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The Slovenian transfer pricing (TP) legislation is defined in Article 382 of Tax Procedure Act, Article 16-19 of Corporate Income Tax Act, Rules on transfer prices, Rules on the recognized rate of interest, and is based on provisions of OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereinafter “OECD Guidelines”).
TP documentation has to be prepared by submission of corporate income tax return and for each financial year in which a taxpayer had transactions with related parties. TP documentation is submitted to STA only upon request, and has to be provided immediately. In case the immediate submission is not possible, STA defines a deadline for submission, which should not be less than 30 or more than 90 days.
CbCR (Country by Country Reporting) has been implemented in Slovenia for larger groups (over 750 million €).
Slovenian transfer pricing rules follow the OECD Guidelines, which are in some part incorporated into Slovenian legislation and used for interpretation purposes.
When selecting the most appropriate method, the method should be selected on a transaction by transaction basis, providing the most reliable measure of an arm’s length result. The current OECD methods, namely the comparable uncontrolled price, resale price, cost plus, transactional net margin, and profit split methods, are all accepted but the method used must be in line with the functional and risk profile of the entity.
Any of the above-mentioned OECD methods or a combination thereof may be used; however, comparable uncontrolled price method has priority over other methods.
The taxpayer should adequately mark whether it is doing business with related parties in its yearly corporate income tax return.
A taxpayer’s tax base should not be adjusted for transactions performed with Slovene related parties residents, unless one of the residents:
has a tax loss carried forward, or
pays tax at the rate of 0% or at a specially determined rate lower than the general rate, or
is exempt from paying tax.
Transfer pricing documentation has to be prepared in accordance with Slovene tax legislation and TP rules, which are based on OECD transfer pricing documentation model.
TP documentation consists of:
Master file
Local file
TP documentation has to be prepared by submission date of corporate income tax; however, filled TP documentation has to be submitted to STA only upon request.
Slovenia has also introduced CbCR (Country by Country Reporting) regulations for groups with revenues over 750 million €.
In case Master file is not prepared in Slovene language, it should be translated into English upon STA’s request within 60 days.
TP documentation has to be kept for 10 years after the end of the financial year to which it relates.
Master File can be uniform for the group of related persons as a whole and must contain at least a description of the taxpayer, the organizational structure at the global level and the type of connection, its transfer pricing policy, operations and business strategies, general economic and other factors and the competitive environment.
Local File must contain at least data related to transactions with related parties, data on the performance of a comparability analysis of transactions on the properties of assets and services, performed functional analysis, contractual conditions, economic and other conditions affecting transactions, business strategies, other influences that are important for the performance of the transaction, methods for determining transfer prices and other documentation proving the compliance of transfer prices with comparable market prices.
Business restructurings or changes in transfer pricing model
Persistent losses in a “low risk” entity
High risk business models include manufacturing and R&D
Limited risk business models include distributors
Licensing payments to low tax jurisdictions
Significant values of management fees
In case a taxpayer does not have in place a TP documentation or does not provide STA with the requested documentation, it can be penalized with a fine ranging from €1,200 to €15,000, or €3,200 to €30,000 in case the company is a medium-sized or large company. The representative of the company is also penalized with fine ranging from €600 to €4,000, or €800 to €4,000 in case the company is medium-sized or large.
The penalties in the same amount apply also to non-compliance with CbCR and notification requirements.
Local comparable companies are preferred, however also regional comparable companies are accepted.
In case databases are used in order to find suitable comparables, a certain conditions have to be taken into consideration when making comparables’ search (e.g. EBIT in all years should be zero or positive - no losses allowed, etc.). In case benchmark is used on a group level, it should be reviewed by local advisors in order to check whether it complies with Slovene requirements and tax practice.
In Slovenia, safe harbour rule for interest on loans can be applied, which is defined in Rules on recognized interest rate.
APAs are written agreements between a business and STA to govern the appropriate transfer pricing method for a forward-looking period.
In Slovenia, no preference is specified with regard to multilateral and unilateral APAs, however OECD guidelines point to much greater effectiveness of multilateral agreements.
STA charges 15.000 € for agreement process, and 7.500 € for the extension of agreement validity. If the agreement cannot be achieved for reasons other than those of the taxpayer, a flat-rate amount of 5.000 € shall be refunded to the taxpayer.
STA with the participation of the taxpayer in the monitoring phase of the implementation of the agreement, examines whether the methodology set out in the agreement is appropriate due to the deviation in each critical assumption. If the methodology is not appropriate, the agreement shall be amended in accordance with the Slovenian legislation.
In case the taxpayer does not agree to the adjustment of the tax base due to transfer pricing in the tax inspection procedure, he has the right to initiate a joint agreement procedure on the basis of an international treaty that binds Slovenia (Mutual agreement procedure - MAP) before the competent authority.
For further information on transfer pricing in Slovenia please contact:
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Vesna Radovanović Ahčin, LL.M. |
