EU. In this case, the taxation depends on the valid international agreement that Slovenia has signed with this country. The profit distribution to another company is taxable at the rate of 15 %. If the foreign companies wish to get a profit distribution at a lower rate, they must show a certified KIDO form before the transaction.

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