Israel – Slovenia Tax Treaty

Business activity in Slovenia

In Slovenia, there is extensive business activity in various sectors. For example, in recent years, several projects have been established in the field of cybersecurity. Firstly, since 2011, SI-CERT, a public team operating within Slovenia’s academic and research network, works to raise national awareness in the field through the “Safe Internet” program funded by the Ministry of Education, Science, and Sport. Additionally, there is another project called SI-SAFE aimed at raising awareness among children and youth about safe internet and mobile device usage, through an online reporting point that allows real-time anonymous reporting of cyberbullying incidents. In the education sector, most higher education institutions in Slovenia include courses and content related to cybersecurity in their curricula.

In the export sector, Slovenia excels in the export of chemical products and related goods (accounting for about 34% of the country’s exports) followed by machinery and transport equipment (26%). The Port of Koper serves as the only free trade area in the country and facilitates convenient, cost-effective, and sometimes greener import and export between European countries. This port, linking Central and Eastern Europe, has earned the title “Ambassador of the Slovenian Economy” due to its strategic location.

Moreover, the country has dedicated multiple land areas for investment, where most of the newly developed industrial areas have direct access to developed infrastructure, including highways and rail services. Land prices in Slovenia vary from city to city and are not fixed, but there are areas where a square meter of land costs as low as 5 euros. Furthermore, sometimes the municipality and government subsidize infrastructure and land costs to enhance business opportunities for real estate investments, reducing the prices of equipped lands in industrial areas.

There is also a complete range of services and free concessions provided by local development agencies to potential investors interested in investing in startups. These services include assistance in completing all the necessary paperwork, ensuring permits, and in some cases, even organizing and financing construction according to investor requirements.

Bilateral agreements between Slovenia and Israel

Several agreements were signed between Israel and Slovenia:

1. Agreements for the promotion and protection of investments.
2. A treaty to avoid double taxation.

Agreements for the Encouragement and Protection of Investments

In 1999, a bilateral agreement between Israel and Slovenia came into effect. Its purpose is to provide a legal protective framework for the activities of investors and investments against non-commercial risks. It also aims to encourage investments by Israelis in Slovenia and vice versa by creating a favorable and secure investment climate.

A link to the agreement in English on the website of the Ministry of Finance can be found here.

Convention on the Prevention of Double Taxation

A treaty to avoid double taxation is a bilateral agreement in which two countries establish the tax rules that will apply to income and assets connected to both countries. Additionally, these treaties include principles for the exchange of tax information between the countries.

The bilateral tax treaty between Israel and Slovenia was signed in 2007 and came into force on January 1, 2008.

A link to the agreement in English on the website of the Ministry of Finance can be found here.

Applicability of the MLI

The Multilateral Agreement (MLI) is an automatic mechanism for modifying bilateral tax treaties. To apply it, both countries must sign the multilateral agreement and ratify its application in their domestic law. Both Israel and Slovenia signed the MLI in 2017. Slovenia ratified the agreement on July 1, 2018, while Israel ratified it on January 1, 2019. This means that the treaty between Israel and Slovenia automatically changed in accordance with the MLI, subject to the reservations set by both countries, effective from January 1, 2019.

Residency for Tax Purposes in Slovenia

Residence of an Individual

An individual will be considered a resident of Slovenia for tax purposes if at least one of the following conditions is met:

1. The individual has a permanent residence in Slovenia.
2. The individual is a Slovenian public servant employed abroad.
3. The individual is a resident of Slovenia currently employed in the European Union.
4. The individual is present in Slovenia for more than half of the tax year.
5. The individual has a center of vital interests in Slovenia – significant personal and economic ties with the country.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company will be considered resident in Slovenia for tax purposes if it is registered in Slovenia or its place of effective management is located in Slovenia.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Slovenia

The Slovenian Tax Authority is called “FURS” (Financial administration of the Republic of Slovenia)

Income taxation:16-50%

Taxation of companies and branches:19%

VAT: 9.5/22%

Capital gains tax: 0/25%

Withholding Tax

Inheritance Tax and Estate Tax in Slovenia

How will the tax base be determined? Inheritance tax is levied against the value of the asset transferred by inheritance at the time of transfer, after deducting debts and costs associated with the asset that is subject to tax. Furthermore, the calculation of the tax varies according to the degree of kinship between the heir and the deceased, ranging from 0-40%. The closer the relationship, the lower the tax rate. Heirs who are first-degree relatives, including children, adopted children, and spouses of the deceased, are exempt from tax. Additionally, movable property inherited with a value not exceeding 5,000 euros is exempt from tax. It’s worth noting that the legislation allows for additional exemptions.

When is inheritance tax paid? The heir must pay the inheritance tax within 30 days from the date of receiving the final decision on the tax assessment. There is no need for the heir themselves to file a report, as the tax is estimated by the Slovenian Finance Administration based on the inheritance decision received from the court.

Relocation to Slovenia

In Slovenia, there is a Jewish community comprising about 100 Jews who actively participate in the cultural and political life of the country. In the last two decades, there has been a significant development of Jewish culture in Slovenia, with several public events organized by the Jewish community that were warmly received by the broader public and other communities in Slovenia.

