Taxes and Contributions
Differences between a sole proprietor (s.p.) and a limited liability company (d.o.o.) – legal and formal aspects
|
|
sole proprietor (s.p.) |
limited liability company (d.o.o.) |
|
Legal form |
A natural person performing business activity. |
A legal entity performing business activity. |
|
Share capital |
No share capital required. |
EUR 7,500.00 |
|
Business operations |
A sole proprietor may freely dispose of earned funds. |
The earned funds do not belong to the shareholder but to the company. |
|
Profit taxation |
Progressive taxation based on profit under the personal income tax scale (*under certain conditions, profit may be taxed using lump-sum expenses at a flat rate of 20%). |
19% flat corporate tax rate. Distribution of profit to an individual shareholder is taxed at 27.5%**. |
|
Liability |
The entrepreneur is liable with all personal assets. |
The company is liable with all its assets. As a rule, the shareholder is not personally liable for company obligations. |
|
Salary |
The entrepreneur’s income equals the profit of the sole proprietorship. Withdrawals during the year are not considered expenses, except for social contributions. |
The salary of a shareholder employed by the company is an expense for the company. |
|
Social contributions |
The individual is compulsorily insured as a self-employed person. The contribution base is the profit of the sole proprietorship. If the individual is already insured on another basis, only flat-rate contributions apply (part-time sole proprietor). |
If the shareholder is employed by the company, they are insured under an employment contract, with contributions based on salary. A shareholder–director not employed by the company is insured as a shareholder, with contributions based on all income received for management activities. The amount of contributions does not depend on the profit of the company. |
|
Accounting |
Single-entry or double-entry bookkeeping or *lump-sum expenses. |
Double-entry bookkeeping / accounting. |
* applies to lump-sum sole proprietors.
** depending on the length of capital ownership: less than 5 years – 27.5%, 5–10 years – 20%, 10–15 years – 15%, 15–20 years – 10%, more than 20 years – exempt.
Differences between a sole proprietor (s.p.) and a limited liability company (d.o.o.) – tax perspective
|
2020 |
standard s.p. |
lump-sum s.p. |
d.o.o. |
lump-sum d.o.o. |
|---|---|---|---|---|
|
Taxation |
Progressive |
Flat (schedular) |
||
|
Tax base |
Profit as the excess of tax-recognized income over tax-recognized expenses. |
20 percent of tax-recognized income. |
Profit as the excess of tax-recognized income over tax-recognized expenses. |
20 percent of tax-recognized income. |
|
Tax period |
Calendar year |
Calendar year |
May differ from the calendar year but may not exceed 12 months and cannot be changed for 3 years |
Calendar year |
|
General tax rate |
According to the personal income tax scale (16, 26, 33, 39, 50%) |
20% |
19% |
19% |
|
Tax allowances available |
Yes |
No |
Yes |
No |
Sole proprietor – tax on income from business activity = personal income tax
A sole proprietor is a natural person and is therefore subject to personal income tax.
Personal income tax rates for 2020:
| If the annual tax base amounts to (EUR) |
|
Personal income tax amounts to (EUR) | |
| up to 8,500.00 | 16% | ||
| 8,500.00 | 25,000.00 | 1,360.00 | + 26% above 8,500.00 |
| 25,000.00 | 50,000.00 | 5,650.00 | + 33% above 25,000.00 |
| 50,000.00 | 72,000.00 | 13,900.00 | + 39% above 50,000.00 |
| 72,000.00 | 22,480.00 | + 50% above 72,000.00 |
A standard sole proprietor may claim general, personal, and special tax allowances already in the business income tax return, while a lump-sum sole proprietor does not have this option.
The amount of the general allowance depends on the total annual income in 2020:
|
If total income amounts to (EUR) |
General allowance amounts to (EUR) |
|
|
Above |
Up to |
|
|
|
13,316.83 |
3,500.00 + (18,700.38 − 1.40427 × total income) |
|
13,316.83 |
|
3,500.00 |
Limited liability company – corporate income tax and capital income tax
Corporate profits are taxed at a 19% rate regardless of whether the tax base is determined based on actual or lump-sum expenses.
Profit distributions (dividends) to shareholders are also taxable. Dividend taxation depends primarily on the status of the recipient (individual or legal entity). Dividends paid to an individual are subject to personal income tax at a rate of 27.5%**, withheld at source. If dividends are paid to a corporate shareholder who is a tax resident of Slovenia, no withholding tax applies, provided the recipient submits their tax identification number prior to payment.
Profit participation paid to an individual is taxed at a 27.5%** rate, which represents final taxation, meaning that dividends received are not included in the annual personal income tax return or the informative tax assessment.
** depending on the length of capital ownership: less than 5 years – 27.5%, 5–10 years – 20%, 10–15 years – 15%, 15–20 years – 10%, more than 20 years – exempt.
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