Slovenia: Overview

RENTAL YIELDS

Yields are moderate in Ljubljana

Rental yields for properties in central Ljubljana range from 4.8% to 7%. Apartment prices are around €2,200 to €3,750 per sq. m. while rents are around €600 per month for a small (40 sq. m.) unit. Larger units have much higher rents that can reach up to €3,400 per month (for a 300 sq. m. flat).

Within the suburbs of Ljubljana, rental yields are a bit higher at 5.85% to 7.5%. Property prices are much lower at €1,500 to €1,650 per sq. m. Rents are around €2,000 per month for a 200 sq. m. property.

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TAXES AND COSTS

Rental income tax in Slovenia can be very high

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: Net rental income is taxed at progressive rates. Taxable income is computed by deducting income-generating expenses from the gross rent.

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

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

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

Most advanced ex-Yugoslav country

Slovenia is a small country (pop. 2 million) located in the Balkan peninsula in Europe. The most advanced of the ex-Yugoslav countries, it had a per capita GDP of US$23,000 in 2007, about 75% of the EU average. It is mountainous and heavily wooded, and has a short coastline.

The capital Ljubljana (pop 250,000) is rich in baroque architecture. Koper, the country’s large port, was the capital of Istria under the Venetian Republic and just down the coast is Piran, a gem Venetian city.

Slovenia joined the European Union in May 2004, having routinely topped all league tables of preparedness among EU accession countries. It has used the Euro since January 1, 2007, and was the first former communist bloc country to do so.

Slovenia’s economy is dynamic, its politics are democratic, its press free, its social atmosphere liberal, oriented towards Europe, modernity, and progress. Free-market reforms aimed at creating a pro-entrepreneurial Slovenia are being pushed by the centre-right Slovenian Democratic Party (SDS), which took power at the head of a coalition in October 2004. The proposed reforms focus on cutting state costs, privatizing, cutting welfare benefits, and simplifying the tax system. Educational and health service reforms are also on the agenda.

Slovenia’s economic growth has been accelerating. In 2007, GDP rose by 6%, firmly up on 2006’s 5.7% growth. GDP per capita has risen dramatically from €10,700 in 2000 to €16,700 in 2007. Average wages rose by 3.6% in 2005, and 2.6% 2006 and 5% in 2007 in real terms. Unemployment has fallen from 9% in 1993 to 4.7% in 2007.