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GOOD TO KNOW
CROATIA:
Changes in the context of the EU Presidency
CONTENT:
Summary
New Personal Income Tax Act 2020
New Personal Income Tax Rulebook
New Value Added Tax Act
New Value Added Tax Rulebook
New Corporate Income Tax Act
New Corporate Income Tax Rulebook
Announced Changes of other Tax Regulations
Summary
NEW PERSONAL INCOME TAX ACT AND NEW CORPORATE INCOME TAX ACT AND
RULEBOOK RULEBOOK
– Amendments to PIT Rulebook – Increase of revenue threshold for application
– Reduction of PIT obligation for young people of lower rate of 12 per cent
– Other changes – Changes in tax procedures in the event of
liquidation
NEW VALUE ADDED TAX ACT AND RULEBOOK – Exit taxation and hybrid mismatch provisions
– Other changes
– Changes of tax rates and thresholds
– Changes in taxation of cross-border tran- OTHER TAX CHANGES
sactions
– Other changes – Amendments to the General Tax Act
– Amendments to the Fiscalisation Act
– Amendments to the Act on Administrative
Cooperation in the Area of Taxes
New Personal Income Tax Act 2020
REDUCTION OF INCOME TAX FOR YOUNG – the taxpayer proves that the costs of
PEOPLE initiating certain actions exceed the amount
of receivables, or if he proves that he has
– Reduction of PIT liability by 100 per cent for initiated certain actions for the purpose of
individuals up to the age of 25, and by 50 per collecting the receivables, establishing that
cent for individuals between 26 and 30 years he is ultimately unable to collect the amount
of age; of the receivables written off;
– Basis for the reduction is the year of birth – write-off of receivables from unrelated
and not the date; persons, which does not exceed HRK
– The mentioned reduction applies only to the 5,000.00 in each tax period in case of
first tax bracket (up to HRK 30.000) which is receivables form other taxpayers and HRK
taxed at a rate of 24 per cent; 200 per individual person in the case of
– Tax relief for young people will be made private individuals.
through the annual tax return (refunds in
mid-2021). NON-TAXABLE PREMIUMS OF ADDITIONAL
AND SUPPLEMENTARY HEALTH INSURANCE
INCREASE IN PERSONAL ALLOWANCE
Allows employers to pay non-taxable additional
Increase of personal allowance from the current and supplementary health insurance to emplo-
HKR 3.800 to HKR 4.000. yees up to HRK 2.500 annually.
WRITE-OFF OF RECEIVABLES PERSONAL INCOME TAX CALCULATION FOR
STUDENTS
Equal tax treatment of write-offs of receivables for
taxpayers taxed as self-employment and for CIT A provision is introduced that implies the
taxpayers. obligation to calculate income tax (24 per cent)
It is not considered as taxable receipt for payments to students when these exceed the
in the following cases: non-taxable amount of receipts (HRK 15,000) and
– write-offs from an unrelated person in the amount of annual basic personal allowance
accordance with special regulation (consu- (HRK 45,600).
mer bankruptcy or extraordinary adminis-
tration proceedings in companies of
systemic importance);
2
LUMP-SUM TAXATION DONATION
– The Tax Authorities may determine, on the Scope of receipts that are not considered as
basis of tax audit and the data collected, taxable income is expanding. Donations from
that the taxpayer has received receipts legal persons and private individuals collected in
above the threshold prescribed for entering humanitarian and public actions are considered
the VAT system; non-taxable receipts.
– In accordance with above mentioned, the
taxpayer cannot pay income tax on a lump- DATA INSIGHT - EPOREZNA
sum basis.
Access to information relating to non-taxable
In that case, the Tax Authorities would issue a tax receipts already paid out to a person/employee.
ruling stating the obligation to pay PIT in Obligation to collect statements of received non-
accordance with the regulation prescribed for taxable payments will be terminated.
self-employment activities.
FORMER EMPLOYEES´SALARY CALCULATION
Employers are able to use personal allowance
when paying salary for the last month of work for
former employees if they have access to the tax
card.
New Personal Income Tax Rulebook
NEW NON-TAXABLE RECEIPTS AND for use in restaurant and catering or at the super-
INCREASED DAILY ALLOWANCE market.
