Tax news February 2021

In the present issue of the Tax News we  prepared for you a short overview of rules implemented by the adopted laws in 2020 for the purpose of mitigating the consequences of the COVID-19 pandemic. Additionally, we would like to inform you of the obligation of appointing of a VAT representative for  companies established in the United Kingdom.

Aid measures under anti-corona packages

In 2020, the National Assembly adopted quite a few new laws and measures to mitigate the effects of the COVID-19 epidemic. More precisely, 7 anti-corona packages (»PKP1 – PKP7«) have been adopted so far, on which we informed you about in our monthly Tax news.

The measures are mostly intended for companies who suffered a decline in business due to epidemic. In this issue of Tax news, we summarize the most important measures and the conditions under which the companies were and are entitled to state aid.

PKP1 and PKP2

Measure: Reimbursement of compensation for idle workers

The condition for the application of this aid is a decrease in revenue (sales revenue according to local accounting rules) by more than 10% in 2020 compared to 2019 or the correspondingly comparable period. If the condition is not met when submitting annual reports for 2020, the Tax  Authorities should be notified accordingly, and the funds received should be returned. If the taxpayer does not notify the tax office on about not meeting the conditions, the  legislation prescribes penalties. Only compensations paid to idle workers are subject to refund.

In the event of a refund, the employer should return all funds received for idle workers (i.e. salary compensation and the total amount of exempt contributions).

An employer who claimed salary compensation and  exemption from the payment of contributions in connection with the reimbursement of salary compensation to idle workers and pays out profits, purchases own shares or own business shares, pays out management bonus or part of salaries for bonus for business performance in 2020 or for 2020, should notify Tax Authorities accordingly and return the aid. In this case, the funds are returned together with the statutory default interest, which run from the day of 3 Tax News February exercising the rights until the day of return.

With regards to the statute of limitation for the obligation to repay received funds , together with default interest, with fulfillment of the condition - paid-out profit for 2020, the rules of the Obligations Code on the limitation period for claims apply.

PKP3

Measure: Partial subsidization of part-time work.

The third anti-corona package also includes the possibility of part-time work of full-time employees. The employer may claim a subsidy from the Employment Service of Slovenia, a partial refund of the paid salary compensation due to parttime work (subsidy).

Entitlement to the subsidy may be exercised by an employer who:

is a legal or natural person and who was entered in the Business Register of Slovenia before 13 March 2020 and employs workers on the basis of a full-time employment contract, and

according to their estimate, cannot provide work to at least 10% of employees at least 90% of work per month.

If the employer has received a subsidy, restrictions apply to the payment of profits, purchases of own shares or own business shares, payment of bonuses to management or part of salaries for bonus for business performance paid to  management in 2020 or for 2020.

If the conditions are not met, the employer will have to  inform Tax Authorities accordingly and return the received state aid. The funds will also have to be repaid if the  liquidation procedure is initiated during the period of receipt of funds or in the period after termination of the receipt of the aid, which is equal to the period of receipt.

In addition, the employer must regularly pay wages and salary compensation during the period of receiving the subsidy, must not order overtime work and during the period of receiving the subsidy and for a month thereafter must not initiate the procedure of termination of  employment. In case of non-compliance, the funds are returned.

PKP4

The fourth anti-corona package has not brought any changes in terms of aid and related conditions but has extended the conditions from PKP2 and PKP3 under the same conditions.

PKP5

Measure: Reimbursement of salary compensation for idle workers according to ZZUOOP.

Eligible are employers who, due to the consequences of the epidemic, are unable to carry out their activities or are carrying them out on a reduced scale and whose revenues have fallen by more than 20% in 2020, compared to 2019.

The condition for enforcement is a 20% drop in revenue. If this is not achieved, the aid must be returned. The aid  recipient should notify the Tax Authorities of the nonfulfillment of the conditions, no later than the deadline for the submission of the CIT return for 2020.

The measure was extended by PKP6 and PKP7.

PKP6

Measure: Deferral on payment of taxes and contributions.

PKP6 reintroduces that taxpayers can apply for a deferral of payment of tax liabilities for up to two years or payment of tax in a maximum of 24 monthly installments.

If the taxpayer does not pay the installment on time, all  subsequent unpaid installments will be due on the due date of the unpaid installment. In this case, the taxpayer is obliged to pay default interest on the unpaid amount of tax liabilities. Also, the approved installment payment may be revoked if the debtor does not use the correct reference when making the payment.

Measure: Partial reimbursement of uncovered fixed costs

The eligibility condition is a sufficient decrease in revenue (30% or more) during the eligible period, compared to the comparing period. If the condition is not met, it will be necessary to repay the entire aid, or a proportional share, if revenues fall by less than the taxpayer estimated in the application. If the beneficiary receives a higher amount of aid on the basis of an estimate of the uncovered fixed costs than he is entitled to on the basis of actual data, he must  repay the overpaid funds. The taxpayer should notify the Tax Authorities of the non-fulfillment of the conditions no later than the deadline for submitting the CIT return for 2020 and return the aid received within 30 days of service.

