Corporate tax in Slovenia

Summary

Corporate Income Tax Rate (%) 17
Capital Gains Tax Rate (%) 17
Branch Tax Rate (%) 17
Withholding Tax (%)
Dividends 15 (a)
Interest 15 (a)
Royalties from Patents, Know-how, etc. 15 (a)
Services 15 (b)
Rentals 15 (c)
Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited (d)

a) This tax applies to payments to residents and nonresidents.

b) Specified categories of service payments (consulting, marketing, market research, human resources, legal, administrative and information technology services) are subject to a 15% withholding tax if the payments are made to persons with a head office outside the European Union (EU) and if the coun­try of the head office is on the list published by the Ministry (list of black­listed countries).

c) A 15% withholding tax applies to cross-border payments for the lease of real estate located in Slovenia.

d) See Section C.

Taxes on corporate income and gains

Corporate income tax. In general, all companies resident in Slove­nia are subject to tax on their worldwide income (but see Foreign tax relief). A company is resident in Slovenia if it has its legal seat or effective place of management in Slovenia. Nonresident com­panies are subject to tax on their Slovenian-source income only (income derived from or through a permanent establishment and other Slovenian-source income subject to withholding tax).

The definition of a “permanent establishment” of a nonresident company in Slovenia generally follows the definition in the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and Capital 2010.

Rates of corporate income tax. The standard corporate income tax rate is 17%.

The corporate income tax rate for qualified venture capital com­panies is 0%, subject to specific conditions.

Investment funds that distribute 90% of their operating profits for the preceding tax year by 30 November of the current tax year are taxed at a rate of 0%.

Pension funds established in accordance with the Pension and Disability Insurance Act are taxed at a rate of 0%.

Insurance undertakings that are authorized to implement the pen­sion scheme in accordance with the act regulating pension and disability insurance must pay tax with respect to the activities re­lating to such implementation at a rate of 0% of the tax base if a separate tax calculation is compiled only for this pension scheme.

Capital gains. Fifty percent of a capital gain from the disposal of shares is exempt from tax if certain conditions are met. The other 50% is treated as ordinary business income and is subject to tax at the regular corporate rate. However, in such circumstances, the expenses of a taxpayer are decreased by 5% of the exempt amount of capital gains. The same principle applies to capital losses (only 50% of a capital loss is deductible for tax purposes).

If a capital gain is realized from disposal of shares acquired with respect to venture capital investments in a venture capital compa­ny that is established in accordance with the act regulating venture capital companies, the total amount of such gain may be exempt from tax if the company had the status of a venture capital com­pany for the entire tax period and if the company had the status of venture capital company for the entire period of the holding of the shares by the taxpayer. Losses incurred on the transfer of shares acquired under a venture capital scheme are not deductible for tax purposes.

Administration. The tax year is the calendar year. However, a com­pany may select its financial year as its tax year if the selected year does not exceed a period of 12 months and if it informs the tax authorities regarding its selection of the tax year. The selected tax year may not be changed for a period of three years.

Annual tax returns must be filed within three months after the end of the tax year.

Companies must make advance payments of corporate income tax. Monthly advance payments of corporate income tax are required if the total amount of the advance payments exceeds EUR400, based on the tax calculated in the tax return for the preceding tax year. Companies must make quarterly advance payments if the total amount of the advance payments is less than EUR400, based on the tax calculated in the tax return for the preceding tax year. Advance payments of corporate income tax are due on the 10th day of the month following the period to which the advance tax payment relates. The balance of tax due must be paid within 30 days after the annual tax return is filed with the tax authorities. If the total amount of advance payments of corporate income tax exceeds the amount of tax due for the year, the overpaid tax is refunded to the company.

Dividends. In principle, dividends paid to residents and nonresi­dents are subject to withholding tax at a rate of 15%. The tax does not apply to dividends paid to a resident or to a permanent estab­lishment of a nonresident if the dividend recipient informs the dividend payer of its tax number.

Measures implementing the EU Parent-Subsidiary Directive are in effect in Slovenia. Under these measures, dividend distribu­tions are exempt from withholding tax if all of the following conditions are satisfied:

  • The recipient of the dividends owns at least 10% of the equity capital or voting power of the payer of the dividends.
  • The duration of the recipient’s ownership in the payer is at least two years.
  • The recipient of dividends is a taxable company that has one of the prescribed legal forms, is a resident of an EU member state and is a taxpayer for one of the taxes for which the common system of taxation applies.

