Commercial real estate law and rules in Slovenia

1. Parties and Ownership – Who can own real estate and what types of ownership are there?

Parties

Right to private property is a constitutional right guaranteed under Article 33 of the Constitution of the Republic of Slovenia (Ustava Republike Slovenije – URS). Any legal or natural person with full legal capacity can acquire and hold title to real estate in Slovenia as well as other rights in rem. Legal “person” includes companies, associations and other entities having legal standing, units of local and regional government and the Republic of Slovenia.

Under Article 68 of URS foreign citizens may acquire ownership rights to real estate under conditions provided by law or treaty ratified by the Parliament. However, since the accession to the European Community nationals of the European Community can acquire property rights in real estate in Slovenia under the equivalent legal requirements to those applied to Slovenian nationals. Based upon the EU agreements citizens of Norway, Lichtenstein and Iceland acquire property rights in real estate in Slovenia under the equivalent legal requirements to those applicable to Slovenian and EU citizens.

Since April 1st 2006, Swiss nationals can acquire ownership rights to real estate in Slovenia under the condition that they have the right of residence and a place of residence in Slovenia. If real estate is needed for economic activity the right of residence alone is sufficient.

United States of American nationals can acquire property rights to real estate pursuant to the most-favoured-nation clause agreed in the Treaty on trade and navigation between Republic of Serbia and United States of America, 1881 (Pogodba o o trgovini in plovbi med Srbijo in Združenimi državami Amerike, Srbske novine). Therefore, citizens of the United States of America can purchase real estate in Slovenia according to the conditions applicable for EU citizens.

Since 28 June 2006, the date of entry into force of the law on conditions for acquisitions of ownership rights of candidate countries for membership in European Union (Zakon o pogojih za pridobitev lastninske pravice fizičnih in pravnih oseb držav kandidatk za članstvo v Evropski uniji na nepremičninah), natural and legal persons with the citizenship of candidate countries and candidate countries itself may acquire property rights, under the condition of reciprocity.

Ownership

Ownership is the most comprehensive right a person/legal entity can hold in relation to a certain property. The right of ownership is defined as a property right (right in rem) on a particular object, authorising the holder to possess, use, utilize and to dispose with the object. The following type of ownership exist in Slovenia:

  • Joint ownership
  • Co-ownership
  • Condominium ownership (ownership of a single real estate unit)

Co-ownership of real estate is defined as ownership of two or more persons of an undivided object where the share of each owner is determined as part of entirety of the object. Co-ownership may be established by an agreement or by virtue of law. Each of the co-owners freely dispose its share. However, if the object of the co-ownership is real estate, other co-owners have a statutory pre-emptive right. It has to be noted that in the event of conflict between a statutory and contractual pre-emption right, the statutory right shall prevail.

Joint ownership is defined as ownership of undivided object where the shares of joint owners are not determined. In this case title of the property can only be transferred with the consent of all title-owners. The same applies for use of the property. Any of the co-owners or joint owners may at any time, except at an inconvenient time, request a partition of the undivided real property.

According to the Slovenian real estate law a single apartment or an office may be an object of an exclusive ownership right. Each owner of a single real estate unit is necessary also a co-owner of the common parts and areas of the building in condominium ownership and land around the building necessary for the use of the single real estate unit. Each single real estate unit is registered in the land register separately. If a building in condominium ownership is divided into eight or more single real estate units and has two or more owners, it is obligatory for condominium owners to appoint a property manager and establish an obligatory reserve fund. The owners may freely dispose their ownership of single units together with their corresponding shares of the common parts and areas. The co-ownership of common parts and areas and exclusive ownership right in regard to a single real estate unit cannot be subject to separate transfer.

2. Interests – What types of interest in real estate are sold?

Slovenian law recognises several forms of interest in real estate. These include:

  1. Rights in rem:
    • Ownership
    • Mortgage
    • Land debt
    • Easement
    • Right of encumbrance
    • Building right 
  2. Right in personam on real estate are, inter alia, the right to lease or rent, a contractual preemption right, and right to use public assets.

