At the government session that took place on 28th of March 2019, Slovenian government defined the text of the new proposal for the new amendments to the personal income tax and social security contributions legislation. The Slovenian government kept the promise of taking action regarding tax optimization and implemented a relief of taxation of labor costs.
The main change is definitely an expanded non-taxation of holiday allowance. It`s in employer`s domain to decide the amount of holiday allowance, however, the minimum holiday allowance is stipulated by the legislation (equal to the minimum monthly gross salary). Previously, holiday allowance of up to 70% of the average monthly gross salary in Slovenia was not subject to social security contributions. The new amendments are setting some new frameworks. Consequently, holiday allowance of up to 100% of the average monthly gross salary in Slovenia will not be subject to either social security contributions or personal income taxation. Therefore, employees shall receive the gross amount of the holiday allowance (up to the average monthly gross salary in Slovenia). Holiday allowance exceeding the threshold shall be subject to social security contributions and personal income taxation (only the excess amount). The average monthly gross salary currently amounts to 1.729,15 € - this information is valid as of 1st of April 2019.
The purpose of this measure is to raise the competitiveness of the business environment, which should result in economic growth and bigger global competitiveness of Slovenia.
Until the changes come into force, employers and employees are still obligated to pay advance income tax and social security contributions as currently stipulated by the law. However, the new provisions will already take effect for the year 2018, meaning that payments of advance income tax and social security contributions in 2018 on the basis of the old legislation shall be duly refunded.
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