If, at the time of payment of a dividend, the duration of ownership of the recipient is shorter than two years and all other require­ments are met, a withholding tax exemption is still possible if the payer or its agent provides an appropriate bank guarantee to the tax authorities.

Dividends paid to EU/European Economic Area (EEA) residents are exempt from withholding tax if a tax credit is not available in the country of residence of the recipient.

Dividends and interest paid to EU/EEA resident pension funds, investment funds and insurance companies performing pension plans are exempt from withholding tax if a tax credit is not avail­able in the country of residence of the recipient and if the recipi­ent of such income is not a Slovenian branch of such persons.

Dividends received by Slovenian taxable persons are generally subject to a full participation exemption.

Expenses of an amount equal to 5% of the dividends received are not deductible for tax purposes because they are deemed to be expenses incurred with respect to the exempt dividend income.

Foreign tax relief. Income tax paid abroad can be credited against the final tax liability of a company if the income on which the tax has been paid abroad is included in the tax base. The foreign tax credit may not exceed the lower of the amount of foreign tax on foreign income that was paid or the amount of tax that would have been paid under Slovenian law on the foreign income if the credit had not been granted. To claim the tax credit, the taxpayer must submit appropriate documentation together with the tax return.

Determination of trading income

General. Taxable income is based on the profits reported in the annual financial statements prepared in accordance with Inter­national Financial Reporting Standards (IFRS) or Slovenian ac­counting standards, which generally follow IFRS. For tax purpos­es, profits are adjusted, primarily for non deductible expenses.

In general, only those expenses that are directly required for the generation of taxable revenues are allowed as deductible expenses.

The law specifies that certain expenses are not deductible, includ­ing the following:

  • Incentives paid to the management board and to the board of directors
  • Pecuniary penalties (fines paid to government agencies)
  • Donations
  • Bribes

Only 50% of entertainment expenses and fees paid to the super­visory board is deductible for tax purposes.

Interest on loans to related entities is deductible up to the amount computed by applying the acknowledged interest rate at the time of the loan approval. The Ministry of Finance publishes the ac – knowledged interest rate. It is possible for a taxable person to prove that a contractual interest rate exceeding the acknowledged inter­est rate is an arm’s-length rate. The measure described in the pre­ceding sentence applies to interest accrued after 7 June 2008 and to loan agreements entered into after January 2007.

A deduction for bad debts can be claimed if specified conditions are met.

Inventories. Inventories may be valued using any of the methods prescribed by the applicable accounting standards. Permissible methods include first-in, first-out (FIFO), average cost and other methods. The last-in, first-out (LIFO) method is not allowed. In – ventories are measured at the lower of cost or net realizable value.

Provisions. The following provisions are deductible for tax pur­poses up to an amount equal to 50% of the provisions established in accordance with the accounting standards:

  • Provisions for warranties
  • Provisions for restructurings
  • Provisions for expected losses from onerous contracts
  • Provisions for pensions
  • Provisions for termination benefits with respect to employees
  • Provisions for jubilee benefits

Other provisions established based on applicable accounting stan­dards are 100% tax deductible when they are set aside.

Specific provisions established by a bank for specific risks are deductible up to the amount prescribed by the Banking Act. Tech­nical provisions that insurance companies are required to establish under the law are deductible up to the amount prescribed by the Insurance Companies Act. Special provisions that are required for stockbrokerage companies are deductible up to the amount pre­scribed by the Securities Market Act.

Revaluation expenses. In general, subject to special conditions and limitations, revaluations of the following items are deductible for tax purposes:

  • Receivables
  • Financial assets and financial instruments measured at fair value through profit or loss
  • Goodwill
  • Debts, receivables, investments and cash receivables, provided that the revaluations are based on changes in the exchange rate

Tax depreciation. Depreciation calculated using the straight-line method is deductible for tax purposes. The tax law sets the maxi­mum depreciation rates. The following are some of the prescribed maximum straight-line depreciation rates.

Assets Rate (%)
Buildings, including investment property 3
Parts of buildings, including investment property 6
Equipment, vehicles and machinery 20
Parts of equipment and equipment for research activities 33.3
Computer equipment, hardware and software 50
Crops lasting several years 10
Breeding animals 20
Other investments 10

Tax relief for investments. A taxable person may claim a reduction of the tax base in the amount of 40% of the amount invested in equipment and intangible assets (subject to certain limitations). The reduction may not exceed the amount of the tax base, and the unused portion of the tax relief can be carried forward to the next five tax periods.