EMPLOYEE ACCOMMODATION COSTS
Domestic daily allownaces – HRK 200 instead of
HRK 170.
Non-taxable on the basis of authentic document-
tation to the extent of actual accommodation
REMUNERATION FOR COST OF VACATION OF
cost incurred.
EMPLOYEES
The employer can pay the non-taxable
accommodation costs directly to the employee’s
Remuneration for costs of tourism and other
account, with a mandatory retention of a copy of
services related to employee’s vacation is deter-
the documentation.
mined in an amount of HRK 2.500,00 per year.
Total amount indicated in the contract
The Ministry of Tourism will define how the
or invoice is considered as accommodation costs
remuneration for vacation will be used.
(costs of telephone and internet, utilities, etc. are
generally not included).
LUMP-SUM REMUNERATION FOR COST OF
MEALS FOR EMPLOYEES COMPENSATION FOR COSTS OF REGULAR
CHILDCARE FOR THE EMPLOYEE’S CHILDREN
Lump-sum payment for cost of meals for
employees is determined in amount of HRK Paid to the employee’s account based on authen-
5.000,00 per employee per year. Remuneration tic documentation to the extent of actual cost
can be made at any time and any amount, up to incurred. Regular childcare for employee’s pre-
HRK 5.000,00 per year to the employee’s account school (kindergarten) children.
(compensation can also be paid in instalments). Covers only regular programs (does
not cover additional programs that are charged
COST OF MEALS FOR EMPLOYEES separately).
The employee is required to provide a
The Up to HRK 12.000,00 per year based on written statement that no one else has already
actual costs. The costs must be invoiced to the used such compensation and a copy of the
employer and paid directly by the employer. invoice. Employee is obliged to inform the
Provided it is a continuous food service. Allowed employer in case of change in the cost.
3CRITERIA ELEMENTS FOR DETERMINING OTHER CHANGES
CHARACTERISTICS OF EMPLOYMENT
– An employer who has an insight into a former
If the Tax Authorities determines that a particular employee’s tax card is allowed to use per-
job has the characteristics of employment, the sonal allowance in determining the PIT
procedure for calculating taxes and contributions advance, when paying a monthly salary to a
prescribed for employment will be carried out. former employee;
The employment characteristics are – An exception to the method of payment of
determined based on the fulfilment of criteria income receipts has been introduced –
elements (not necessarily all of them): payments of receipts up to HRK 5.000,00
– Criteria for behavioral control includes per account to self-employed individuals can
elements that reveal whether the employer be made in cash;
has the right to direct and control what the – If the taxpayer in the same period for the
employee does and how he or she performs same real estate generated property income
the job; on the basis of a lease and by leasing
– Criteria for financial control includes apartments, rooms and beds to tourists and
elements that reveal whether the employer organizing campsites, the tax is determined
has the right to direct or control the financial on a lump-sum basis and the taxpayer is
and business aspects of the employee’s obliged to pay the tax on both basis;
work; – It is specified in more detail which
– Criteria parties’ relations includes elements conditions have to be fulfilled in order that
that reveal type of these relationships. the receipts collected in humanitarian
actions are not considered taxable.
In addition, it is allowed to prove the character- Donations for which a personal allowance of
istics of employment by other criteria, which in 2 per cent of the taxpayer’s self-employed
particular situation may represent a typical income may be increased can include
feature of employment. donations to individuals for health purposes.
If the characteristics of employment Change of deadline for submission of JOPPD
are determined, the Tax Authorities will issue a form for non-taxable payments.
tax resolution by which they will determine the
amount of remuneration paid to the employee for
a particular job along with liabilities for taxes and
contributions.
New Value Added Tax Act
STANDARD RATE OF 25 PER CENT REMAINS, Applicable regardless of institutional from =
REDUCED RATE OF 13 PER CENT equal treatment of taxation of medical care
services and services provided by dental
Aplicable to: Preparation and serving of meals – technicians → adjustment of the deduction of
restaurant and catering services. input VAT for property that will be used for
exempted supplies.
