Slovenia’s transfer pricing regulations align with the Transfer Pricing Guidelines set by the Organization for Economic Co-operation and Development (OECD). Currently, the transfer pricing rules are governed by the Corporate Income Tax Act and Rules on Transfer Pricing.
Arm’s Length Principle
In Slovenia, the arm’s length principle requires that transactions between related parties must be priced as if they were made between independent companies in similar situations. If the prices are not in line with what independent parties would agree, the tax authorities can adjust the income and expenses to reflect market prices.
Related Party Definition
Related parties include a taxpayer (resident or non-resident) and a foreign company or person if one directly or indirectly owns at least 25% of the shares, voting rights, or control in the other. They are also related if the same person owns at least 25% of both companies or if family members own such shares. Control can also come from contracts or agreements that allow one party to influence the terms of transactions. Family members like spouses, partners, children, and parents are also considered when determining related parties.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Slovenia are in alignment with OECD Guidelines, and include the following:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method
- Profit Split Method
The selection of the method is based on the most appropriate method principle. The law allows for the usage of combined methods as well.
Comparability Analysis
In Slovenia, comparability analysis is used to check whether the terms of related-party transactions are consistent with what independent parties would agree on in similar situations. Taxpayers must compare their controlled transactions to comparable market prices or conditions, using accepted methods like the comparable uncontrolled price, resale price, cost-plus, profit split, or transactional net margin method. If there are differences between the compared transactions that could affect the results, adjustments must be made to improve comparability.
While there is a preference for domestic comparables, given the limited size of the market, external ones are generally used. If the data is highly reliable, the most accurate figure in the range is used. If not, the interquartile range and median are applied to find the arm’s length price. Secret comparables are not allowed for transfer pricing assessment.
Documentation Requirements
Transfer pricing documentation requirements in Slovenia are based on the three-layer approach that requires multinational groups to submit the following documentation to the Slovenian tax authorities:
- Master File;
- Local File, and
- Country-by-Country (CbC) report.
Master and Local File
Slovenia has adopted the Master File and Local File structure since 2006. The Master File contains general information about the multinational group, while the Local File includes detailed, country-specific information about the taxpayer’s transactions and transfer pricing practices in Slovenia. Transfer pricing documentation must be prepared in advance of controlled transactions and provided to the tax authorities upon request, usually during a tax audit. If the taxpayer cannot provide the documentation immediately, the tax authority will set a deadline of 30 to 90 days, depending on the complexity and amount of data. Documentation can be prepared in a foreign language, but a Slovene translation may be required.
Country-by-Country Reporting
Slovenia’s CbC reporting rules apply to multinational enterprise (MNE) groups with total consolidated revenue of at least 750 million euros to file a report each year. The ultimate parent company files the report in its EU country of residence, no later than 12 months after the fiscal year ends. If the parent company is outside the EU or can’t provide a report, a Slovenian group company may need to file it instead. However, this can be avoided if another group company (a surrogate parent) submits the report in a country that has an agreement to share the information with Slovenia.
The CbC report needs to include key data for each country where the group operates: revenue, profits, taxes paid, number of employees, capital, earnings, and tangible assets. It must also list all group entities, their tax residence, and main business activities.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
Taxpayers can apply for an Advance Pricing Agreement (APA) to agree in advance with the tax authority on the appropriate transfer pricing method for certain controlled transactions. APAs can cover future transactions and are generally valid for a specified period, usually up to five years. Slovenia allows for unilateral, bilateral, and multilateral APAs, depending on whether other tax authorities are involved.
Mutual Agreement Program (MAP) – Slovenia allows taxpayers to request a MAP procedure when they believe that taxation is not aligned with the terms of a tax treaty. The request must usually be made within three years from the first notification of the action leading to taxation, not following the treaty. Slovenia allows MAP to run parallel with domestic remedies (like appeals), and if both countries agree, the case can also be resolved through arbitration.
Approach to Transfer Pricing Audits
Transfer pricing audits are conducted by the Financial Administration (FURS), focusing mainly on large taxpayers and those with significant related-party transactions. During an audit, FURS checks whether the taxpayer has applied the arm’s length principle and maintained proper transfer pricing documentation. FURS reviews the selection of transfer pricing methods, comparability analysis, and consistency of application. Non-compliance can lead to adjustments and penalties.
Penalties
In Slovenia, there are no special penalties just for using incorrect transfer prices, but doing so can be treated as a misdemeanor, and intentional tax avoidance may lead to criminal charges. If tax is underpaid, late payment interest applies. If a taxpayer fails to provide transfer pricing documentation correctly or on time, the following penalties can apply: up to €30,000 for the company and up to €4,000 for responsible individuals.
Taxation at a Glance
Slovenia’s Corporate Income Tax Act and Personal Income Tax Act were introduced in 1993 and have been amended over time, especially after joining the EU in 2004. The tax authority manages tax filing and audits. The government promotes tax incentives for R&D and investments to attract foreign investors.
The currency is the Euro (EUR). The official name of the Slovenian tax authority is the Financial Administration.
The table below provides a summary of the main taxation rates related to businesses:
|
Tax Type |
Tax Rate |
|
Corporate Tax |
22% |
|
VAT |
22% |
|
Withholding tax on dividends to non-residents |
15% |
|
Withholding tax on interest to non-residents |
15% |
|
Withholding tax on royalties to non-residents |
15% |
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