For 2010 through 2017, a special regulation applies in the region of Pomurje. Taxable persons may claim a reduction of the tax base in the amount of 70% of salaries paid to employees (under certain conditions). The reduction may not exceed the amount of the tax base. In addition, taxable persons may reduce their tax base by up to 70% of the amount invested in equipment and intangible assets, under certain conditions.

Tax relief for research and development expenditure. Tax relief is available for research and development (R&D) expenditure.

The tax base may be decreased by 100% of the expenditure in­curred in R&D activities.

The taxable person may also carry forward the unused portion of the tax relief to the following five fiscal periods.

Such tax relief may not be granted for R&D that is financed by government funding or the EU.

Tax relief for R&D expenditure excludes the use of the tax relief for investments.

Tax relief for the hiring of employees. An employer who hires cer­tain employees may claim relief in the amount of 45% of the sal­ary of such employees for the first 24 months of employment, but not exceeding the amount of the tax base. To be eligible for the relief, all of the following conditions must be met:

  • The employee must be younger than 26 years old or older than 55 years old.
  • The employee must have been registered as unemployed at the Employment Service of Slovenia for more than six months be­fore the commencement of employment.
  • The employee was not employed by the employer seeking the tax relief or a related party in the past 24 months.
  • Agreement is reached on an employment contract for an indef­inite time period.
  • The overall number of employees employed at the employer in the tax period increased.

Hidden profit distributions. Hidden profit distributions are non­deductible expenditures and are subject to withholding tax as deem ed dividends. The following items are treated as hidden profit distributions to a shareholder owning directly or indirectly at least 25% of the capital in the payer (or controlling the payer on the basis of the contract or having influence over the payer):

  • Providing assets or performing services, including the discharge of debts, without consideration or at a price that is lower than the comparable market prices
  • Payments for the purchase of assets and services at a price that is higher than the comparable market prices
  • Payments for assets that were not transferred or for services that were not rendered
  • Interest on loans granted at an interest rate that differs from the acknowledged interest rate if the taxpayer cannot prove that an unrelated entity would have agreed to the interest rate
  • Interest on loans exceeding the thin-capitalization limit (see Section E)

Relief for losses. Assessed tax losses may be carried forward for an unlimited time period. It is possible to use tax losses carried forward from previous years, up to a maximum of 50% of the tax base for a tax period. The right to carry forward tax losses is lost if the ownership of share capital or voting rights changes by more than 50% during a tax year, as compared to the beginning of the tax year, and if the taxpayer did not conduct any business activity for two years or the business activity was significantly changed in the two-year period before or after the change of ownership (unless the business activity was significantly changed to main­tain jobs or to restore business operations).

Loss carrybacks are not allowed.

Groups of companies. The formation of groups of companies for tax purposes is not allowed.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax
Standard rate 22
Reduced rate 9.5
Transfer tax on immovable property 2
Motor vehicle tax
Petrol cars 0.5 to 28 and 0 to 16
Diesel cars; rate based on the level of
exhaust emissions
1 to 31 and 0 to 16
Motorcycles 1.5 to 5 and 0 to 5
Camper vans; rate based on the power
of the engine
6 to 18
Water Vessel Tax; amount of the tax depends
on the length of the vessel (minimum of
five meters) and the power of the engine
Various
Tax on insurance premiums 8.5
Property tax; levied on premises such as
buildings, parts of buildings and land
0.1 to 1.5
Social security contributions, on monthly
salary
Health insurance, paid by:
Employer 6.56
Employee 6.36
Pension and disability, paid by:
Employer 8.85
Employee 15.5
Unemployment insurance, paid by:
Employer 0.06
Employee 0.14
Maternity benefits, paid by:
Employer 0.1
Employee 0.1
Workers’ compensation insurance (for occupational injuries and diseases),
paid by employer
0.53

Miscellaneous matters

Foreign-exchange controls. The official Slovenian currency is the euro (EUR).

Legal entities with their head office in Slovenia and subsidiaries of foreign commercial companies that are registered in the Court Registry in Slovenia may maintain foreign-currency accounts or foreign-currency deposit accounts at authorized banks in Slove­nia. Slovenian and foreign enterprises and their subsidiaries may freely perform one-sided transfers of property to or from Slovenia. Profits may be freely transferred abroad in foreign currency.