In Ljubljana, the capital of Slovenia, there is a Jewish Cultural Center (JCC) that serves the social life of the city’s Jewish population and visitors from around the world. The center showcases innovative themes through theater performances, concerts, lectures, and more. The Jewish community in Slovenia is officially recognized by the Slovenian government as a representative community organization and organizes various events frequently.

Although Slovenia’s population is relatively small, it is diverse, with origins from all over Europe. This diversity in the population facilitates easy transition and relatively quick adaptation for newcomers.

Regarding the visa types available in the country, Slovenia offers three types of visas: Type A, D, and C. Type C is a short-stay visa, Type A is an airport transit visa (issued to foreigners only when crossing the international transit area of the airport, without physically entering the country), and Type D is a long-stay visa.

In addition to its diverse population, Slovenia is one of the safest countries in the world. In 2023, it ranked eighth in the Global Peace Index due to its low crime rate. Slovenia is also known for its breathtaking landscapes, historical sites, and a wide range of sports and recreational activities. Furthermore, in recent years, the Slovenian government and the Ministry of Tourism have been working on developing the tourism sector in general and green tourism in particular.

Real Estate Taxation in Slovenia

Real Estate Transfer Tax

When selling real estate in Slovenia, the seller must file a real estate tax return with the tax authority within 15 days of signing the sale agreement. The tax assessment in this case is made after receiving the tax return and amounts to 2% of the property’s value. If the Slovenian tax authority determines that the contractual value reflects the market value, the authority will quickly issue a decision and a tax levy order. After the tax has been paid by the taxpayer, the tax authority issues a confirmation on the original purchase agreement that the tax has been assessed and paid. Without this payment confirmation, it is not possible to sign the purchase agreement or to register a property right in the Slovenian land registry.

Property Tax

Property tax is an annual tax levied on real estate properties that are not occupied by their owners (e.g., rented apartments, business premises, etc.), and it is paid by the owners or tenants of the property. It’s important to note that agricultural land is not subject to this tax. The rate of the tax depends on the type of property, and it generally increases with the value of the property. Currently, the rate of property tax is not fixed and is determined by the local authority.

Transfer of Funds from Israel to Slovenia

According to section 170(a) of the Israeli income tax ordinance, any transfer of payment to a non-Israeli resident is subject to 25% of withholding tax. The tax authority can allow, under certain circumstances, to reduces or dismiss the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

Due to the fact that both countries have a tax treaty with each other, one can submit a declaration form (2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, there is a possibility to transfer the payment without the withholding tax and the approval of the Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our office handles the requirements of the foreign banks, such as an accountant’s approval regarding the payment of taxes and examines additional actions required in light of the uniform standard of CRS between the countries – automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

The banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Slovenia

1. Limited Liability Company (Družba z omejeno odgovornostjo – “D.O.O.”): This is a separate legal entity established by one or more partners, but not more than 50. Shareholders have limited liability based on their investment. This is the most common legal entity, especially suitable for small to medium-sized businesses. To establish a D.O.O., a relatively small initial capital of 7,500 euros is required, and the establishment process can be fast, taking about a week in some cases.
2. Sole Proprietorship (Samostojni podjetnik – “S.P.”): This entity is established by an individual and does not require any initial capital. However, the liability is unlimited and applies to all the individual’s assets, both business and personal. The establishment of this entity is very quick, taking only one day. It is a common legal form for crafts and small start-up businesses. It’s important to note that non-EU citizens must wait at least one year from obtaining a residence permit in Slovenia before they can establish this type of company.
3. Public Limited Company (Delniška Družba – “D.D.”): This is a legal entity established by one or several shareholders with limited liability according to their investment. The company’s shares are issued to the public. A relatively high initial capital of 25,000 euros is required to establish a D.D.
4. Limited Partnership (Komanditna družba – “KD”): This legal entity is established by two or more partners. At least one partner has unlimited personal liability, typically structured as a limited liability company. The other partners have no liability but participate in the profits of the company. No initial capital is required to establish a limited partnership.
5. Branch of a Company (“Podružnica”): This is not a separate legal entity but a branch under the main company. The branch must be registered in the business register.

Incentive Laws in Slovenia

Slovenia aims to attract companies and individuals to relocate and operate within its territory, offering various incentives to boost investments and international business activities, particularly in advanced technology and automation. Slovenia provides tax incentives for investments, research and development, and more.

For example, from January 1, 2022, Slovenia recognized tax benefits for those investing in green technology, artificial intelligence, energy efficiency, and research and development. Additional tax benefits are granted to those employing students or trainees, people with disabilities, and young people seeking their first job.

Additionally, Slovenia has extensive activities to promote direct investment, including providing information, services, and consulting to investors, marketing communication activities, and organizing various events to promote investments. Slovenian law offers various economic incentives such as grants, loans, guarantees, interest arrangements, and the option to purchase properties owned by the local community at reduced prices.

Slovenia Double Tax Treaties