INCREASE OF THRESHOLD FOR VAT CASH
ACCOUNTING CORRECTION OF TAX BASE
Threshold increased to HRK 7.500.000 (instead When buyers have no establishment or VAT
of the previous HRK 3.000.000) – approval of the number in Croatia, a statement should be
VAT Committee (EK) necessary. collected from such buyers that they have not
claimed a VAT refund.
EXEMPTION FROM VAT FOR CERTAIN
ACTIVITIES OF PUBLIC INTEREST OCCASIONAL INTERNATIONAL ROAD
TRANSPORT
Harmonization of the VAT exemption application
for for certain activities of public interest when The tax payer performing occasional inter
these are performed by taxpayers without national road passenger transport is obliged to
authorization of public bodies.
4file the Application form for international trans- the transport (i.e. exempted supply) will be
port before entering the Republic of Croatia and considered to have been made by the first
is obliged to have it in writing in vehicle (mis- supplier to the intermediary (so called first
demeanor provisions are introduced as an ac- customer). Exceptionally, if the intermediary
tions for violation of these obligations). has notified supplier on its’ VAT ID number
issued by the Member State from which the
IMPLEMENTATION OF COUNCIL DIRECTIVE goods are dispatched or transported, he is
(EU) 2018/1910 considered to perform the zero-rated intra-
Community supply;
In order to implement the EU VAT legislation in – Obtaining and validating the customer’s VAT
the national VAT legislation and to further ID number as well as submitting EU sales list
simplify and relieve business of taxpayers, the with accurate information will be a condition
following rules have been implemented: for the application of the zero VAT rate. Also,
– Simplification of rules for movement of own if the taxpayer (supplier) omits to submit EC
goods (which form part of a taxpayer's sales list or does not provide accurate
business assets) to another Member State in a information in the submitted EC sales list,
way that such transfer will not be considered the exemption for intra-EU supplies will not
as a supply of goods for consideration; apply, unless he can justify his omission in
– Chain transaction – Under the new rules, in accordance with the requirements of the Tax
case where the intermediary also partici- Authorities.
pates in the supply chain, the supply with
New Value Added Tax Rulebook
EU REGULATIONS 2018/1912 ZP FORM
Council Implementing Regulation amending Provision defining that the supplied services which
Implementing Regulation (EU) no. 282/2011 are VAT exempt in the Member State where the
regarding certain exemptions for intra-commu- place of taxation is should not be reported in ZP.
nity transactions. More detailed definition of certain terms,
modification of certain forms (ZP, P-PDV i PDV-P).
VAT “QUICK FIXES”
LIQUIDATION MASS
Quick fixes rules have come into force. In this
section, we emphasize omission of provisions Tax treatment of the liquidation mass is now the
concerning the supporting documents in the case same as the treatment of the bankruptcy mass
of delivery of goods to another Member State. (considered as a universal legal successor).
5 New Corporate Income Tax Act
INCREASE OF THE REVENUE THRESHOLD 30 days after the end of the tax period. A tax
return relating to the period from the commence-
For revenue up to HRK 7.500.000 tax is payable ment up until the completion of the liquidation
at the rate of 12 per cent. For revenue above HRK shall be filed within 8 days of the end of the tax
7.500.000 tax is payable at the rate of 18 per period.
cent.
IMPLEMENTATION OF DIRECTIVE 2016/1164
THRESHOLD FOR ESTABLISHING CIT BASE ON (“ATAD”) AND DIRECTIVE 2017/952
A CASH PRINCIPLE
The aim is to make EU taxation more fair and to
The revenue threshold for determining the tax prevent harmful tax practices.
base on a cash basis has increased from HRK
3.000.000 to HRK 7.500.000. EXIT TAXATION
LUMP-SUM TAX FOR NON-PROFIT Possibility to tax capital gain at the time of:
ORGANISATIONS – transfer of assets from headquarters to
permanent establishment and vice versa;
Non-profit organizations may pay CIT on a lump- – transfer of residence; or
sum basis if they generate less than 7.500.000 – transfer of permanent establishment where-
HRK of income from their economic activity in the in the right to tax those assets in the
previous tax period.
Republic of Croatia ceases.