Resident enterprises may obtain loans from nonresident enterpris­es in their own name and for their own account. They are required to report selected loan transactions with nonresident enterprises to the Bank of Slovenia. For this purpose, loan transactions include the following:

  • Pledges of real estate and other security
  • Purchases by nonresidents of ac counts receivable arising from transactions between resident enterprises
  • Purchases by residents of accounts receivable arising from transactions between nonresident enterprises
  • Certain other transactions between resident and nonresident enterprises if the economic purpose of the transaction is effec­tively the granting of a loan

Transfer pricing. Transfer prices are determined by referring to market prices of the same or comparable assets or services charg ed between unrelated parties (comparable market prices). Compa­rable market prices are determined by one of the five methods prescribed by the OECD guidelines.

A resident or nonresident and a foreign legal entity or foreign partnership are deemed to be related parties if any of the follow­ing circumstances exist:

  • The taxable person directly or indirectly holds 25% or more of the value or number of shares or equity holdings, or control over management or supervision or voting rights of the foreign person or controls the foreign person on the basis of contract or transaction terms that differ from terms that are or would in the same or comparable circumstances be agreed to between unre­lated parties.
  • The foreign person directly or indirectly holds 25% or more of the value or number of shares or equity holdings or control over management or supervision or voting rights of a taxable person, or controls the taxable person on the basis of contract or trans­action terms that differ from terms that are or would in the same or comparable circumstances be agreed to between unrelated parties.
  • The same person at the same time, directly or indirectly, holds 25% or more of the value or number of shares or holdings or participates in the management or supervision of the taxable person and the foreign person or two taxable persons or they are under the same person’s control on the basis of contract or trans­action terms that differ from terms that are or would in the same or comparable circumstances be agreed to between unrelated parties.
  • The same natural persons or members of their families directly or indirectly hold 25% or more of the value or number of shares or holdings or control over the management or supervision of the taxable person and the foreign person or two resident enti­ties or they are under their control on the basis of contract or transaction terms that differ from terms that are or would in the same or comparable circumstances be achieved between unre­lated parties.

Taxpayers must maintain transfer-pricing documentation continu­ously. The transfer-pricing documentation requirements are based on the masterfile concept. Under this concept, which is recom­mended by the European Community (EC) Council and the EU Joint Transfer Pricing Forum, the transfer-pricing documentation consists of a general part and a country-specific part. A prescrib­ed abstract of the documentation must be enclosed with the tax return when the tax return is filed with the tax authorities. The transfer-pricing documentation must be archived for a period of 10 years after the year to which it relates.

The transfer-pricing rules can apply to transactions between domestic related parties in specific circumstances.

Debt-to-equity rules. Interest on loans from shareholders, who directly or indirectly at any time during a tax year hold at least 25% of capital or voting rights of the taxable person (with the exception of banks and insurance companies as borrowers), is deductible only if it is attributable to the part of the loan that does not exceed a specified multiple of the value of the share capital owned (debt-to-equity ratio). Loans from shareholders are also considered loans from related persons of the taxable person if the shareholder directly or indirectly at any time during a tax year holds at least 25% of shares, holdings or voting rights in the lender and the taxable person. For example, this applies to loans obtained from sister companies. For 2014, the applicable debt-to-equity ratio is 4:1.

Treaty withholding tax rates

Most of Slovenia’s double tax treaties follow the OECD model convention. The following table shows the withholding tax rates under Slovenia’s tax treaties.

Dividends

%

Interest

%

Royalties

%

Albania 5/10 (a) 7 (s) 7
Armenia 5/10 (a) 0/10 (m) 5
Austria 5/15 (a) 0/5 (m) 5
Azerbaijan 8 0/8 (x) 5/10 (y)
Belarus 5 5 (t) 5
Belgium 5/15 (a) 10 5
Bosnia and
Herzegovina 5/10 (a) 7 5
Bulgaria 5/10 5 5/10 (c)
Canada 5/15 (f) 0/10 (k) 10
China 5 10 10
Croatia 5 0/5 5
Cyprus 5 5 5
Czech Republic 5/15 (a) 0/5 (b) 10
Denmark 5/15 (a) 5 5
Estonia 5/15 (a) 0/10 (b) 10
Finland 5/15 (a) 0/5 (b) 5
France 0/15 (d) 5 (b) 5
Georgia 5 0/5 (s) 5
Germany 5/15 (a) 0/5 (k) 5
Greece 10 10 10
Hungary 5/15 (a) 0/5 (k) 5
Iceland 5/15 (a) 0/5 (b) 5
India 5/15 10 10
Iran 7 0/5 (ee) 5
Ireland 5/15 (a) 0/5 (b) 5
Israel 5/10/15 0/5 (b) 5
Italy 5/15 10 5

