What awaits you if you sell a business share or real estate below market value?

The sale of real estate and business shares in companies in Slovenia is taxed by the seller, a natural person, with capital gains tax. This means that the seller must pay tax on the difference between the purchase and sale value of such capital. The transaction is not taxed if the seller has owned the capital for 15 years or if other conditions prescribed by law for tax exemption exist.

When structuring transactions, Article 99 of the Personal Income Tax Act (ZDoh-2) is often forgotten, which stipulates that in cases where the contract results in a value that does not correspond to the value that could be achieved in free circulation at the time of disposal, the comparable market price of the capital at the time of disposal is considered the value of the capital at the time of disposal.

In practice, this means that FURS can ignore the contract price and determine and use the comparable market value as the sales value, which is often reflected in a significantly higher tax liability of the seller and can even lead to the tax liability being higher than the purchase price received by the seller, or significantly exceeding the profit that would have been generated from the sale.

Practical examples

Due to liquidity needs, the seller has to sell the property quickly (so-called fire sale) and sells it for EUR 350,000, even though the market value is EUR 500,000. In such a case, the FURS may, in accordance with Article 99 of the ZDoh-2, consider EUR 500,000 as the disposal value. Taking into account the assumptions of a purchase value of EUR 300,000, a tax rate of 25%, standardized acquisition and disposal costs of 1%, and real estate transfer tax (DPN) of 2% (which is assessed from EUR 500,000 in both cases), in the case of a disposal value of EUR 350,000, the seller would pay EUR 8,375 in tax, and in the case of EUR 500,000, as much as EUR 45,500. This means that the tax liability would exceed the seller's earnings and the seller would actually make a loss due to the payment of tax.

One of the two partners cannot sell a business share in a limited liability company on the market because the other partner does not give his consent under the partnership agreement, which means that the seller is forced to sell the business share to the other partner at a lower price (the only alternative is to withdraw from the company by filing a lawsuit). The purchase price of the business share was €50,000, the market value is €150,000, the actual selling price is €90,000, the tax rate is 25%, and the standard acquisition and disposal costs are 1%. Under such assumptions, the tax liability in the case of the actual selling price would be €9,650, and in the case of the established comparable market price it would be €24,500. The seller's effective tax rate on the difference between what he paid to acquire the business share and what he received for the share would therefore be as much as 61.25% (and not 25%).

The seller is the 100% owner and director of the company. The seller wants to attract a strategic partner who would contribute significant added value to the company with his know-how, business connections and access to new markets, so he decides to sell him a 10% share of the company at a nominal value of €10,000. Instead of treating such an entry as a mere business decision within the contractually agreed value, the FURS, in accordance with Article 99 of the ZDoh-2, determines that the market value of the 10% share is €80,000 and assesses tax on this basis, even though the seller has not actually made any profit. Assuming a purchase price of €10,000, ownership of 3 years (25% tax rate) and standard costs of 1%, this would mean that the seller has to pay €17,275 in tax, even though he has not earned anything from the sale of the share.

Such legislation disproportionately restricts business autonomy and rational decision-making, distorting market signals and reducing market liquidity. The effect is particularly pronounced in short ownership periods (higher taxation rates) and in forced or quick sales situations, where the gap between contractual and market value is a consequence of real market and legal constraints.

What can you do?

The FURS is generally quite rigid in the procedures for determining capital gains. In practice, taxpayers can more successfully influence the established value of the so-called comparable market price of capital, primarily by submitting appropriate valuations, from which it follows that the comparable market price is lower than that determined by the FURS. There is much less or no room for arguing that, due to legal, contractual or other factual restrictions or due to the purpose of the transaction, a higher price would not be objectively possible to achieve and that the contractually agreed price should be taken into account. In other words, in the procedures, it is usually possible to achieve primarily a reduction in the estimated market value of capital, while it is much more difficult to recognize the actually agreed lower selling price.

For this reason, the current regulation requires special caution and thoughtfulness when structuring and deciding on transactions. It makes sense to structure certain transactions (entry of strategic partners, exit of partners, etc.) differently, and it makes sense to support certain transactions in advance with appropriate evidence of comparable market values, such as valuations, which should substantiate the market value of the capital in a detailed and convincing manner, if this needs to be proven in the procedure.

It should be particularly emphasized that gratuitous transfers of capital are also subject to capital gains tax (Article 94 of the ZDoh-2). In these cases, too, the so-called comparable market value of the capital upon disposal is determined for taxation purposes, which means that the donor may be liable to pay capital gains tax on the difference between the value of the capital upon acquisition and its market value upon disposal, even though he did not receive any payment upon transfer. Avoiding the payment of profit tax in gratuitous legal transactions that would otherwise be subject to taxation is only possible by exercising the deferral of tax liability under the conditions set out in Article 100 of the ZDoh-2. This is possible, for example, when donating capital to a spouse or child, in which case the deferral must be notified to the tax authority in a timely manner. If the deferral is notified in a timely and correct manner, tax is not assessed upon transfer, but the tax treatment is postponed to the moment of the next taxable disposal.

In anticipation of changes

The regulation of Article 99 of the ZDoh-2 is controversial from the perspective of the principle of tax fairness from Article 14 of the Constitution, since it does not take into account the actually generated profits and thus the real increased income power of the transferor in taxation. For this reason, we have filed a revision before the Supreme Court of the Republic of Slovenia following the decision on the admissible revision X DoR 94/2025, in which we claim that the aforementioned provision should be repealed due to unconstitutionality.

In our opinion, there are weighty arguments for unconstitutionality, including comparative law, since the German and Austrian regulations, to which ZDoh-2 refers, do not regulate the taxation of capital gains in this way. At the same time, it is positive that a review procedure is also underway before the Supreme Court of the Republic of Slovenia, which addresses a similar question, namely whether you are obliged to pay capital gains tax even if you donate capital (X DoR 36/2025-6).

Until a decision is made in these matters, careful and thoughtful structuring of transactions and the use of all legal options and procedures to reduce tax risks and liabilities, as highlighted above, remain key.