Unofficial and unauthorized translation

Unofficial and unauthorized translation

Unofficial and unauthorized translation 1 Pursuant to the first paragraph of Article 153 of the Rules of Procedure of the National Assembly of the Republic of Slovenia, the Legislative and Legal Service has drawn up an unofficial consolidated version of the Corporate Income Tax Act comprising: – the Corporate Income Tax Act – ZDDPO-2 (Uradni list RS [Official Gazette of the Republic of Slovenia], No. 117/06 of 16 November 2006), – the Act Amending the Corporate Income Tax Act – ZDDPO-2A (Uradni list RS, No. 65/08 of 6 June 2008), – the Act Amending the Corporate Income Tax Act – ZDDPO-2B (Uradni list RS, No.

76/08 of 25 July 2008), – the Act Amending the Corporate Income Tax Act – ZDDPO-2C (Uradni list RS, No. 5/09 of 23 January 2009), – Act Amending the Corporate Income Tax Act –ZDDPO-2D (Uradni list RS, No. 96/09 of 27 November 2009), – Act amending the Tax Procedure Act – ZDavP-2B (Uradni list RS, No. 110/09 of 29 December 2009 and 1/10 of 8 January 2010 – correction) and – Act Amending the Corporate Income Tax Act –ZDDPO-2E (Uradni list RS, No. 43/10 of 31 May 2010). Ref. No.: 435-02/10-15/1 Date: 03 June 2010 EPA 1088-V Božo Strle Head of the Legislative and Legal Service CORPORATE INCOME TAX ACT UNOFFICIAL CONSOLIDATED TEXT (ZDDPO-2-NPB6) I.

GENERAL PROVISIONS Article 1 (Contents of the Act) (1) This Act regulates the system and introduces the liability to pay corporate income tax. (2) This Act shall transpose the following Directives of the European Community into the legislation of the Republic of Slovenia: – Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (OJ L 225 of 20 August1990, p. 142), as last amended by Council Directive 2005/19/EC amending Directive 90/434/EEC 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (OJ L 58 of 4 March 2005, p.19); – Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ L 225, 20 August 1990, p.

6), as last amended by Council Directive 2003/123/EC amending Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ L 7 of 13 January 2004, p.41); – Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States (OJ L 157 of 26 June 2003, p.49).

Article 2 (Entitlement to tax proceeds) Corporate income tax (hereinafter: tax) under this Act shall be revenue for the state budget. II. TAXPAYER AND TAX LIABILITY Article 3 (Taxpayer)

Unofficial and unauthorized translation 2 (1) Taxpayers shall be legal entities of domestic and foreign law (hereinafter: taxpayer). (2) Without prejudice of the first paragraph of this Article, a taxpayer shall also be a company and/or any association of persons, including a civil law company subject to foreign law, which does not have legal personality and is not considered a taxpayer subject to the Act regulating personal income tax.

(3) Unless otherwise stipulated by this Act, the Republic of Slovenia and local authorities shall not be considered taxpayers.

Article 4 (Scope of tax liability) (1) Residents of the Republic of Slovenia (hereinafter: residents) shall be liable to pay tax on all income originating in the Republic of Slovenia (hereinafter: Slovenia) and on all income originating outside Slovenia. (2) Non-residents of Slovenia (hereinafter: non-residents) shall be liable to pay tax on income originating in Slovenia. (3) The income of residents or non-residents, stipulated by this Act, shall be taxable within the scope and in the manner stipulated by this Act.

Article 5 (Resident and non-resident) (1) A resident shall be a taxpayer as referred to in Article 3 of this Act who meets one of the following conditions: 1.