 

Korea (South) 5/15 (a) 5 5
Kosovo 5/10 (cc) 0/5 (dd) 5
Kuwait 0/5 (v) 0/5 (w) 10
Latvia 5/15 (a) 0/10 (b) 10
Lithuania 5/15 (a) 0/10 (b) 10
Luxembourg 5/15 (a) 0/5 (b) 5
Macedonia 5/15 (a) 10 10
Malta 5/15 (g) 5 5
Moldova 5/10 5 5
Netherlands 5/15 (o) 0/5 (b) 5
Norway 0/15 (r) 0/5 (e) 5
Poland 5/15 (a) 0/10 (b) 10
Portugal 5/15 (a) 0/10 (b) 5
Qatar 5 5 5
Romania 5 0/5 (b) 5
Russian Federation 10 10 10
Serbia and
Montenegro (n) 5/10 (a) 0/10 (b) 5/10 (h)
Singapore 5 5 5
Slovak Republic 5/15 10 10
Spain 5/15 (a) 0/5 (b) 5
Sweden 5/15 (a) 0 0
Switzerland 0/15 (z) 5 (aa) 0/5 (bb)
Thailand 10 0/10/15 (b)(i) 10/15 (j)
Turkey 10 0/10 (b) 10
Ukraine 5/15 (a) 5 5/10
United Arab
Emirates 0/5 (ff) 0/5 (l) 5
United Kingdom 0/15 (p) 0/5 (q) 5
United States 5/15 (a) 0/5 5
Uzbekistan 8 8 8
Non-treaty countries 15 15 15

a) The lower rate applies if the recipient of the dividends is a company that holds at least 25% of the capital of the payer of the dividends.

b) The 0% rate applies to interest paid to the government including local authorities or the national bank. In certain treaties, the 0% rate applies to interest paid to national export companies and other institutions, subject to additional conditions.

c) The lower rate applies to royalties paid for the use of, or the right to use, the following:

  • Copyrights of literary, artistic or scientific works (not including cinemato­graphic works)
  • Industrial, commercial or scientific equipment

d) The 0% rate applies if the recipient of the dividends is a company that holds at least 20% of the capital of the payer of the dividends.

e) Interest arising in a contracting state and paid to the government of the other contracting state is exempt from tax in the state of the payer. In the case of Slovenia, interest arising in Norway and paid with respect to a loan guaran­teed or insured by Slovene Export and Development Bank Inc., Ljubljana on account of the Republic of Slovenia as authorized in accordance with the domestic law is exempt from tax in Norway.

f) For dividends paid by Slovenian companies, the 5% rate applies if the recipi­ent of dividends holds at least 25% of the capital of the payer of the dividends. The 15% rate applies to other dividends paid by Slovenian companies. For dividends paid by Canadian companies, the 5% rate applies if the recipient of dividends holds at least 10% of the voting power of the payer of the divi­dends. The 15% rate applies to other dividends paid by Canadian companies.

g)For dividends paid by Slovenian companies, the 5% rate applies if the recipi­ent of dividends owns at least 25% of the capital of the payer of the dividends. The 15% rate applies to other dividends paid by Slovenian companies. For dividends paid by Maltese companies to Slovenian resident beneficiaries, the withholding tax rate may not exceed the tax imposed on the profits out of which dividends are paid.

h) The 5% rate applies to royalties for the use of, or the right to use, copyrights of literary, artistic or scientific works, including cinematographic works, and films or tapes used for radio or television broadcasting.

i) The 10% rate applies to interest paid to financial institutions, including insur­ance companies.

j) The 10% rate applies to royalties paid for the following:

  • The use of, or the right to use, copyrights of literary or artistic works, including motion pictures, live broadcasting, films and tapes
  • Other means for use or reproduction in connection with radio and televi­sion broadcasting
  • The use of, or the right to use, industrial, commercial or scientific equipment

(k)   Subject to additional conditions, the 0% rate applies to the following:

  • Interest paid with respect to indebtedness of the government or local authorities
  • Interest paid to an entity that was established and operates exclusively to administer or provide benefits under pension, retirement or other employee benefit plans

Interest arising in Slovenia (Canada) and paid to a resident of Canada (Slove­nia) is taxable only in Canada (Slovenia) if it is paid with respect to loans made, guaranteed or insured by the Export Development Corporation (Slove­nian Export Company).