Right in personam on real estate are created and transferred on a basis of a binding agreement, whereby rights in rem have to be registered in the land register in order to come into existence (with exception when acquiring ownership by virtue of law (e.g. by virtue of adverse possession) or by virtue of the competent court decision.

Pursuant to the Slovenian real estate law principle of the unity of title to land and building (superficies solo cedit) applies. Discontinuance of this fundamental principle of real property is the existence of the building right. A holder of a building right is an owner of a building but not of a land.

Much commercial property is sold by way of a share sale rather than an asset sale. In general such sales are used to avoid real estate transfer tax and the risk of termination of some of occupational leases by tenants after a transfer.

3. Employees – What employment issues affect real estate acquisitions?

Typical employment issue under Slovenian law in connection to real estate transactions is ex lege transfer of rights and duties arising from employment relationships from the seller (employer transferor) to the buyer (employer transferee) in event of a transfer of undertaking. When assets of ta undertaking, irrespective of this being in whole or in part of, are sold (Asset deal) the buyer will become the new employer of the employees. Further implications are as follows:

  • All contractual as other rights and obligations of employees arising from the employment relationship with the seller that existed on the day of transfer shall be transferred to the buyer as the new employer.
  • The new employer (buyer) is obliged to respect the Collective agreements which were in use at the previous employer (seller). This obligation is prescribed for the time period of one year, unless a new collective agreement is accepted in this period, or in event the collective agreement ceases in this time.
  • In regard to the deterioration of the rights of the employee and working conditions: Should these result to termination of the employment agreement by the employee, the employee is treated as his contract would be terminated due to business reasons by the employer. The termination notice, severance fee and all other rights relating to length of work, shall in such case include the time spent with both Employers.
  • Both, previous and past employers are jointly responsible for the claims arising before the date of transfer as well as for the claims arising from the in previous point described termination.
  • The transferor employer, who is the majority owner of the company onto which the business has transferred remains jointly responsible for the claims of the employees arising from the possible termination of employment agreement due to insolvency proceedings, if this commences in two years from date of transfer up to amount that would have to be paid out to the employees by the Seller in event he would cancel all employment contracts.
  • The employees` elected representatives retain their function, if the conditions for their nomination in accordance with the collective agreement exist at the new employer (buyer).
  • Both employers (seller & buyer) must inform the trade union of the expected change at least 30 days prior to the transfer of the intended transfer. Furthermore a consultation is with the trade union representatives at least 15 days prior to the transfer is obligatory. Provided no trade union is recognized with the seller, information should be given in a regular manner in deadlines and of terms as described previously.
  • If the employee refuses to accept the proposed transfer to new employer (buyer) and actual exercise of work, the new employer (buyer) has the right to terminate the contract due to extraordinary reasons.

In the event of transfer of business enterprise through acquisition of shares of the company (hereinafter referred to as Share deal) the “employer” remains unchanged and as consequence the rights and duties of “employees” remain unchanged.

4. Procedure – What are the steps in a sale and purchase transaction?

Steps in a sale and purchase transaction, in general:

  • legal due diligence
  • settlement of purchase price and other purchase conditions
  • composing of the contract (it is important to include an »registry permission«)
  • getting permits for purchase (e.g. in case of a pre-emptive right), if needed and payment of tax
  • notary verification of the seller’s signature
  • registration of new owner in the land register

Often parties to sale and agreement use services of real estate brokers to establish first contact. Real estate broker will also make first verification of respective real estate’s status and assistance parties with negotiations. Once the heads of terms have been finalised, they are usually sent to the parties’ lawyers. The buyer’s lawyers will undertake due diligence of all legal documents relating to the property. If the purchase is made with borrowed finance, the lender of the finance may instruct its own lawyers to carry out due diligence on its behalf and negotiate loan and security documentation.

