In March 2026, the revised Employee Profit-Sharing Act entered into force (Official Gazette of the Republic of Slovenia, No. 14/2026 of 24 February 2026; hereinafter: ZUDDob-1), which promises a more attractive regulatory framework for the employee participation in company profits; 30% final taxation of distributed profits at the level of the employee and the 100% additional deduction of the shared proftis in the corporate income tax of the employer.
WHO IS ENTITLED TO EMPLOYEE PROFIT PARTICIPATION
An employee is a natural person who is in an employment relationship with the company. In profit-sharing, all employees are included under the same conditions, while the company may determine a minimum duration of employment in the financial year, but not exceeding six months.
A member of management, a procurator and an executive director is treated as an employee, provided that they have an employment contract and are not entitled to profit-sharing on that basis. On the other hand, a substantial owner with a 10% share or more of the company is not deemed to be an employee. Closely related persons, namely a spouse or a partner, are also deemed to be substantial owners.
PAYMENT SCHEMES
There are three profit-sharing schemes:
- cash scheme: distribution of profit to employees in cash;
- share scheme: distribution of shares or stocks to employees;
- business share scheme: distribution of business shares to employees.
In practice, the cash scheme will be the most suitable option for most companies, but it is also allowed a combination of one or more schemes under the same agreement.
PROCEDURE FOR IMPLEMENTING EMPLOYEE PROFIT-SHARING
Under ZUDDob-1, there are two available routes for introducing a profit distribution scheme for employees: by means of (a) an agreement or (b) a plan.
- Profit-Sharing Agreement
The first route is a profit-sharing agreement. It may cover one or more financial years, including a previous year if concluded in the year when the profit appropriation resolution was adopted. Only one agreement may exist at a time, and it must apply to all employees, though it may include several schemes.
The agreement sets the criteria for employees’ entitlements, such as salary, attendance, performance, or other relevant factors. It must also define the parties, schemes, profit share, payment deadline, minimum employment period, notification rules, consequences of termination, and rules on share disposal.
The initiative may come from employees, management, shareholders, or members. If employees initiate it, management must respond with a reasoned opinion within 15 days. The agreement is approved on the company’s side by the general meeting by simple majority, and on the employees’ side by a trade union, works council, workers’ representative, or employees’ assembly.
- Resolution on Participation and Distribution Plan
The second option is a general meeting resolution with a profit distribution plan. It may be used if no profit-sharing agreement is concluded within 45 days of the initiative.
After the resolution, management prepares a plan applying to all eligible employees who worked for the company in the relevant year for the required period, up to six months. The plan must set out the schemes, payment deadline, share-disposal conditions, and distribute at least 5% of that year’s net profit to employees.
This route is more formal and restrictive: 30% to 90% of the payment is based on gross salary, while 10% to 70% is distributed equally. Performance or other criteria may also be used, but each may account for no more than 30%.
Management determines and notifies each employee of their amount within 30 days, and payment or share acquisition follows the plan.
SPECIAL TAX TREATMENT
Profit distributions to employees are subject to special tax treatment if the following conditions are met:
- the share of profit allocated to employees does not exceed 33% of the net profit and 20% of the gross wage bill for the financial year whose profit is being distributed;
- the ratio between the highest and the lowest amount due to individual employees must not exceed 1:8;
- all employees participate in profits under the same conditions.
One of two specific conditions regarding the height and growth of the average gross monthly salary must also be met.
Special Tax Treatment for the Company
The company may claim a reduction of its corporate income tax base for 100% of the amount of profit from the preceding year that was distributed to employees.
Special Tax Treatment for Employees
Income received by an employee under the cash scheme is taxed under the special treatment if two conditions are met:
- the income is paid in two equal instalments at least one year apart; and
- at the time of receiving the income, the employee is in an employment relationship with the payer of the income.
In such case, the income is not included in the annual tax base, while personal income tax is paid at a rate of 30% and is treated as a final tax.
Under the share scheme and the equity interest scheme, the value of the shares received is likewise not included in the annual tax base; instead, personal income tax is assessed at a rate of 25%, which is treated as a final tax. Shares acquired under this Act are, as a rule, subject to a three-year lock-up period and may not be sold during that period.
These types of income are also not included in the base for social security contributions. This applies to the cash scheme as well as to the share scheme and the equity interest scheme.
Reporting And Supervision
The management must submit the agreement or resolution to the ministry responsible for economic affairs no later than 15 days after its conclusion. The same 15-day obligation also applies in the event of any amendment or termination of the agreement.
Transitional Provisions For 2025 And 2026 Profits
For 2025 and 2026, the Act provides for a relaxation of the wage growth conditions applicable to the special tax treatment. Instead of 70% of the sectoral wage growth, 50% is sufficient, and instead of exceeding the full average annual inflation rate, it is sufficient to exceed half of the inflation rate.
Example: In the 2026 financial year, a company with 16 employees generates EUR 200,000 in profit and wishes to distribute 10% of that profit among employees under a profit distribution plan. The plan provides that 60% of the amount is distributed proportionately according to salaries, while 40% is distributed equally among all employees.
- Total annual gross wage bill: EUR 444,000
- Amount to be distributed: 200,000 × 10% = EUR 20,000
- Portion based on gross salaries: 20,000 × 60% = EUR 12,000
- Equal portion for all employees: 20,000 × 40% = EUR 8,000 / 16 = EUR 500 per employee.
The amounts due are as follows:
- 10 employees with a gross salary of EUR 2,500 each receive EUR 810.81 + EUR 500 = EUR 1,310.81
- 5 employees with a gross salary of EUR 1,600 each receive EUR 518.92 + EUR 500 = EUR 1,018.92
- the director with a gross salary of EUR 4,000 receives EUR 1,297.30 + EUR 500 = EUR 1,797.30
The ratio between the highest and the lowest payment is therefore approximately 1.76:1 and thus does not exceed the 1:8 limit. If the payment is made in two equal instalments at least one year apart, the special tax treatment may apply for employees: a 30% final tax, no social security contributions, and no inclusion in the annual personal income tax base.
