Taxpayers under the lump-sum tax regime — Income tax changes

Changes to Personal Income Tax: General Tax Allowance – One of the significant changes to personal income tax is that the general tax allowance will be set at 5,000 euros. The current legislation had stipulated that the general tax allowance would increase to 5,500 euros in 2023, to 6,500 euros in 2024, and to 7,500 euros in 2025. However, this will no longer be the case. The new provisions for the general tax allowance only include an increase for 2023, with no further increases planned thereafter. What other personal income tax changes are there? Let’s take a quick look at some of the other adjustments: · An additional general tax allowance will be granted to taxpayers with a total income of up to 16,000 euros. · The tax rate for the fifth (highest) income bracket will revert to 50% (instead of 45%). · The amounts for the special tax allowance for dependent family members will increase by approximately 7.5% in 2023 and 2024. · A new special tax allowance for young people up to the age of 29 – the tax base for income from employment will be reduced by 1,300 euros. · Taxation is being reintroduced on the value paid out for shares or ownership interests when they are disposed of as part of a company’s acquisition of its own shares. · The personal income tax rate on income derived from the leasing of property will increase to 25% (up from 15%). · Performance-based bonuses will once again be tax-exempt up to the amount of the average monthly salary in the Republic of Slovenia (replacing the previous rule, which allowed for the average salary of the specific employee if that was more favorable). · The option to include income from property leasing and capital income in the annual tax base is being abolished. · Payments compensating for the use of one’s own resources for remote work (working from home) will also be excluded from the tax base. You can register a "side-hustle" sole proprietorship (*popoldanski s.p.*) alongside your regular full-time employment! Changes to personal income tax also affect sole proprietors who use the "standardized expense" regime (*normiranci*). For those with annual revenues of up to 50,000 euros, 80% of revenue will continue to be recognized as standardized expenses. For those exceeding this threshold, the recognized standardized expenses will be reduced by 40%. For annual revenues exceeding 100,000 euros, no standardized expenses will be recognized. Furthermore, the standardized expense regime will be available to sole proprietors who have at least one person compulsorily insured for full-time work for a minimum of nine months. But what about "side-hustle" sole proprietors using the standardized expense regime? The changes to income tax will be even more significant for "side-hustle" sole proprietors (those who are employed elsewhere but also run a business under the *normirani s.p.* tax regime). For these individuals, the rules will be as follows: up to an income threshold of 12,500 euros, they may claim 80% of their revenue as "standardized expenses" (deemed expenses); for income above this amount—up to and including 50,000 euros—only 40% of revenue may be claimed as standardized expenses. For any income exceeding 50,000 euros, no expenses are recognized. Entrepreneurs will certainly need to carefully consider how these income tax changes will affect their business operations in 2023 and, based on their findings, select the appropriate taxation method when submitting their annual tax return for 2022 (at the end of March).