Slovenia: Overview

RENTAL YIELDS

Last Updated: Jul 28, 2009

Uninspiring rental yields in Ljublijana

Gross rental yields on properties in central Ljubljana range from 4.9% to 5.3%. Properties are priced at around €2,643 to €3,133 per square metre (sq. m.)

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TAXES AND COSTS

Last Updated: Jul 24, 2008

Taxes are moderate

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	15%	15%	15%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Nonresident foreigners earning rental income are generally taxed at 25%. A standard deduction of 40% of gross income is available for all taxpayers earning rental income, for income-generating expenses.

Capital Gains: Capital gains tax is levied at a flat rate of 20%. The rate is reduced by 5 percentage points for every 5-year holding period, which effectively means that properties held for 20 years or more are exempt from capital gains taxation.

Inheritance: Inheritance of spouses and direct descendants are not taxed in Slovenia. Other heirs are liable to inheritance tax and the applicable progressive rates vary depending on the relationship between the donor and the recipient and the value of the property.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Last Updated: Apr 10, 2007

Buying costs are moderate in Slovenia

Roundtrip transaction costs are around 6.8% - 7.7% of the property value. The 2% Transfer Tax is paid by the seller while the real estate agent’s fee at 4% (plus 20% VAT) is typically split between buyer and seller.

Transaction costs for newly constructed or renovated residential apartment or building is substantially higher because of 8.5% VAT levied in lieu of transfer tax. New apartments intended for rental are considered commercial properties and are subject to 20% VAT.

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LANDLORD AND TENANT

Last Updated: Sep 15, 2006

Rental market practice is pro-landlord

Rent: Rent and rent increases can be freely negotiated but must be based on the market rate. In theory, rents must not be 50% higher than average rents in the same local municipality. In practice, this is not followed; landlords can draw contracts and change it as they wish.

Tenant Security: If the contract is for a definite period of time, the landlord has no obligation to renew the contract. If there has been no renewal 30 days before contract expiration, the tenant has to vacate the apartment at the day of expiration.

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ECONOMIC GROWTH

Last Updated: May 09, 2008

Economic downturn began

The Republic of Slovenia lies at the heart of Europe, where the Alps face the Pannonian plains and the Mediterranean meets the Karst. Slovenia has excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe.

Slovania made the transition in 2004 from World Bank borrower status, to donor-partner. Slovenia acceded to both NATO and the EU in the same year.

Slovenia’s economy is fueled by exports and foreign investments, and its high level of trade openness makes Slovenia sensitive to the current global economic crisis. In view of that, the economy has suffered from the recession in export markets, primarily from its main trading partner Germany.

The unemployment rate for the first quarter of 2009 rose to 8%, from 6.77% in Q4 2008. Average wages declined by 2% in 2008, from 4% in 2007.

The manufacturing sector accounts for most employment, and the decline in exports hit the manufacturing sector hard.

Inflation rate rose to 5.68% in 2008, but began to stabilize at the end of the quarter.

In the first quarter of 2009, Slovenia entered recession, with a contraction of 6.4% following a contraction of 4.1% in Q4 2008. The economy is expected to contract by 4% for the entire 2009.