Wage compensation for idle workers is still valid, provided that revenues fall by more than 20% in 2020. The change is regarding the maximum amount of compensation  reimbursement. It rises to the amount of the average monthly salary in the Republic of Slovenia.

PKP7

Currently, the latest anti-corona package does not bring any significant changes regarding aids.

However, the procedure for refunding the salary compensation on idle workers according to ZIUOOPE, ZZUOOP and ZIUPDV is determined, when the taxpayer subsequently finds that he does not meet the conditions for obtaining funds. The company should inform the Tax Authorities, which will issue a decision for the return of entitlements.

The application for the refund of received salary compensations to idle workers will be available on the eDavki portal. The deadline for submitting the declaration is no later than the deadline for submitting the corporate income tax return for 2020 or for the period that includes data for the period of the second half of 2020.

PKP7 allows the payment of obligations in installments in a maximum of six-monthly installments from the return of unduly received funds on the basis of submitting an application via the eDavki portal. No interest is charged on the deferred amount.

However, the timeliness of payment of installments and  payment with the correct reference still apply. Otherwise, all subsequent unpaid installments fall due on the due date of the unpaid installment or the one paid with the wrong reference. Also, default interest on the unpaid amount of tax liabilities then begins to run.

How can EY help you?

EY can help you identify the rights and obligations arising from the rules of all PKP laws and prepare and file all the necessary documentation for you to ensure business compliance.

Appointment of a VAT representative for companies established in the United Kingdom

On 31 December 2020, the transitional period for the  withdrawal of the United Kingdom ("UK") from the EU  expired. The UK left the single market and the customs union on 1 January 2021 and became a third country, which means that the rules for third countries came into force for taxpayers established in the UK, including the mandatory appointment of a VAT representative in accordance with Slovenian VAT legislation.

On 31 December 2020, the transitional period for the  withdrawal of the United Kingdom ("UK") from the EU  expired. The UK left the single market and the customs union on 1 January 2021 and became a third country, which means that the rules for third countries came into force for taxpayers established in the UK, including the mandatory appointment of a VAT representative in accordance with Slovenian VAT legislation.

Taxpayers established in the UK who have already been  identified for VAT purposes in Slovenia have to appoint a VAT representative who will fulfil obligations on their behalf and exercise their VAT rights. Taxpayers established in the UK, who have not yet been identified for VAT purposes in Slovenia and will be identified after 1 January 2021, will have to appoint a VAT representative when submitting an application for a VAT identification number.

If a taxable person established in the UK acting as a person from a third country wants to release goods into free circulation in Slovenia under procedure 42 for the sale on the EU market, he has to be  registered for VAT purposes in Slovenia after 1 January 2021 and has to  appoint a VAT representative.

On 31 December 2020, the transitional period for the withdrawal of the United Kingdom ("UK") from the EU  expired. The UK left the single market and the customs union on 1 January 2021 and became a third country, which means that the rules for third countries came into force for taxpayers established in the UK, including the mandatory appointment of a VAT representative in accordance with Slovenian VAT legislation.

Taxpayers established in the UK who have already been identified for VAT purposes in Slovenia have to appoint a VAT representative who will fulfil obligations on their behalf and exercise their VAT rights. Taxpayers established in the UK, who have not yet been identified for VAT purposes in Slovenia and will be identified after 1 January 2021, will have to appoint a VAT representative when submitting an application for a VAT identification number.

If a taxable person established in the UK acting as a person from a third country wants to release goods into free circulation in Slovenia under procedure 42 for the sale on the EU market, he has to be  registered for VAT purposes in Slovenia after 1 January 2021 and has to  appoint a VAT representative.

In customs procedure 42, one of the conditions is that a taxable person who is not established in Slovenia but is established in another Member State may claim a VAT exemption on import of goods in accordance with the second paragraph of Article 50 of ZDDV-1, if he is identified for VAT purposes or if he appoints a VAT representative.

Regarding the appointment of a VAT representative, it should be pointed out that in the event  that a taxpayer established in the UK has a branch office in Slovenia, the branch office cannot be a VAT representative.

Duties and obligations of a VAT representative The purpose of establishing the institute of a VAT representative is to facilitate the fulfilment of obligations and the exercise of rights under VAT legislation, and the actions performed by the representative are binding on the represented taxpayer.

VAT representative acts within the scope of his powers and on behalf of the taxable person established in the UK by  fulfilling obligations and exercising VAT rights, such as preparation  and submission of VAT returns, filing claims for refund of excess VAT deduction and performing other actions in accordance with ZDDV- 1.

VAT representative cannot be held liable for the taxpayer's tax liabilities if the taxpayer does not inform him about the performed transactions or does not provide data for the correct calculation of the tax liability.

VAT representative is appointed by submitting a new DDV-P3 form via the tax authorities e-portal eDavki, on which all data is filled in, including Section III. Information on the VAT representative.