Ljubljana
Ernst & Young Svetovanje d.o.o.
Dunajska cesta 111
1000 Ljubljana
Slovenia
ey.com/globaltaxguides
GMT +1
+386 (1) 583-1700
Fax: +386 (1) 583-1710
Principal Tax Contact and Business Tax Services Leader
Matej Kovačič
+386 (1) 583-1762
Mobile: +386 (41) 395-325
Email: matej.kovacic@si.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Matej Kovačič
Business Tax Advisory
Matej Kovačič
+386 (1) 583-1762
Mobile: +386 (41) 395-325
Email: matej.kovacic@si.ey.com
+386 (1) 583-1762
Mobile: +386 (41) 395-325
Email: matej.kovacic@si.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Matej Kovačič
+386 (1) 583-1762
Mobile: +386 (41) 395-325
Email: matej.kovacic@si.ey.com
International Tax and Transaction Services – Transfer Pricing
David Jež
Tax Policy and Controversy
Matej Kovačič
Global Compliance and Reporting
Dina Ćosić
People Advisory Services
Mojca Lukač
Indirect Tax
Anka Pogačnik
A. At a glance
+386 (1) 583-1961
Mobile: +386 (40) 725-482
Email: david.jez@si.ey.com
+386 (1) 583-1762
Mobile: +386 (41) 395-325
Email: matej.kovacic@si.ey.com
+386 (1) 583-1878
Mobile: +386 (40) 233-898
Email: dina.cosic@si.ey.com
+386 (1) 583-1731
Mobile: +386 (41) 332-396
Email: mojca.lukac@si.ey.com
+386 (1) 583-1754
Mobile: +386 (30) 479-902
Email: anka.pogacnik@si.ey.com
Net Operating Losses (Years)
(a) This is a temporary increase from 19%. See Section B.
(b) This tax applies to payments to residents and nonresidents.
(c) 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 prohibited list countries) or on the list of EU non-cooperative jurisdictions.
(d) A 15% withholding tax applies to cross-border payments for the lease of real estate located in Slovenia.
(e) See Section C.
B. 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 Sloveniansource income only (income derived from or through a permanent establishment and other Slovenian-source income subject to withholding tax).
The definition and corresponding rules related to “permanent establishment” of a nonresident company in Slovenia were updated on 10 February 2024 with amendments of the corporate income tax in a manner that generally follows the definition in the last version of Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and Capital 2017.
Rates of corporate income tax. The standard corporate income tax rate is 19%. However, a special legislative act (Act on Reconstruction, Development and Provision of Financial Resources) introduced a temporary increase of corporate tax rate from 19% to 22% for the years from 2024 to 2028.
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.
Balance sheet tax for banks and savings banks. A 0.2% balance sheet tax for banks and savings banks was introduced in the Act on Reconstruction, Development and Provision of Financial Resources in December 2023. Balance sheet tax will be effective from 2024 to 2028. The tax base is calculated as the average of
the values of the balances on each last day of the month in the tax period.
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 20th 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.
(b) of ATAD I. On the contrary, the amendments include a grandfathering clause for borrowing costs incurred on loans used to finance long-term public infrastructure projects in the EU, and loans concluded before 17 June 2016. However, Slovenia did not opt for any carryforward possibilities.
Despite the acceptance of the new rule, Slovenia decided to retain its pre-existing thin-capitalization rule for interest deductibility, according to which tax deductibility of interest expense on intercompany (group) financing is limited to the debt-to-equity ratio of 4:1.
The amendments are applicable for fiscal years starting 1 January 2024 and later.
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.
For the depreciation of operating leases, the maximum annual depreciation rate is calculated taking into account the period of the contractual lease of the asset. Depreciation recognition is determined depending on the contractual lease terms.
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.
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 (super deduction).
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 investment in the digital and green transition. Tax relief amounts to 40% of the amount representing investments in the digital transformation and green transition. These investments include investments in cloud computing, artificial intelligence and big data, and investments in environmentally friendly technologies, such as cleaner, cheaper, and healthier public and private transport, decarbonization of the energy sector, energy efficiency of buildings, and the introduction of other climate neutrality standards.
The new relief is mutually exclusive with the R&D investment relief and the investment relief and cannot be claimed if investments were financed from the budgets of self-governing local communities, the budget of the Republic of Slovenia or the EU budget, and if these funds have the nature of a grant.
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, one of the following conditions should be met:
• The employee is younger than 29 years old or older than 55 years old.
• The employee represents a person who is in a profession for which there is a shortage of jobseekers in the labor market and who was not employed by the employer seeking the tax relief or a related party in the past 24 months, provided such shortage is identified on the list determined by the Ministry of Labor.
• The overall number of employees employed at the employer in the tax period increased.
An employer may claim relief in the amount of 55% of the employee’s salary if he employs a person under the age of 25 who is employed for the first time, but no more than the amount of the tax base.