SELF-EMPLOYED INDIVIDUALS AS CIT
Not applicable if:
TAXPAYERS
– The assets are transferred temporarily;
– If the transfer is made for the purpose of
The revenue threshold is raised from HRK
3.000.000 to HRK 7.500.000 – Self-employed meeting prudential capital requirements, for
individuals are considered CIT payers and are the purpose of liquidity management or in
obliged to keep accounting in accordance with the case of securities financing transactions
financial reporting standards. or collateralized assets.
ANNUAL LUMP-SUM TAX HYBRID MISMATCHES
The annual lump-sum tax, or the amount of the The Hybrid mismatch implies double deduction
advance payment, is determined on the basis of or deduction without inclusion. Applicable only if
reports submitted by the taxpayer and the it arises between related parties, between a
taxpayer is obliged to pay the difference as of the taxpayer and a related company, between com-
date of submission of the report. pany headquarters and permanent establish-
ment, between two or more permanent establish-
TAX DEDUCTIBLE COSTS OF CLAIMS WRITE- ment of the same entity or under a structured
OFF arrangement.
In the case of hybrid mismatches, the
The tax deductible costs of write-offs are no right to deduct is denied or is required that the
longer limited to debtors that are CIT taxpayers. taxpayer includes certain revenues in the tax
base.
DONATION COSTS Hybrid entities – entities where there
is a difference in legal definition and which are
The cost of donation, in addition to the expenses not considered taxpayers in one jurisdiction,
paid for the health needs of individuals, also while the same entities are considered taxpayers
include costs of transportation and accom-
modation to health institutions. in another jurisdiction.
Hybrid instruments – contain different
DEADLINE FOR SUBMITTING CIT RETURN IN legal definitions and at the same time have the
CASE OF INSOLVENCY AND LIQUIDATION characteristics of debt and equity leading to
double deduction or deduction without inclusion.
When a insolvency/liquidation procedure is com-
menced, the CIT return shall be submitted within
6 New Corporate Income Tax Rulebook
FLAT-RATE TAX FOR NON-PROFIT TAXATION HYBRID MISMATCHES
Tax brackets have been introduced. Lump-sum In the event of Hybrid mismatch, the taxpayer is
CIT base will be determined as a difference obliged to provide the following information along
between revenues and tax recognized expenses with the CIT return:
which will be determined based on generated – A financial instrument that creates a hybrid
revenues. Rulebook lays down provisions mismatch;
concerning lump-sum taxation bookkeeping – Hybrid transfers of a financial instrument;
records and the content of the PD-PO form. – A business unit not taken into a account;
– A related hybrid entity;
EXIT TAXATION – A structured arrangement or transaction or
series of transactions between related parties;
If such situation occurs, it is necessary to submit, – Arrangements with a financial instrument
with the CIT return, information on acquisition of created to utilize paid withholding tax;
the property and its purchase value, the market – Reverse hybrid mismatches;
value of the property, the manner in which the – Tax residency mismatches and reported
depreciation or amortization cost is expressed income which is double included.
during the period of use along with the amount
included in the taxable base; and information on OTHER CHANGES
the country or jurisdiction in which the property,
business or residence is transferred. – Tonnage tax scheme includes yachts;
In certain cases, the taxpayer may be – CIT taxpayers that transfer to lump-sum
granted a tax deferral (during a period of 5 years) taxation scheme will be obliged to declare
when the property, business or residency is hidden reserves;
transferred to another country which is part of the – Tax taxpayer of withholding tax, in case of
EEA and with whom a mutual assistance payment of fees for performances of foreign
agreement has been concluded for a tax recovery performers, in certain conditions may also
(given that the taxpayer provides an appropriate be a foreign payer;
bank guarantee for the deferred tax liability when – Foreign entrepreneurs are obliged to inform
transferring business and residency). the Tax Authorities of their intention to
perform business activities (at least 8 days
prior to undertaking the activity.