Usually seller will arrange for the property to be valued by a court appointed evaluator for tax purposes. The purchase price is freely negotiable.

If the transfer of the respective real estate is object of a pre-emptive right, the seller has to offer the respective property to the holder of the pre-emptive right prior to concluding a sale and purchase agreement with the third party. In some cases it is necessary for the contract to be in a form of a notarial deed. Purchase of the agricultural property is object to some special provisions and restrictions.

Prior to all sale and purchase terms/conditions have been agreed the parties may first enter into a sale and purchase pre-agreement, undertaking thereby the obligation to enter into a final sale and purchase agreement once the ascertained issues have been cleared/financing has been approved. In such case, it is usual for the buyer to provide a 5 – 10% deposit to the seller as a sign that the buyer is serious about the transaction and as “security” that the buyer shall enter into the final sale and purchase agreement

All agreements for transfer or establishment of ownership of real estate or property rights of real estate are usually prepared by the lawyers or by notary and have to be executed in writing. In order to register real estate in the land register the seller’s signature on the land registry permission (either included in the contract or attached to it as a separate document) needs to be notarised. The notary may verify the seller’s signature only after he obtains the proof that the real estate transfer tax has been paid and if the certificate on use of the respective real estate does not include restrictions with respect to the transfer.

Following conclusion of the transfer agreement, registration of the transfer of real estate at the Land Registry is needed. The request for registration of title is to be filed immediately after the execution of the underlying sale and purchase agreement. Title is transferred to the buyer upon its registration in the land register. Alternatively, the buyer may decide to request first the pre-registration of title (conditional registration of title) – this allows the buyer to “reserve” a priority order in the Land Registry and once the purchase price is paid and the request for registration filed, the registration shall occur under the reserved order.

5. Contract terms – What provisions does a real estate contract contain and what is implied by law?

Provisions of the contract

An agreement for the sale and purchase of land must be in writing. The signature of the party transferring rights in rem has to notarise its signature on the contract. 

Besides the essential terms of the sale and purchase agreement, the document should also mention the following, namely:

  • the title document under which the seller acquired ownership,
  • all liabilities burdening the property (mortgages, easements, pre-emptive rights, leases),
  • the conditions of payment of the purchase price,
  • a date of a handover/takeover of the property,
  • a provision on which of the parties will pay the real estate transfer tax,
  • the conditions on the basis of which any party will be entitled to withdraw from the agreement and
  • if the property being sold is under construction or is an already constructed building, the agreement shall also regulate the transfer of permits and liabilities towards construction contractors,
  • a seller’s warranty that it is a sole unrestricted owner of the property and that the real estate is and will remain in the (legal and actual) condition described in the agreements until registration of the transfer’s title in the Land Registry.

Terms implied by law

Some of the most significant issues to be considered are:

  • The seller is liable for material and legal defects of the property – unless such defects were known or should have been known to the buyer. In case defects are ascertained, the buyer has a statutory right to seek remedy and damages. The right to seek remedy and damages is subject to specific deadlines. However, such liability can be contractually waived, unless the seller was familiar with a certain defect and did not disclose the relevant information to the buyer;
  • The buyer is obliged in the usual way to examine or inspect the property as soon as possible in normal course of things, and manifest error inform the seller;
  • The risk of wrecking is transferred onto buyer with transfer of the possession of the property or when he comes in delay, if parties have not agreed otherwise;
  • The acquisition of title requires registration of title for the benefit of the buyer at the Land registry.

With respect to land register, following principals have to be considered:

Registration of ownership

Ownership title passes upon execution of the decision of the Land Registry. The decision of the Land Registry has legal force as of the date upon which the application was filed to make an entry.

The principle of publicity

Principle of publicity, presumes that the information registered in the Land Register is known to everybody by the next day (from the beginning of the official hours of the Land register) after the proposal for the registration has been filled. Rights and legal facts that are not entered into Land register are deemed not to exist unless proven otherwise.

