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On 11 February 2026, the Slovenian National Assembly adopted the new Employee Participation in Profit Sharing Act (ZUDDob-1), which entered into force today, 11 March 2026, and replaces the previous regulation from 2008. The main objective of the new act is clear: with higher limits and more favorable tax treatment, it encourages broader employee participation in profit-sharing. This currently stands at a mere 0.07%, which, according to data from the Financial Administration of the Republic of Slovenia, means in practice only about 8 companies and a good 600 employees annually. The act also brings greater flexibility in designing profit-sharing schemes and introduces a simpler notification procedure.
Legal Basis for Payout and Distribution Criteria
Profit-sharing within a company is primarily regulated by a profit-sharing agreement, which the management, based on a resolution of the general meeting, concludes with employee representatives (a trade union, a works council, or an assembly of workers). If the agreement is not concluded within 45 days from the given initiative, the general meeting may subsidiarily adopt a unilateral resolution on employee profit-sharing, based on which the management prepares a plan for the distribution of profit to employees. Regardless of whether profit-sharing is regulated by an agreement or a resolution, the act requires, for the full utilization of the prescribed benefits, that the ratio between the highest and lowest allocated profit amount among employees must not exceed a ratio of one to eight. In the case of distribution based on a resolution, the act also requires a mandatory distribution in the amount of at least 5% of the net profit in the financial year.
New Payout Schemes and More Favorable Tax Treatment
A novelty of the act is the increase in the maximum share of net profit that companies can distribute among employees. The act sets two upper limits: up to 33% of the net profit (previously 20%) or up to 20% of the company's annual gross payroll (previously 10%) can be distributed for this purpose, whereby only the lower limit is relevant for the maximum allowed payout amount. Companies have three different participation schemes available, namely a cash scheme for cash payouts, a business interest scheme for limited liability companies, and a stock scheme for joint-stock companies. The old mandatory registration of agreements with the ministry has been abolished and replaced by a simpler notification, which the company must submit to the Ministry of the Economy, Tourism and Sport within 15 days after concluding the agreement or adopting the resolution.
ZUDDob-1 brings notable changes in the tax area. Companies may claim a 100% tax allowance for the amount of profit distributed to employees (but at most up to the amount of the tax base), which they can claim in the following financial year. The changes regarding the taxation of employees are even more pronounced; receipts from profit-sharing are not included in the annual personal income tax base and are entirely exempt from the payment of all social security contributions. Taxation is carried out solely at a fixed schedular rate, which amounts to 30% for cash payouts and 25% for the receipt of shares or business interests.
Conditions
The main condition for claiming tax benefits under this act is that the company achieves an appropriate above-average monthly gross salary in the private sector and demonstrates its appropriate growth. To utilize the tax benefits, the company must fulfill one of the alternative options:
I. either demonstrate:
II. or demonstrate:
The act also contains a transitional provision for the financial years 2025 and 2026. During this period, the salary growth condition is satisfied if the company achieves 50% of the relevant sectoral salary growth referred to in point a) ii) or half of the average annual inflation rate referred to in point b) ii).
To claim the benefits, other restrictions also apply. Profit-sharing must apply to all employees under equal conditions, and predominant owners of the company who hold at least a 10% capital share or voting rights in the company are absolutely excluded from the schemes. A spouse or an extramarital partner is also considered a predominant owner. The act, however, explicitly allows profit distribution also to members of the management, procurators, and executive directors, provided they work on the basis of an employment contract and are not entitled to a variable part of the profit-based remuneration on that basis.
For the cash scheme, the special tax treatment can only be applied if the amount is paid to the employee in two equal installments with an interval of at least one year.
Conclusion
For companies, the new regulation with higher limits and broader tax incentives could represent an additional tool for rewarding, motivating, and retaining talent. At the same time, the act requires a certain administrative input and compliance with prescribed conditions from companies. In practice, the condition regarding the growth of the average gross salary might stand out as the central limitation, as companies will have to demonstrate the required salary growth year after year to utilize the more favorable tax treatment. In the future, it will be interesting to observe to what extent companies will regularly fulfill this condition, especially after the expiration of the more favorable transitional conditions regarding salary growth.