(l)   Interest paid by a company that is a resident of a contracting state is taxable only in the other contracting state if the beneficial owner of the interest is one of the following:

  • The other state
  • Political subdivision
  • Local government
  • Local authority
  • Central bank
  • Recognized pension fund
  • Abu Dhabi Investment Authority
  • Abu Dhabi Investment Council
  • Emirates Investment Authority
  • Mubadala Development Company
  • International Petroleum Investment Company
  • Dubai World
  • Investment Corporation of Dubai
  • Any other institution created by the government, a political subdivision, a local authority or a local government of that other state that is recognized as an integral part of that government, as agreed through an exchange of letters by the competent authorities of the contracting states

Interest arising in the United Arab Emirates and paid on a loan guaranteed or insured by the Slovenian Export and Development Bank (Slovenska Izvozna in Razvojna Banka, or SID Bank) Inc. Ljubljana, on behalf of the Republic of Slovenia as authorized by the domestic law is exempt from tax in the United Arab Emirates.

(m) The 0% applies if any of the following circumstances exists:

  • The interest is paid to the government including local authorities or the national bank.
  • The payer of the interest is the government including local authorities or the national bank.
  • The interest is paid with respect to a loan made, approved, guaranteed or insured by an institution that is authorized under internal law to act as an export financing institution on behalf of the contracting state.

n) The tax treaty between Slovenia and the former Union of Serbia and Monte­negro is expected to continue to apply to the republics of Serbia and Monte­negro. The treaty does not apply to Kosovo.

o) The 5% rate applies if the recipient of the dividends is a company that holds at least 10% of the capital of the payer of the dividends.

p) The 0% rate applies if the recipient of dividends owns more than 20% of the capital voting rights of the payer of the dividends.

q) The 0% rate applies if either of the following circumstances exists:

  • The interest is paid to the government including local authorities or the national bank.
  • The payer and the recipient are both companies and one of the companies owns directly at least 20% of the capital of the other company, or a third company that is a resident of a contracting state holds directly at least 20% of the capital of both the payer company and the recipient company.

(r)   The 0% rate applies if any of the following circumstances exists:

  • The recipient of dividends owns more than 15% of the capital voting rights of the payer of the dividends.
  • In the case of Norway, the beneficial owner of the dividends is a resident of Norway who is a partner in a Norwegian partnership and alone or together with the other partners holds directly at least 15% of the capital of the company paying the dividends.
  • The dividends are derived and beneficially owned by the government of a contracting state.

(s)   A 0% rate applies if any of the following circumstances exists:

  • The payer of the interest is the government of a contracting state, political subdivision, local authority or central bank of such state.
  • The interest is paid to the government of the other contracting state or a political subdivision, local authority or central bank of such state.
  • The interest is paid with respect to a loan made, approved, guaranteed or insured by an institution that is authorized in accordance with internal law on insurance and financing of international business transactions.

(t)   A 0% rate applies if either of the following circumstances exists:

  • The payer of the interest is the government of a contracting state, or a political subdivision, local authority or central bank of such state.
  • The interest is paid to the government of the other contracting state or a political subdivision, local authority or central bank of such state.

u) The lower rate applies to royalties paid for the use, or the right to use, patents, patterns, models, plans, and secret formulas or procedures or for information regarding industrial, commercial or scientific experience.

v) The 0% rate applies if the beneficial owner of the income is a resident of the other contracting state and is one of the following:

  • The government of that contracting state or a political subdivision or local authority thereof or the central bank
  • A governmental institution created in that contracting state under public law such as a corporation, fund, authority, foundation, agency or similar entity
  • An entity established in that contracting state, all the capital of which has been provided by that contracting state or a political subdivision or local authority thereof or any governmental institution mentioned in the bullet above together with other states

(w) A 0% rate applies if the beneficial owner of the interest is a resident of the other contracting state and is one of the following:

