Closing business as a sole trader (s.p.)
- Withdrawal from the compulsory social security scheme
- Striking off from the Slovenian Business Register (PRS)
- The process of striking off s.p. is relatively simple:
- Obligations to the Financial Administration of the Republic of Slovenia (FURS)
- How do years of service provisions work?
- Opening a new s.p.
- Cessation of pursuit of a business activity by an s.p. through transfer to another person
- Sole trader’s personal bankruptcy
Withdrawal from the compulsory social security scheme
A declaration of withdrawal from the compulsory social security scheme may be made within eight days prior to the day of striking off a sole trader from the Slovenian Business Register (PRS), by submitting the M-2 form via the Slovenia Business Point portal (in Slovenian language) or at one of the SPOT points. In the notes section of the M-2 form in which you are communicating your withdrawal from the compulsory social security scheme, you should indicate that you are withdrawing on account of striking off from the register, and specify when the striking off is to be made.
Note: The last day for filing a notice of withdrawal from the compulsory social security scheme via the Slovenia Business Point portal or at one of the SPOT points is one day before the date of striking off from the PRS.
Once a company is no longer registered in the PRS, an application for withdrawal from the social security scheme can no longer be made via the Slovenia Business Point website or at a SPOT point. Instead, you will only be able to apply by post or in person at any regional unit or branch of the Health Insurance Institute of Slovenia (ZZZS).
Withdrawal from insurance is also necessary upon striking off from the PRS an ‘afternoon s.p.’, in which an activity is pursued as a sideline profession and is subject to insurance against injury at work and occupational disease (M12) under 050. The cancellation of insurance is effected by selecting the Cancellation of insurance against injury at work and occupational disease for an s.p. (M12 form)’ procedure.
Note: The last day for filing a notice of cancellation of insurance for injury at work and occupational diseases via Slovenia Business Point portal or at one of the SPOT points is one day before the company is struck off from the register.
Once a company is no longer registered in the PRS, an application for withdrawal from insurance for injury at work and occupational diseases may no longer be made via the Slovenia Business Point or at a SPOT point. Instead, you will only be able to apply by post or in person at any regional unit or branch of the Health Insurance Institute of Slovenia (ZZZS).
Striking off from the Slovenian Business Register (PRS)
An application for striking off from the Slovenian Business Register (PRS) must be filed at least three days prior to the desired date of the striking off of the company from the register.
Before applying to cease activities, you must resolve all issues with debtors and workers. This is because, unlike companies, sole traders cannot go into liquidation.
As a sole trader, you should also be aware that after the closure of the business (and being stricken off from the PRS), you are still liable for any outstanding liabilities arising from pursuit of the activity with all your private personal assets (Article 7 of the Companies Act). You assume the right to all unpaid claims which your s.p. has against its customers on the day it is stricken off the PRS.
The process of striking off s.p. is relatively simple:
The procedure for striking off an s.p. from the Slovenian Business Register (PRS) may be carried out on the Slovenia Business Point website or at any Slovenian Business Point. The application for an s.p. to be stricken off is filed in the same way as an application for the registrationof a sole trader in the PRS.
An application for an s.p. to be stricken off from the PRSoff may be filed by the sole trader or a person authorised by them. If the notice is given by a proxy, they must submit a written authorisation from the sole trader. The signature of the principal (i.e. sole trader) must be certified by a notary public or at an administrative unit. If the sole trader has a qualified electronic signature certificate, they may file the application for the striking off their s.p. from home via the SPOT or e-VEM online ‘one-stop shop’ website.
The application should be filed at least three days prior to the striking strike offdate (the date the activities of the sole trader are to be ceased). The trader is struck off on the third day following the submission of the application for striking off, or on any subsequent date proposed by the sole trader.
The decision by AJPES is delivered to you personally at your address of residence and is published on the AJPES online portal (with personal data hidden). All the sole trader’s branch establishments are struck off from the PRS at the same time as the sole trader itself.
You must withdraw from the compulsory social security scheme within eight days after the striking off from the Slovenian Business Register (PRS). You may send the M-2 form together with your application for the striking off from the PRS via the Slovenian Business Point portal or to a SPOT point. In the latter case, you should indicate in the notes section that the withdrawal is on the account of the striking off from the register and state the intended striking off date.
You must submit the closing balance to the Financial Administration of the Republic of Slovenia (FURS) via the eDavki online tax system within 60 days after the striking date, as the income tax due is calculated on this basis.
You should close your business account at the bank.
