Profit Tax Act
A reduction has been announced in the profit tax rate by 94% for all entrepreneurs in the Republic of Croatia. The profit tax rate will be reduced from 18% to 12% starting from the declaration of profit tax for 2020 for the entrepreneurs with earnings of less than HRK7.5 million in the previous year.
Income Tax Act
The minimum wage was passed by the Government of the Republic of Croatia on 6 November 2019, increasing the current gross of HRK3,750.00 to HRK4,062.51 in 2020. The minimum net wage for 2020 will amount to HRK3,250.01.
Increase in basic personal allowance from HRK3,800 to HRK4,000.
A change in 2020 personal allowance will result in an increase in the monthly net wages for those employees whose personal allowance was lower than the monthly net wage.
The financial impact of this measure is approximately HRK500 million and already affects the December 2019 wages paid in January 2020.
Tax relief for young people
As already announced, in order to stop the outflow of highly qualified young people from the Republic of Croatia, the possibility of reducing the annual tax liability was introduced:
- 100% for young people aged up to 25.
- 50% for young people aged 26-30.
This tax relief on the basis of employment is worth up to HRK360,000 of the annual tax base. The reduction in the annual income tax is used for the entire period in which the taxpayer reaches a certain year of life. Therefore, the basis is the year and not the date of birth of the person. The financial impact of the income tax reduction measure is approximately HRK700 million.
Supplementary and additional health insurance – non-taxable
This allows employers to cover the costs of supplementary and additional health insurance for employees without tax, up to the amount to be determined subsequently by the Ordinance on Income Tax and on the basis of authentic documentation.
Value Added Tax Act
Certainly, the biggest change relates to the repeal of the provision based on which the VAT rate, starting from 1 January 2020, was to be reduced from 25% to 24%. In accordance with the announcements and due to the introduction of some other non-taxable fees and a reduction of tax rates, this provision is repealed and the basic VAT rate remains at 25%.
Non-taxable transfer of own business assets
It is important to mention the new provisions of Article 7a) of the VAT Act, which define the conditions under which taxpayers do not consider the transfer of their own business assets to another member state under a transfer of goods arrangement as a delivery of goods with a fee.
Therefore, situations where the goods are transported to the end customer, but the delivery is temporarily suspended (e.g. due to the situation of non-receipt of the advance payment) and stored with the carrier (on temporary storage) for a period of less than 12 months, after which the goods are returned to the member state from which they originate, shall not be considered as delivery.
For more information, contact:
T: +385 (0)1 4610 294
Date: February 2020