The resident's registered office is located in Slovenia. 2. The resident's place of effective management is located in Slovenia. (2) A non-resident shall be a taxpayer as referred to in Article 3 of this Act who meets neither of the conditions referred to in the first paragraph of this Article. (3) The minister competent for finance shall define the method of establishing the place of effective management, while taking into account that the place of effective management is the place where key administrative and business decisions needed for the management of business operations are taken and which is usually the place where persons or a group of persons holding leading positions, for example management, take decisions, or the place where the activities to be performed by a person as a whole are planned and that in the procedure of establishing all the important facts and circumstances of a certain case are taken into account.

Article 6 (Non-resident’s business unit) (1) A non-resident’s business unit (business establishment) subject to this Act shall be the place of business, i.e. the place in or through which the non-resident’s activities and/or business in Slovenia are conducted in whole or in part.

(2) The following, in particular, shall be deemed the non-resident’s business unit: 1. Office, branch, factory, workshop, mine, quarry or other place where natural resources are obtained or exploited; 2. A construction site, a project involving construction, assembly or mounting, or the related supervision, if the duration of the activities and/or business concerned exceeds 12 months. (3) An agent that acts on behalf of a non-resident in all the activities and/or business for the non-resident shall also be considered the non-resident's business unit, if the agent holds and normally applies a power of attorney to conclude contracts on behalf of the non-resident, unless the agent’s activities are limited to those referred to in Article 7 of this Act, due to which the place of business in question would not be deemed the non-resident's business unit.

(4) A non-resident's business unit shall be an agent that, on his/her own behalf, acts for the non-resident as a stockbroker within the framework of his/her regular activities, an agent holding a general power of attorney or any other independent agent where the agent in whole or in part acts on behalf of the non-resident and where the conditions and circumstances pertaining to commercial and financial relations between the non-resident and agent in question differ from those prevailing in relations between non-associated enterprises. (5) A construction site, a project involving construction, assembly or mounting, or the related supervision, if the duration of the activities concerned exceeds twelve months, shall be deemed the non-resident’s business unit from the day of commencement of activities and/or business, including preparatory works.

Unofficial and unauthorized translation 3 Article 7 (Place of business that is not a business unit) Without prejudice to Article 6 of this Act, a place of business shall not be deemed a non-resident’s business unit if the non-resident: 1. Only uses the premises in question for warehousing, exhibiting or supply of goods belonging to him; 2. Only maintains inventories of goods belonging to him for the purpose of warehousing, exhibiting or supply; 3. Only maintains inventories of goods belonging to him for the purpose of processing by third parties; 4. Only maintains the place of business in question for the purpose of purchasing goods, or collecting information for himself; 5.

Only maintains the place of business for the purpose of engaging in any other preparatory or auxiliary activity and/or business for himself; 6. Only maintains the place of business in question for the purpose of any combination of activities and/or business referred to in points 1 through 5 of this Article, provided that the general activity and/or business of the place of business which is a consequence of that combination is of a preparatory or auxiliary type. III. SOURCE OF INCOME Article 8 (Source of income) (1) Income shall be considered to have its source in Slovenia when it is possible to determine the source of income in Slovenia according to any stipulation of the second through fourteenth paragraph of this Article.

(2) Income of a resident, excluding income earned in a business unit or through a business unit of that resident located outside Slovenia, and/or excluding income which is, in accordance with the stipulations of the fourth through fourteenth paragraphs of this Article, income with a source outside of Slovenia, shall be considered to have a source in Slovenia.

(3) A non-resident’s income earned either in a business unit of that non-resident or through a business unit of that non-resident, shall be considered to have its source in Slovenia if the business unit is located in Slovenia; (4) Income from immovable property and from the rights pertaining to immovable property shall be considered to have its source in Slovenia if the immovable property concerned is situated in Slovenia, and income from agricultural and forestry activities shall be considered to have its source in Slovenia if the activity is performed on land situated in Slovenia; (5) Income from exploitation or the right to exploitation of deposits of ores, sources or other natural resources shall be considered to have its source in Slovenia, if the deposits of ores, sources or other natural resources are located in Slovenia.

