10 November 2017 EY Slovenia Tax News Tax News - Oktober In this edition of EY Tax News, we inform you about the proposed tax law changes in Slovenia in relation to: Personal Income Tax Act Corporate Income Tax Act Fiscal Validation of Receipts Tax Procedure Act and expected reform of VAT system in European Union.
Proposed tax law changes Description On 28 September 2017 Slovenian government adopted a package of proposed tax law changes, which will now be subject to the Parliamentary process. Proposed measures are related to four tax laws: Personal Income Tax Act, Corporate Income Tax Act, Fiscal Validation of Receipts and Tax Procedure Act. The changes were introduced with the purposes to restructure fiscal burdens, to reduce administration burdens and to increase the efficiency of collecting taxes. Personal Income Tax Act (applicable from 1 January 2018): the general tax allowance for the income between EUR 11,166.37 to EUR 13,316.83 will be determined proportionally (previously it was fix amount of additional general tax allowance); a special tax scheme is introduced for the income achieved through assigning workers from or to Slovenia; new rules in respect of reimbursement of expenses connected to temporary assignments abroad; new rules in respect to standardized expenses for activities; namely the rule on exit from the system of determining the tax base with applying standardized expenses is being amended, the upper absolute amount of recognized standardized expenditure is determined and for determining the tax base the total amount of revenues of the taxpayer and its related persons will be considered; the special personal allowance for students is increased to full amount of general tax allowance. Corporate Income Tax Act (applicable from 1 January 2018): the key proposed measures are related to the system of standarized costs which can be applied by smaller corporate tax payers; revaluations and reclassifications of the financial instruments are included into the tax base to follow the changes of IAS 9. Fiscal Validation of Receipts (enters into force on the day after its publication): taxpayers may choose to use the receipt book even after the transitional period is over (i.e. after 31 December 2017). 2
Proposed tax law changes Tax Procedure Act (enters into force on the day after its publication): enabling payment of tax liabilities with debit/credit cards, without commission, via the non-cash cashier of Public payment administration of the Republic of Slovenia. Impact Tax allowances and expenses for the purposes of Personal Income Tax will be treated differently. Also, different tax regulations will apply for assigned workers. This will impact the payroll and compliance procedures. In relation to Corporate Income Tax there will be new rules in connection to normalized costs applicable. Additionally, revaluations and reclassifications of the financial instrument will be included in the tax base, provided that the legal requirements will be met. The changes will require attention when preparing the corporate income tax returns. How can EY help If you have assigned workers we can help you to determine the correct tax treatment of their income. Additionally, we can assist you with the implementation of the new regulations in respect to Corporate Income Tax, i.e. the implementation of the new rules related to the standardized costs and tax treatment of revaluations and reclassifications of the financial instruments. Additionally, we can assist you with analysing and explaining in detail how specific changes will affect your business. 3
Reform of VAT system Description In the beginning of October 2017, the European Commission launched plans for the biggest EU VAT system reform in the last 25 years. According to European Commission every year around 50 billion is lost due to cross-border VAT fraud. With implementation of this reform, Commission estimates that the amount of lost revenue would be reduced by 80 %. In addition, the proposed changes would help to simplify and modernise the EU VAT system for both, companies and the Tax Authorities. Proposed VAT reform changes principle of taxation for intra-community cross-border B2B supplies of goods. Under the current rules the cross-border movement of goods is split into two different transactions: an exempt supply in the Member State of departure of the goods and an intra-community acquisition taxed in the Member State of destination. Under proposed VAT reform new single taxable event will be introduced and place of intra-community supply (new term is intra-union supply) moved to the country of arrival of goods. Further, the vendor would be liable to charge VAT in the country of arrival (and not the acquirer at intra-eu acquisition as under current rules), unless the acquirer would obtain special status (so called Certified Taxable Person). According to the current VAT system this would trigger supplier s obligation for VAT registration in the country of arrival. However, proposed legislation expands mini one stop shop system and provides that supplier would fulfil its VAT obligations in its domestic country via One Stop Shop portal in its own language. VAT would be collected by the Tax Authorities in the country of the supplier and afterwards transferred to the country where the goods or services are ultimately consumed. In addition to the proposed cornerstones (change in principle of taxation, vendors liability and expansion of One Stop Shop ) and introduction of Certified Taxable Person Status, the reform introduces the Quick Fixes, to improve the VAT system until the definitive system has been implemented, among which are: Implementation of call-off stock simplifications as mandatory rule and not as an option (limited to Certified Taxable Persons). Harmonization and unification of rules in respect to proving that the goods were transported from one Member State to another (limited to Certified Taxable Persons). Clarification that, in addition to proof of transport, the VAT number of the commercial partners recorded in the electronic EU VAT-number verification system (VIES) is required for the cross-border VAT exemption to be applied under the current rules. The adoption of second VAT Directive is planned to be introduced in spring 2018 and the definitive VAT regime should be in force in 2022. 4
Reform of VAT system Impact Taxable persons engaged in B2B cross-border supply of goods within EU should carefully monitor proposed changes as well as timelines in order to be prepared for performing prompt analysis of their business in the light of potential VAT obligations in country of destinations, changes in invoicing system and cash flow due to payment obligations VAT and decide on obtaining Certified Taxable Person status. Regardless of the timeline for implementation of the changes, companies can already review draft legislation on appropriate documents serving as proofs for intra-eu supply and implement solutions in their internal indirect tax compliance system. How can EY help We will keep you up to date to the proposed EU VAT system reform and inform you about the novelties. Please contact us, if you need any further explanation of the proposed changes and its effect to your business. 5
EY Slovenia Tax Services Leaders Dénes Szabó, Partner, Head of Tax T: +386 1 583 17 72 E: denes.szabo@si.ey.com Dénes advises local and multinational companies on tax efficient international restructuring and mergers & acquisitions. He leads teams to solve local and international tax controversy issues and manages APA and tax ruling negotiations. Matej Kovačič, Associate Partner T: +386 1 583 17 62 E: matej.kovacic@si.ey.com Matej advises clients on corporate tax, international tax and transfer pricing. He has extensive experience in advising domestic and international clients on tax aspects of business restructurings, e.g. acquisitions, disposals, spin-offs, liquidations and mergers. Lucijan Klemenčič, Senior Manager T: +386 1 583 17 21 E: lucijan.klemencic@si.ey.com Lucijan assists clients in transfer pricing documentation and taxation of permanent establishments. He has experience advising domestic and foreign clients on tax aspects of corporate restructuring and tax audit procedures. Mojca Lukač, Senior Manager T: +386 1 583 17 31 E: mojca.lukac@si.ey.com Mojca advises clients on personal income tax, social security, payroll and immigration. She has experience in HR advisory and labor law. Iris Bajec, Senior Manager T: +386 1 583 17 12 E: iris.bajec@si.ey.com Iris specializes in accounting, compliance and reporting. She has extensive experience in transaction tax and in preparation and review of CIT returns and financial statements. Anka Pogačnik, Manager T: +386 1 583 17 54 E: anka.pogacnik@si.ey.com Anka advises clients mainly on VAT and other indirect taxes. She has experience in advising clients on complex tax issues, due diligences and VAT optimisation projects. 6
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