Hidden profit distributions. Hidden profit distributions are nondeductible expenditures and are subject to withholding tax as deemed 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.
D. Other significant taxes
The following table summarizes other significant taxes.
amount of the tax depends on the length of the vessel (minimum of five meters) and the
levied on premises such as buildings, parts of buildings and land and depends on the location, age and other factors
E. 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 accounts 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 charged 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.
entities, residence tiebreakers, double tax relief, minimum shareholding periods, capital gains derived from immovable property and a jurisdiction’s right to tax its own residents.
Hybrid mismatches and exit taxation. In light of the Base Erosion and Profit Shifting (BEPS) project and Directive 2016/1164/EU, the following two sets of rules were introduced into the Slovenian tax law, effective from 1 January 2020:
• Rules on exit taxation
• Rules on hybrid mismatches aimed at curbing tax avoidance practices that affect the tax base
The first set of rules determines a tax on the unrealized appreciation of assets gained in Slovenia; it taxes hidden reserves on the transfer of a business activity or assets from Slovenia to another country.
The second set of rules concerns the neutralization of effects in cases of hybrid mismatches between EU Member States, as well as with third countries, arising from payments or alleged payments between the taxable person and related parties in different countries. Hybrid mismatches are the result of differences in the legal characterization of payments, financial instruments and similar items in cases of different legal and tax regimes. The rules provide adjustments in the determination of tax liabilities for such cases.
New provisions on reverse hybrid mismatches were introduced, effective from 1 January 2022.
Mandatory disclosure rules. On 22 June 2019, Slovenia implemented the EU directive on the mandatory disclosure and exchange of cross-border tax arrangements (DAC 6). The rules implementing DAC 6 are effective from 1 July 2020; however, reports retroactively cover arrangements for which the first step was implemented between 25 June 2018 and 1 July 2020.
The deadline for (first) reporting on existing cross-border arrangements (implemented after 25 June 2018) was 28 February 2021. Any new arrangements must be reported within 30 days.
Exchange of information reported by platform operators. In December 2022, Slovenia implemented the EU directive on administrative cooperation in the field of taxation (DAC7), which defines the reporting obligations for digital platform operators (Model Reporting Rules for Digital Platforms [MRDP]). The information must be submitted to the Financial Administration of Republic of Slovenia (FURS) by 31 January 2024.
F. 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.
(g)
(a) 0/10 (b)
(ll) 0/5 (b)
(a)
0/15 (r) 0/5 (e) 5
5/15 (hh) 0/10 (b) 10
5/15 (hh) 0/10 (b) 5
(n) 5/10 (hh) 0/10 (b) 5/10 (h)(j)
(kk) 5
(jj) 10 10
5/15 (a) 0/5 (b) 5
5/15 (a) 5 5
0/15 (z) 5 (aa) 0/5 (bb)
10 0/10/15 (b)(i) 10/15 (j)
(b) 10
5/15 (a) 5 5/10 (h)(j) United
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 10
Non-treaty jurisdictions 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 and (as modified by Paragraph 1 of Article 8 of the MLI) if this condition is met throughout a 365-day period that includes the day of the payment of the dividends (for the purpose of computing this period, no account is taken of changes of ownership that directly results from a corporate reorganization, such as a merger or divisive reorganization, of the company that holds the shares or that pays 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 (see last sentence of second bullet below).
• 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. As modified by Paragraph 1 of Article 8 of the MLI, the conditions stated in this bullet and in the first bullet above must be met throughout a 365-day period that includes the date of the payment of the dividends (for the purpose of computing this period, no account is taken of changes of ownership that would directly result from a corporate reorganization, such as a merger or divisive reorganization, of the company that holds the shares or that pays 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
(gg) The 0% rate applies to interest paid to the government, including local authorities, or the national bank. The 0% rate also applies to interest paid to a resident of the other contracting state with respect to debt claims guaranteed, insured or indirectly financed by any institution promoting exports, investment or development.
(hh) 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 and (as modified by Paragraph 1 of Article 8 of the MLI) if this condition is met throughout a 365-day period that includes the date of the payment of the dividends (for the purpose of computing this period, no account is taken of changes of ownership that would directly result from a corporate reorganization, such as a merger or divisive reorganization, of the company that holds the shares or that pays the dividends).
(ii) The 5% rate applies (as modified by Paragraph 1 of Article 8 of the MLI) 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. The 10% rate applies (as modified by Paragraph 1 of Article 8 of the MLI) if the following conditions are met:
• The beneficial owner is a company that holds directly at least 10% of the capital of the company paying the dividends and the dividends are paid out of profits that by virtue of the law of the state in which the payer is a resident are exempt from company tax or subject to company tax at a rate that is lower than the normal rate in that state.
• The above condition is met throughout a 365-day period that includes the date of the payment of the dividends (for the purpose of computing this period, no account is taken of changes of ownership that would directly result from a corporate reorganization, such as a merger or divisive