The Slovenian Parliament adopted tax amendments to exempt the so-called holiday allowance from taxation in cases where it does not exceed the average gross salary.
Holiday allowance is a mandatory remuneration to which all employees are entitled once a year. It shall generally be paid out by 1 July of each year and it cannot be lower than the minimum gross salary (which currently amounts to around EUR 887 and is set to increase to around EUR 941 in 2020). Previously, personal income tax was always levied on the holiday allowance. Social security contributions had to be paid in instances where the holiday allowance exceeded 70% of the average gross salary (which as of August 2019 stands at around EUR 1,718). Under the new rules, personal income tax and social security contributions shall only be levied on amounts exceeding the average gross salary.
The described changes came into force in May 2019 with retroactive effect as of 1 January 2019. Therefore, in cases where employers had paid out the holiday allowance, the state reimbursed any tax and social contributions paid.
The Slovenian Government noted at the introduction of these changes that they should contribute to Slovenia's competitiveness, as Slovenia's taxation of salaries is seen as comparatively high. The described changes are also to be seen as a prelude to a more ambitious tax reform that is currently being drafted by the Government and which is aiming at further reducing the tax burden on salaries and compensating this with an increase in capital gains tax. The Government is planning to send these proposed changes to the Parliament later this autumn.