The principle of reliability

Principle of reliability, with regard to the Slovenian Land register, means that any person acting in good faith in relation to legal transaction and relying on the information entered in the Land register regarding rights shall not suffer any detrimental consequences for doing so.

Principle of rank or priority

Applications for registration with the Land register are dealt in the order in which they are received.

Registration is allowed only against the person, who is registered as the owner of the right concerned.

6. Due Diligence – What investigations does the buyer normally make?

Pre-exchange of agreements

Usually the buyer will perform a legal and technical due diligence; and if the seller is a legal entity, also a full corporate, commercial, tax and financial due diligence. The usual procedure is for the buyer’s lawyers to prepare a list of documentation, which they would like to review and to provide such list to the seller’s lawyers for processing and delivery of the requested documents.

It is recommended that the buyer complete legal due diligence of the targeted real estate verifying the following facts:

  • The seller holds a free and clear, valid and marketable ownership title, and is registered as the owner of the real estate in the land register. It is of utmost importance, in order to avoid any risk of rescinding the transaction, to verify that the seller and his predecessors have been valid owners of the respective real estate (that is: registered as owners in the Land register).
  • There are no mortgages, encumbrances and other liens registered on the targeted real estate. Once registered, liens and encumbrances can be enforced against the new owner of the real estate if the transaction has been accomplished after the registration of the liens and encumbrances in the Land register;
  • There are no registered lease agreements, no court restitutions, enterprise pledges, limited property rights established in favour of third parties, no injunctions or claims and complaints before the court;
  • The data from the Land register and cadastral Registry should match.

Firstly, title to the property will be investigated. The buyer’s lawyers will consider the entries on the Land Register and, where relevant, historic title documents. Based upon the extract from the Land Register following information shall be obtained:

  • ownership of the property;
  • details of the registered other rights in rem (mortgages Land debt, easement, right of encumbrance and building right)
  • rights in personam that may be registered in the Land register (e.g. lease, pre-emptive right established on the basis of written agreement)
  • legal facts (e.g. court proceedings in regard to the ownership of the real estate, notice of the successive order for the acquisition of ownership right)

Secondly, documents regarding municipal Land use plan and zoning plans, environmental matters, financial encumbrance’s etc. need to be considered carefully to ensure they are not contrary to the buyer’s intentions for the property. Especially, it needs to be check whether statutory pre-emptive right of municipality, respectively government or co-owners exist. If this is the case, the seller has to offer the respective property to the holder of the pre-emptive right prior to concluding a sale and purchase agreement with the third party.

As up to today not all denationalization proceeding in Slovenia have been completed, it its advisable gain information on denationalization proceeding in progress in regard to the respective real estate. If the competent court decides that the respective real property shall be returned to the rightful claimant in natura, all later legal transactions in regard to the transfers of the ownership of the respective real estate are considered to be null and void.

Where the seller is a company, the buyer’s lawyers will also conduct corporate searches of the seller at the Companies Register to ascertain whether or not the company is registered or declared insolvent and/or bankrupt and therefore able to dispose of its assets freely, the current name and registered office of the company and who is entitled to act on behalf of the company.

Reporting to the client

Before exchange of agreements the buyer’s lawyers usually report their due diligence findings to their client, raising any matter of particular importance or concern.

Their findings are often indirectly included in the sale and purchase agreement – either an issue has been identified that the seller has to remedy before payment of the purchase price, or the seller is asked to provide a particular liability with reference to a certain finding.

7. Registration and Notarisation of real estate – What are the basic requirements?

All property rights (rights in rem) over real estate (and some obligations, e.g. pre-emption right, lease, prohibition of disposal and encumbrance, etc.) are registered at the Land Registry. The registration of property rights (rights in rem) is material for acquisition thereof. The Land Registry consists of (i) the main book, which includes the information about the property, persons having rights over such property and any encumbrance over such property, and (ii) collection of documents, which include documents that were the basis for registration. Data included in the main book are publicly available for inspections, whereby the documents are available for inspection only if the legitimate interest is proven.