NOTE: If you have outstanding liabilities as a sole trader on the date of the striking offoff from the PRS, these liabilities pass to you after the striking off and you are liable for them with all your assets.
Application for the striking off an s.p. from the Slovenian Business Register (when submitting the application at a Slovenian Business Point office)
Obligations to the Financial Administration of the Republic of Slovenia (FURS)
As a sole trader you must within 60 days of the day you cease activities file at FURS a personal income tax and self-employment income tax return that reflects the situation as on the day pursuit of the business activity ceases. The return must show the revenue and expenditure created up to the day on which pursuit of the business activity ceases.
The return may only be submitted through the e-Davki online system, which details precisely all the sole trader’s obligations and the procedure for submitting the return.
How do years of service provisions work?
A sole trader shall have their years of service recognised on the basis of the pension and disability insurance contributions they have paid.
On 1 January 2009, the employment service record was abolished. Since that date, records on a person’s years of pensionable service and the contributions they have paid have been kept by the Pension and Disability Insurance Institute (ZPIZ) and FURS.
ZPIZ keeps a record of the insurance period completed and FURS keeps a record of contributions paid. After withdrawing from insurance, it is recommended that you obtain from FURS a certificate of contributions paid, since it will be useful if you need to prove the length of service in the event that a dispute arises at any time in the future regarding the length of service and contributions paid.
For this reason, it is recommended that as a sole trader you also maintain and retain a record of how many contributions you have paid.
It is important that you inform your employees in due course of the termination of their employment (i.e. at least 30 days in advance). If the notice of termination is not delivered, termination is deemed not to have taken place, even if the company has already been closed down. Moreover, if you fail to deliver notice of termination, you will be liable for a fine.
Proof of termination of an employment relationship must also be enclosed with the notice of withdrawal from the compulsory social security scheme. As regards employees, it is important to state the reason for termination so that they will be entitled to unemployment benefits.
Employees are entitled to severance pay. The provisions of the Employment Relationships Act apply to the calculation in the case of dismissal for business reasons. Employees are entitled to severance pay for every year of employment with their last employer or its legal predecessors.
The basis for calculating severance pay is the average gross monthly salary in the last three months, taking the factor of duration of employment into account. For employment lasting between one and ten years, it is equal to one fifth of the salary for each year of employment, for between ten and 20 years it is a quarter of the salary for each year of employment, and for more than 20 years it is one third of the salary for each year of employment.
Tax is only imposed on severance pay on the amounts exceeding ten average monthly salaries in Slovenia. This does not apply to family members made redundant, where the amount of the severance pay is treated as a transfer of funds to private ownership and is fully taxed.
Article 688 of the Companies Act (ZGD-1) stipulates a fine of between EUR 200 and 5.000 (depending on the size of the enterprise) levied on a sole trader for failing to apply for the entry of changes to data or the cessation of business operations in the Slovenian Business Register in accordance with Article 75(1) of the Act.
Opening a new s.p.
A sole trader who has been struck off the PRS may decide at any time to re-register a new business. The conditions for the re-registration of an s.p. are the same as for the first registration.
Cessation of pursuit of a business activity by an s.p. through transfer to another person
For the duration of their life, a sole trader may transfer their s.p. to another natural person who after the transfer enters all legal relations in respect of the s.p., which means that all rights and obligations relating to the s.p. also pass onto them.
A sole trader must conclude an agreement on the s.p. transfer with the transferee in the form of a notarial act. The transferee files an application for registration of the transfer at AJPES. The transferee may retain the same s.p. identification number and, with the latter’s explicit consent, continue to use the name of the transferor’s s.p.
You may also transfer the sole trade (s.p.) to a successor who is not a member of your family without incurring additional taxation. The sole trader’s retirement, disability or death is a necessary precondition for this.
In this way, you can transfer the s.p. to any person or company (d.o.o.) in a tax-neutral way, i.e. without paying income tax. However, even in those cases, and after all other conditions have been met, the transferee may not close the sole trade (s.p.) for at least five years, otherwise the founder of the s.p. must settle their tax liabilities retrospectively.
Sole trader’s personal bankruptcy
The condition for initiating personal bankruptcy of a sole trader (s.p.) or a private individual performing activities is long-term insolvency or more sustained illiquidity.
A debtor who is a sole trader or private individual performing activities is illiquid for a sustained period of time if they are more than two months in arrears with the settlement of one or more liabilities, totalling in excess of 20% of its liabilities, disclosed in the annual report for the last financial year prior to the maturity of those liabilities.