Announced Changes of other Tax Regulations
MISUSE OF TAX BENEFITS CONTRARY TO THE
PURPOSE OF THE TAX ACT TAX VIOLATIONS
The aim is to strengthen the “content above form” Not keeping accounting documents and other
principle. The various artificial structures (organi- records within deadlines is one of the most
sational forms) that taxpayers use to obtain cer- serious tax violations (fines up to HRK 500.000)
tain tax benefits (for example, the use of self- Serious tax violations (fines up to HRK 300.000)
employment forms based on lump-sum taxation – if the records on daily cash turnover are not kept
or the frequent change of organizational forms in in places where the cash receipts are received or
business) are specified. For tax purposes, such if they are not made available to Tax Authorities.
structures will be taxed as if they do not exist, Unavailability of readable and systematic infor-
that is, in accordance with the economic nature mation in in cases when accounting documents
of the business activities. and other records are kept in electronic form is
also considered as a serious tax violation. Minor
tax violations (fines are up to HRK 200.000) – for
non-compliance with stipulated annual inventory
7of assets and liabilities as prescribed by the – Reportable cross-border arrangement
General Tax Act. means any cross-border arrangement that
contains at least one characteristic that
OBLIGATION TO CARRY OUT FOCALISATION indicates a potential risk of tax evasion. The
OF THE SUPPORTING DOCUMENTATION Minister of Finance will stipulate by Rule-
book the characteristics that indicate
The coProposals, pro forma invoices and similar potential risk (Annex IV of the Directive -
pre-invoice documents showing payment info- basic benefit test).
rmation – effective as of 1 April 2020:
– Obligation to notify customers in business PERSONS OBLIGED TO REPORT ON CROSS-
units applies ONLY for those taxpayers who BORDER ARRANGEMENTS
decide so or who’s business requires issuing
supporting documents; The Intermediaries:
– Implementation of fiscalisation of suppor- – Intermediary means any person who
ting documentation – assignment of JIR; designs, markets or organizes a reportable
– Obligation to fiscalize supporting document- cross-border arrangement or makes such an
tation does not exclude the obligation to arrangement available for the purpose of its
fiscalize invoice. implementation or manages its implement-
tation which meets at least one of the
EXEMPTIONS OF FISCALISATION stipulated requirements;
– Intermediary is also any person who knows
Conditions laid down for the application of the or could reasonably be expected to know
exemption have been supplemented in the case that he or she has undertaken to provide,
of participation in games of chance and games, directly or through other persons, support,
retailing of daily newspapers, tobacco and sale of assistance or advice with regards to
own agricultural products. The exemptions designing, marketing, organizing, making
provided by the Act exclude sales through available for the purpose of implementing, or
vending machines. managing the implementation of a
reportable cross-border arrangement.
FISCALISATION OF SELF-SERVICE DEVICES
Relevant taxpayer – exceptional:
As of 1 January 2021, stipulated by previous – Relevant taxpayer means any person to
amendment of the Act. whom a reportable cross-border arrange-
ment is made available for implementation,
INTRODUCTION OF QR CODE AS OF or who is ready to implement a reportable
1 JANUARY 2021 cross-border arrangement, or who has
implemented the first step of such an
Faster and easier verification of invoices paid in arrangement.
cash.
Persons obliged to report are obliged to provide
OTHER information regarding there portable cross-
border arrangements to the Ministry of Finance,
The defining a software solution that is con- Tax Authorities within 30 days. The Act defines
sistent with the implementation of fiscalisation. the information to be reported.
Implementation of Council Directive Where there are more than one
(EU)2018/822 of 25 May 2018 amending Directive competent authority in more than one Member
2011/16/EU regarding the mandatory automatic State, such information shall be submitted only
exchange of information in the field of taxation to the Ministry of Finance, Tax Authorities in
with regard to cross-border reporting arrange- cases prescribed by the Act.
ments. Exemption from reporting obligation
by invoking professional privilege. In the case of
Definition – cross-border arrangements: multiple intermediaries, all intermediaries
– Cross-border arrangement means an participating in the same cross-border
arrangement concerning either more than arrangement have the obligation to submit infor-
one Member State or a Member State and a mation on the reportable cross-border arrange-
third country, subject to the conditions laid ment.
down by the Act;
8CONTACT FOR FURTHER INFORMATION
Radu-Dragos Dobrescu
Business Graduate, MBA,
Auditor, Tax Consultant, CPA
(Romania)
Partner, Office head Croatia
T +385 1 4920 451
radu.dobrescu@roedl.com
Alina Dobrescu
Commercial Manager Adria
T +385 1 4920 481
alina.dobrescu@roedl.com
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