(6) Dividends, including income similar to dividends and income from holdings sourced in financial instruments and/or of all types financial investments such as securities and ownership shares, shall be considered to have their source in Slovenia if issued by companies, cooperative societies or other types of organisations set up in accordance with the regulations of Slovenia, Slovenia, local authorities or the Bank of Slovenia, and/or from holdings in companies, cooperative societies and other types of organisations set up in accordance with the regulations of Slovenia.

(7) Interest shall be considered to have its source in Slovenia if borne by a resident or non-resident through his/her business unit in Slovenia.

(8) Income from the use or the right to use copyrights, patents, brand names and other property rights, and income from other similar rights shall be considered to have its source in Slovenia if borne by a resident or a nonresident through his/her business unit in Slovenia. (9) Profit from disposal of a resident’s or non-resident’s business unit in Slovenia shall be considered to have its source in Slovenia.

(10) Profit from disposal of the immovable property referred to in the fifth paragraph of this Article shall be considered to have its source in Slovenia. (11) Profit from disposal of the financial instruments and/or investments referred to in the sixth paragraph of this Article shall be considered to have its source in Slovenia. (12) Income from services provided by performing artists or sportsmen, belonging to another person, shall be considered to have its source in Slovenia if such services are provided in Slovenia. (13) Income from all types of services paid to persons who have the seat or place of effective management in

Unofficial and unauthorized translation 4 countries where the general and/or average nominal corporate profit tax rate is lower than 12.5% and these countries are not EU Member States shall be considered to have its source in Slovenia if borne by a resident or non-resident through his/business unit in Slovenia or was paid out by the resident or non-resident through his/her business unit in Slovenia. (14) The profit referred to in paragraph ten of this Article shall also constitute the profit from disposal of equity holdings and the rights arising from equity holdings in a company, cooperative society or other type of organisation if over one half of the value thereof arises directly or indirectly from immovable property and the rights pertaining to immovable property located in Slovenia.

(15) The Ministry of Finance and the Tax Administration of the RS publish on their website a list of countries where the general and/or average nominal corporate profit tax rate is lower than 12.5% and where these countries are not the EU Member States referred to in the thirteenth paragraph of this Article. (16) Stipulations of this Act conditioning the rights and liabilities of taxpayers in relation to the seat and place of effective management in the countries referred to in the thirteenth paragraph of this Article shall enter into force on the day following the publication of the country’s name in the list referred to in the fifteenth paragraph of this Article.

(17) Income subject to this Act not originating in Slovenia shall be considered income originating outside Slovenia. IV. EXEMPTIONS Article 9 (Tax exemption applicable to taxpayer established for performing non-profit activities) (1) Taxpayer such as institutions, associations, institutes, religious communities, political parties, chambers, representative trade unions shall not pay tax subject to this Act, provided that: 1. They are, pursuant to a special act, established for performing non-profit activities; and 2. Actually perform their operations according to the purpose of their establishment and operation.

(2) Without prejudice to the first paragraph of this Article, the taypayer referred to in the first paragraph of this Article shall pay tax subject to this Act on income from profit activity.

(3) Without prejudice to the first paragraph of this Article, a legal entity, as a public institution established to provide mandatory stock of oil and petroleum products according to the Act regulating commodity reserves shall not pay tax under the second paragraph of this Article for the activity of provision of the mandatory stock of oil and petroleum products. (4) The Minister responsible for finance shall define profit and/or non-profit activity in detail for the purpose of this Article, taking into account that profit activity is performed in the market to gain profit and that through performing profit activity the taxpayer under this Article compete in the market with other persons under this Act and the Minister responsible for finance shall define in detail the type of the legal entity of taxpayer under this Article.