  • The government of that contracting state, a political subdivision or local authority thereof or the central bank
  • A governmental institution created in that contracting state under public law such as a corporation, fund, authority, foundation, agency or similar entity
  • An entity established in that contracting state, all the capital of which has been provided by that contracting state or a political subdivision or local authority thereof or a governmental institution as defined in the bullet above, together with other states

(x)   A 0% rate applies if any of the following circumstances exists:

  • The payer of the interest is the government of that contracting state or an administrative-territorial or political subdivision or a local authority or the central bank.
  • The interest is paid to the government of the other contracting state or an administrative-territorial or political subdivision or a local authority or the central bank.
  • The interest is paid with respect to a loan made, approved, guaranteed or insured, on behalf of the Republic of Slovenia, by the Slovenian Export and Development Bank (Slovenska Izvozna in Razvojna Banka, or SID Bank) Inc. Ljubljana, which is authorized under the domestic legislation of the Republic of Slovenia for insuring and financing international business transactions.
  • The interest is paid to the State Oil Fund of the Republic of Azerbaijan.

y) The lower rate applies to royalties paid for the use of, or the right use, com­puter software, patents, designs or models, plans, secret formulas or processes, or for information concerning industrial, commercial or scientific experience.

z) A 0 % rate applies if the beneficial owner of the dividends is one of the fol­lowing:

  • A company (other than a partnership) that is a resident of the other contract­ing state and that holds directly at least 25% of the capital in the company paying the dividends
  • A pension scheme

(aa) Interest arising in a contracting state and paid to a resident of the other con­tracting state that is the beneficial owner of the interest is taxable only in that other state to if any of the following circumstances exist:

  • It is paid by the government of a contracting state, a political subdivision, a local authority or the central bank.
  • It is paid to the government of a contracting state, a political subdivision, a local authority or the central bank.
  • It is paid with respect to a loan made, approved, guaranteed or insured by an institution that is authorized in accordance with internal law to insure and finance international business transactions.
  • It is paid with respect to indebtedness arising as a result of the sale on credit of equipment, merchandise or services.
  • It is paid by a bank to a bank of the other contracting state.
  • It is paid by a company to a company of the other contracting state if the recipient company is affiliated with the company paying the interest by a direct minimum holding of 25% in the capital or if both companies are held by a third company that is resident of an EU member state or Switzerland and that has directly a minimum holding of 25% in the capital of the first company and in the capital of the second company.

(bb) Royalties paid by a company that is a resident of a contracting state to a resident of the other contracting state is taxable in only the other state if the beneficial owner is a company that is affiliated with the company paying the royalties by a direct minimum holding of 25% in the capital or if both com­panies are held by a third company that is resident of an EU member state or Switzerland and that has directly a minimum holding of 25% in the capi­tal of the first company and in the capital of the second company.

(cc) The lower rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends.

(dd) A 0% rate applies if any of the following circumstances exists:

  • The payer of the interest is the government of that contracting state or a political subdivision, local authority or the central bank.
  • The interest is paid to the government of the other contracting state or a political subdivision, local authority or the central bank.
  • The interest is paid with respect to a loan made, approved, guaranteed or insured by an institution of the other contacting state on behalf of that state as authorized by a special domestic law on insuring and financing of inter­national business transactions.

(ee) Interest arising in a contracting state and paid to a resident of the other contracting state that is the beneficial owner of the interest is taxable only in that other state if any of the following circumstances exists:

  • The interest is paid the government of the other contracting state, a politi­cal subdivision or a local authority thereof, or to the central bank of the other contracting state.
  • The interest is paid in connection with the sale on credit of industrial, commercial or scientific equipment.
  • The interest is paid in connection with the sale on credit of merchandise by one enterprise to another enterprise.

(ff) Dividends paid by a company that is a resident of a contracting state is tax­able only in the other contracting state if the beneficial owner of the divi­dends is one of the following:

  • The other state
  • Political subdivision
  • Local government
  • Local authority
  • Central bank
  • Recognized pension fund
  • Abu Dhabi Investment Authority
  • Abu Dhabi Investment Council
  • Emirates Investment Authority
  • Mubadala Development Company
  • International Petroleum Investment Company
  • Dubai World
  • Investment Corporation of Dubai
  • Any other institution created by the government, a political subdivision, a local authority or a local government of the other state that is recognized as an integral part of that government as agreed through an exchange of letters by the competent authorities of the contracting states