Basic requirements of registration include:

  • a contract in the form of notarial deed or a contract on which the signature of the transferor has been certified by a notary public (in case of a contractual acquisition of property) and
  • an registration permission (Slovenian “intabulacijska klavzula”) which is a precise and unconditional statement of the transferor, allowing the registration of an acquirer in the Land register.

In the event of acquisition of ownership and if the transferor is obliged to pay Real Property Transaction Tax or Value Added Tax the certificate on payment of such tax has to be enclosed to the registration permission.

There are some other specific requirements, e.g.: for the acquisition of agricultural land.

In case right in rem is obtained by a court ruling or by the virtue of law no registration permission is needed for registration as the right in rem is acquired with the finality of the decision, respectively when all statutory conditions are fulfilled.

Registrations in the Land registry is carried out:

  • on a basis of a request,
  • ex officio in certain cases provided by law

Registration request and all other writings (e.g. oppositions, appeals) in the land register proceeding shall be submitted electronically via web application “eZK” available at internet website of the Slovenian Supreme Court. Requests must be submitted only by a notary public or other authorized person (e.g. attorneys at law, real estate agency, state attorney’s office). In the event that request is filed by attorneys at law, real estate agency the original documents on the basis of which the request for registrations is submitted, must be handed over to the notary public, who converts them into electronic form, submits them to the court and holds them in custody until the finality of the court decision.

The documents must be filed in the official language. Slovenian is the official language. Additionally, Italian and Hungarian are official languages, where such minorities reside.

Other forms of registration with the Land Registry are:

  • pre-registration (Slovenian “predznamba”; in order to have registration effect, pre-registration has to be subsequently justified). In order to ensure priority rank, a (conditional) pre-registration is possible for a certain period of time (usually two months). Such registrations are, inter alia, allowed on the basis of a contract without verification of seller’s signature by a notary public, or a legal decision, which is not final. If within due time signature of a seller is verified by a notary public, or proof of finality of the legal decision is provided to the Land register, the registration becomes unconditional with the same priority rank.
  • remark (Slovenian “zaznamba”; has a public purpose of evidencing some circumstances in connection with the real estate or the owner of the real estate such as registration of a dispute, registration of insolvency, registration of personal circumstances).

8. Permits – What permits are required for the use and occupation of real estate and are they personal?

Building permit: Construction of the new or substitute building, reconstruction, or removal of the building can be carried out only after the finality of the building permit. Building permit determines the start of the construction works and conditions of the construction that have to be met. Application to obtain a building permit must be filed with the local construction authority, which has responsibility for controlling the use and development of land in its area. Local construction authorities have statutory time periods within which a decision must be made as to whether a building permit should be issued. The local construction authorities have to issue a building permit within period of one month, respectively two months if special declaratory proceeding of the issue of the building permit has to be carried out. Building permit is issued on the basis of the approved project documentation and other documents that have to be submitted by the law. Project documentation has to be in accordance with the certificate on intended use. Together with the request for a building permit the investor has to provide a proof of his right to build on the individual property, if his right to do so is not already recorded in the Land Register. The certificate on intended use contains information on disposal of the land, planning and other conditions for the use of the land as set out by the Municipal spatial planning act.

The validity of the building permit ceases, if the investor fails to commence the work:

  • within three years after the permit becomes final in case of a complex constructions;
  • within two years after the permit becomes final in case of a less complex constructions;
  • within one year after the permit becomes final in case of a simple constructions or change in intended use of the real estate.

Validity of the building permit can be extended for maximum additional two years. Building permit is not required for simple construction. Simple construction is legally defined, i.e. where special static technical testing of the building is not needed. It is not intended as a living facility and has no environmental impacts (e.g. auxiliary or provisional building).

