Slovenia

Limitation of recognized interest

On 14 November 2024, the National Assembly of the Republic of Slovenia adopted the Act on Amendments to the Corporate Income Tax Act (hereinafter referred to as "ZDDPO-2U"). The amended provisions will apply to all tax periods from 1 January 2025.

Changes to the rules on limiting the recognition of interest Since the introduction of the EBITDA rule as part of the implementation of the Anti-Tax Avoidance Directive (ATAD Directive), two rules on limiting the recognition of interest have existed in Slovenian tax legislation at the same time – the so-called thin capitalisation and the EBITDA rule. The amendment to the ZDDPO-2U completely abolishes the thin capitalisation rule set out in Article 32 of the ZDDPO-2. As a result, loan amounts exceeding four times the book value of capital will no longer be considered as excess loans. Interest attributed to the excess loans referred to in Article 32 will be tax deductible from the tax period 2025 onwards. The recently implemented EBITDA rule is also being changed, namely the absolute threshold for the recognition of excess borrowing costs is being raised from EUR 1 million to EUR 3 million. The change will thus unify the absolute threshold with that set out in the directive.

Directive (EU) 2022/2523 - Pillar II

In 2022, the Council of the European Union (EU) adopted Council Directive (EU) 2022/2523 on ensuring a global minimum tax rate for international corporate groups and large domestic groups in the Union (the so-called ‘Pillar II Directive’).

The Pillar II Directive lays down rules to ensure a minimum of 15% effective taxation of international corporate groups and large domestic groups. The Pillar II Directive framework consists of two interrelated rules: the Income Inclusion Rule (IIR) and the Undertaxed Profit Rule (UTPR), which together form global rules against erosion of the tax base (GloBE). The IIR sets a minimum effective tax rate of 15% for large international corporate groups and large domestic groups with a total minimum turnover of 750 million euros (EUR) (based on the consolidated financial statements), while the UTPR, which serves as a buffer in cases where the IIR is not applied, from international groups / large domestic groups with effective tax rates below 15% are required to pay so-called ’qualified domestic top-up tax‘ in order to achieve fair taxation in each jurisdiction. 

In December 2023, Slovenia adopted a new Minimum Tax Law, which transposes this Directive, ensuring global minimum taxation into Slovene national law and will apply to fiscal years beginning on or after 31 December 2023. The newly adopted Law generally applies to multinational and large domestic groups that exceed a threshold of EUR 750 million in revenue on a consolidated basis and will impose a new, highly complex administrative burden to groups in scope in efforts to ensure a minimal tax rate of 15%.