Amendments to the Decree on the tax treatment of reimbursement of costs and other income from employment

Please note that the Decree only changes the tax treatment of reimbursements of commuting costs, namely, the amount up to which reimbursements of costs are not tax deductible. Regarding the content and scope of obligations and rights of an employer and an employee in this respect, the statutory provisions and provisions of binding collective agreements and employment agreements shall continue to apply. In other words, the new Decree does not change the amounts of costs an employee is entitled to (except in cases where it has been agreed, for example, that the employee is entitled to the “maximum tax-free amount under the Decree on the tax treatment of reimbursements of costs and other income from employment”). 

The Decree has overhauled the treatment of reimbursement of commuting costs. The tax-free amount for each full kilometre between the employee’s usual place of residence (defined by the Decree as the employee’s nearest place of residence or the place from which the employee actually travels to work at least four times a week) and the place of work (for each day of its presence at work) remains EUR 0.18 under the new Decree. In this respect, it is the shortest route that is relevant, not perhaps the fastest. An additional condition is that the route must be at least 1 km long in one direction. Please note that e.g. the current Collective Agreement for the Hospitality and Tourism Industries of Slovenia provides that an employee is entitled to reimbursement of commuting costs if the employee’s place of residence is at least 2 km away from the place of work. The main difference from the previous regime is that the tax-free amount no longer depends on whether or not the employee has access to public transport to get to work and the cost of such public transport, rather it is calculated based on the following formula (number of km to and from work × number of days of present at work in a month × EUR 0.18). 

An additional rule states that a monthly amount of up to EUR 140 is tax-free, provided that the employee has been at work at least one day and that the route is at least 1 km long in one direction. In other words, even if the employee is entitled to a lower amount according to the formula set out in the previous paragraph, the employer may pay him a (tax-free) amount of up to EUR 140 as reimbursement of commuting costs. However, where the commuting costs reimbursement exceeds EUR 140, the above formula shall be applied to calculate the tax-free amount. 

It should be added that under employment law, an employee is entitled to reimbursement of costs only if these costs are actually incurred. Employment law, therefore, determines the minimum rights of employees, while the Decree on the tax treatment of reimbursements of costs and other income from employment establishes maximum reimbursements that are not subject to tax. 

Author: Golfam Abbasi, Associate