Use permit: The building may be used only after the use or operating permit is issued by the competent local construction authority that has issued the building permit. The local construction authority will issue the use permit after the technical inspection of the building. The investor has to file an application for the use permit within eight days after the completion of the construction work. Use permit is not required for the use of simple constructions.

The Administrative Fees Act (Zakon o upravnih taksah, Official gazette of the Republic of Slovenia, No. 16/2010) defines a building and use permit fees, which are generally calculated based on the value of the investment. Building permit fee of a building of an estimate value of EUR 13,000 is approximately EUR 54 and for a building of an estimate, value of EUR 420,000 the building fee is approximately EUR 724. Additionally, fees are paid for public utility infrastructure and official technical testing of the building. Young families are exempt from duty to pay fees for a building permit. Expenses for the preparation of the project documentation are also considered significant.

Please note that the basic guidelines of the spatial arrangements, organisation of space, usage, architectural, landscape and design conditions of the construction, land subdivision and similar are determined by different levels of Spatial Acts.

9. Insurance and Risk – What insurance will the parties effect and when does the insurance risk pass at the time of sale?

Transfer of the ownership and the risk to the purchaser is effectuated by the transfer of the agreed subject (registration in Land register shall be deemed as a transfer of real estate).

Before a sale is completed, insurance is generally the responsibility of the owner of the property. However, where such property is the subject of a lease, the terms of the lease can prescribe which party has responsibility to insure.

The risks, which are covered by insurance, depend on the respective policy. According to the Code of Obligations (Obligacijski zakonik, Official Gazette of the Republic of Slovenia, No. 97/2007 et al., hereinafter “OZ”) the rights and obligations of the insurer are passed on the buyer, by operation of law.

10. Environmental – What are the common environmental issues?

Traditionally, the primary environmental consideration has been potential soil and groundwater contamination because of current and former uses. In recent years, the consideration has been broadened to include air, nature life and mineral resources research.

There is a statutory obligation to remedy contamination and to undertake measures to prevent harm to occur to people and nature. In principle, legal responsibility follows the “polluter pays” principle (i.e. the person who spilled, released or discharged the offending substance will normally be liable). In case the owner of a property fails to comply with this statutory obligation, the local or regional authorities may sequestrate the property in order to comply with the respective obligations. Slovenian act regarding protection of the environment (Zakon o varstvu okolja) does not include any special provisions which would protect new owner in cases when former owner contaminated environment, with an exception of a general provision, which states that Republic Slovenia is responsible for abolition of environmental burden consequences and covers costs of that abolition, if costs cannot be loaded to certain polluters or consequences cannot be eliminated in any other possibility.

The exception in national law is the provision arising from the European Directive 2004/35/ec (environmental liability Directive). It states that every person is responsible for preventing an imminent threat of damage to the environment and for the prevention and remedying of environmental damage in connection with its activities, regardless of fault. However, this provision is not used for contamination that occurred before 30 April 2007. Further, the statute of limitation applies in cases where more than 30 years has already passed since the contamination.

Concerning potential soil and groundwater contamination as a result of current and former uses, for every functioning of device which can contaminate air, soil or water, special environmental permit is needed. Every intervention that could permanently or temporarily effected on water regime or water status, a document “water approval” is required. These approvals are often obligatory requirement for obtaining a building permit.

The Energy act (Energetski zakon), has introduced an important novelty- introduction of energy performance certification in accordance with provisions of Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010. Everyone who rents or sells a building should possess energy performance certification. The cost of such certification is determined in a special procedure, but in average the price for a house would be from EUR 200 to EUR 500 while for multiple dwelling cost would arise to around EUR 3.000,00.

In regard to due diligence review, there are no special appointments of environment consultants, which will carry out a site visit and if necessary, undertake an intrusive investigation. Nevertheless, CMS office in Slovenia has experience of environmental due diligence reports in cooperation with environmental experts for clients interested in purchasing companies that have allegedly caused environmental damage in the past. It is also established and standard practice that important environmental issues are put in the “red flag” section, especially in regard towards soil contamination, which is most common in Slovenia

Strength of civil society initiative is very high, therefore Slovenian courts have already decided that many projects cannot be developed at all because of endangered animal species’ present on the certain area and of course because of emissions which has negative consequences for human health. It would be appropriately that potential investor explicitly orders due diligence performer to appoint all environmental issues, although that is already standard practice.