V. TAX PERIOD AND INCOME SUBJECT TO TAXATION Article 10 (Tax Period) (1) Tax shall be imposed on a taxpayer’s income as laid down in this Act during the tax period, which shall be the same as the calendar year. (2) Notwithstanding the first paragraph of this Article, a taxpayer may choose to have the tax period be the same as the financial year, which differs from the calendar year, where the tax period shall not exceed a period of 12 months. (3) The taxpayer referred to in the second paragraph of this Article shall be obliged to notify the Tax Authority of his/her choice. The tax period thus chosen shall not be changed for at least three years.

Article 11 (Income subject to taxation) (1) According to this Act, the following income shall be subject to taxation: 1. A resident’s or a non-resident’s profit, earned by the activity and/or business performed by him/her either in or through a business unit in Slovenia; 2. A resident’s or a non-resident’s profit, subject to withholding tax under Article 70 of this Act.

Unofficial and unauthorized translation 5 VI. TAX BASE 1. General provisions Article 12 (Tax base) (1) The tax base of a resident and non-resident in respect of activities and/or business performed either in or through a business unit in Slovenia shall be the profit established in accordance with the provisions of this Act. (2) Profit shall be the surplus of revenue over expenses as laid down in this Act. (3) In establishing the profit, the revenue and expenses determined in the profit and loss statement or the annual report corresponding to the profit and loss statement, and declaring revenue, expenses and profit or loss shall, subject to the law and the accounting standards established on the basis thereof, be taken into account., unless otherwise provided in this Act (4) The profit of a non-resident's business unit in Slovenia shall be profit that can be attributed to that business unit.

The profit which can be attributed to the place of establishment shall be the profit that can be expected to be earned by that place of establishment as if it were a taxpayer performing the same or similar activity and/or business. Income earned by performing an activity and/or business in a non-resident’s place of establishment or through a non-resident’s place of establishment in Slovenia, and the actual expenses which are incurred for the purposes of that place of establishment, including executive and general administrative expenses, shall be attributed to that place of establishment whether incurred in Slovenia or elsewhere.

(5) The tax base for withholding tax on the income listed in Article 70 of this Act shall be each individual income.

Article 13 (Elimination of double taxation and elimination of less than single taxation) (1) Resident’s revenue and non-resident’s revenue in respect of activities and/or business performed in a business unit or through a business unit in Slovenia which is included in the tax base of the current tax period or was included in the tax base of past tax periods shall not be included again in the tax base of the current or future tax periods. (2) Resident’s expenses and non-resident’s expenses in respect of activities and/or business performed in a business unit or through a business unit in Slovenia which are included in the tax base of the current tax period or were included in the tax base of past tax periods shall not be included again in the tax base of the current or future tax periods.

(3) Resident’s revenue and non-resident’s revenue in respect of activities and/or business performed in a business unit or through a business unit in Slovenia which originates from expenses not recognised for tax purposes in the past tax periods shall be exempt from the tax base, however only up to an amount not exceeding the amount of expenses not recognised for tax purposes in the past tax periods. (4) The taxpayer shall provide and store data on revenue and expenses under the first through third paragraphs of this Article which were included in the tax base and/or which reduced the tax base.

Article 14 (Tax base in case of changes in accounting policy and in case of rectification of errors) In establishing the tax base and/or in the recognizing the revenues and expenses of a taxpayer, amounts representing differences arising from changes in accounting policy and rectification of errors in taxable revenue and expenses recognised for tax purposes under this Act, for which the retained earnings or other capital components are calculated shall , be included in the tax base in the period of change in accounting policy and rectification of errors in such a way that they increase or reduce the tax base.

Article 15 (Tax base in revaluation to higher values) When establishing the tax base and/or recognizing the revenue and expenses of a taxpayer, the amount of revaluation surplus, resulting from revaluation of economic categories to higher fair values, and which is transferred to the retained earnings or other equity items by taxpayer, shall be included in the tax base in the year of such transfer. For assets which are being depreciated the revaluation surplus shall be transferred to the retained earnings and to the tax base in proportion to the accounted depreciation according to Article 33 of this

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