11. Pricing/Valuation – What sets the price/valuation of real estate?

The Slovenian law does not provide for a fix method of assessing the price/value of real estate. The evaluators use the internationally accepted methods to assess the value of the real estate such as the market value, liquidation value and replacement value.

Two systems of valuation of the real estates are asserted in the expert public, namely the administrative system and the market system.

The administrative system regulates the methods of real estate valuation applicable for administrative purposes (e.g. denationalization, tax procedures). In this case the value of real estate (the so-called generalised average market value) is determined by the legally established and statistically standardised equations, which take or rather should take into account all the factors of individual appraisals.

In the market system the factors and their influences on the value of the real estate are assessed on the basis of the real estate market analysis. The methods of their assessing are not determined, however the standards are established. The system of market price evaluation is based on three approaches:

  • cost approach in which the costs necessary for the construction of the same (reproduction value) or similar (replacement value) building considering physical deterioration, functional and economic superannuation are assessed;
  • income approach in which the incomes and expenses related to the operation of the real estate are assessed and thereon the current value of the future cash flow is assessed;
  • comparative approach in which the executed transactions are analysed and applied on the specific real estate.

12. Taxes and Costs – What are they and who pays them?

The main taxes on acquisition are the real estate transfer tax (RETT) and value added tax (VAT).

VAT at the rate of 22% is levied on supplies of new buildings (within two years of first use) and building land. Provided that the transactions takes place between two VAT payers, pending certain administrative requirements, VAT may be levied to otherwise VAT exempt supplies. A reduced VAT rate at 9.5% is available for supplies of apartments, residential and other buildings intended for permanent stay. The seller is ultimately liable for tax claims.

If transfer of real estate is not subject to VAT it is taxed with RETT at the flat rate of 2% of the real estate purchase price or the value of the property. The seller is ultimately liable for taxation; however the contracting parties may agree that the tax shall be paid by the buyer. Generally, a tax liability is created at the moment the contract is concluded. The application for taxation must be submitted to the competent tax authority within 15 days after the conclusion of the contract, and the tax needs to be paid within 30 days from the date at which the taxable party received the notice concerning the tax assessment. Tax paid is a precondition to registering the change of ownership with the Land Registry.

The Real Estate Transfer Tax Act (Zakon o davku na promet nepremičnin, Official Gazette of the Republic of Slovenia, No. 117/2006, hereinafter “ZDNP-2”) defines exceptions from the land transfer tax.

If real estate has been acquired through a share purchase, there will be no VAT/RETT on the transfer of shares.

Under the Inheritance and Gift Taxation Act (Zakon o davku na dediščine in darila, Official Gazette of the Republic of Slovenia, No. 117/2006, hereinafter “ZDDD”) several gifts and heritage are exempt from the taxation: gifts among successors of the first succession rank and gifts or heritage to legal entities which conduct activities of religious, philanthropic, charitable, health, social-security, educational, research and cultural nature if the gift or heritage is intended for the use connected to the aforementioned activities.

It is common that the seller and the buyer have each appointed its own broker, to whom they will pay commission. The commission payable to real estate brokers is subject to the Real Estate Agencies Act (Zakon o nepremičninskem posredovanju, Official Gazette of the Republic of Slovenia, No. 49/2011, hereinafter “ZNPosr”). Pursuant to the aforementioned law, the broker may charge a commission fee of up to 4% of the purchase price unless the transaction value of the real estate is less than EUR 10,000.

Generally, each party pays its own expenses. The buyer will usually be responsible for the payment of the Land Registry fees associated with registration of the transfer.