Tax Changes 2020

09/01/2020

The fourth round of tax relief is a part of the tax reform started in the 2016. In Official Gazette no. 121/19. from 11.12.2019. amendments to tax laws have been announced under the fourth round of tax reform. The fourth round of tax relief begins through a tax package of 9 laws and the most important changes are given bellow:

Value Added Tax

  • 25% standard rate retained
  • Applying a 13% rate
    • for preparing and serving meals and desserts in and out of restaurants and
    • services and related copyrights of writers, composers and artist performers and holders of phonogram rights
  • Possibility of determining VAT on remuneration collected to a value of HRK 7,500,000.00
  • Alignment with Directive (EU) – Inclusion of the Italian municipality of Campione dʼItalia and the Italian waters of Lake Lugano in the customs territory of the Union and the territorial scope of Directive 2008/118 / EC
  • Alignment with Directive (EU) 2018/1910 – Simplification of certain rules for the taxation of trade between Member States:
    • simplifying the movement of goods
    • defining transportation services in the supply in a chain
    • determining the VAT ID number as a material condition for applying the exemption
  • Correction of VAT liability when changing tax base
  • Registration of international road passenger transport services is required before entering the Republic of Croatia
  • Removing conditions for applying the VAT exemption for deliveries in certain activities of public interest when performed by other persons to whom the public authorities have not been delegated

Personal income tax

  • Increase of basic personal allowance from HRK 3,800 to HRK 4,000 (basic personal allowance of HRK 2,500 remains unchanged)
  • Reduction of personal income tax liability, up to an annual tax base of HRK 360,000 on the basis of self-employment, for which annual tax is paid at the rate of 24%, for:
    • 100% for young people up to 25 years of age
    • 50% for young people aged between 26 and 30 years
  • Extension to include non-income tax receipts:
    • Receipts received by natural persons on the basis of donations raised in humanitarian actions and publicly advertised actions that have a general purpose (refinement of the norm)
    • awards to students for practical work and apprenticeships up to the prescribed amount
    • compensation for students during dual education up to the prescribed amount
    • payment of premiums of social security contributions paid by the employer for the benefit of his worker up to the prescribed amount – the prescribed amount is determined by the rulebook
  • Equalization of tax treatment of write-offs of individual claims of the taxpayer of income tax who is self-employer (craft) with write-offs of claims with the taxpayer of income tax
  • For payments of non-taxable receipts – the obligation to submit statements is abolished and payers have an insight in realized non-taxable receipts of workers and insight into the unused amount of personal allowance
  • To calculate the salary of a former employee – possibility of insight into the tax card
  • Prescribing the characteristics of self-employment for tax purposes by defining the relevant criteria: behavioural control, financial control and client relationships

Fiscalisation

  • From January 1, 2021 – Fiscalisation of vending machines and introduction of QR code
  • Prescribing the obligation to fiscalize supporting documents – effective from April 1, 2020.

Special tax on motor vehicles and special tax on coffee and soft drinks

  • Amendment of the provision stipulating exemptions from the payment of an administrative fee for the acquisition of used motor vehicles by transfer between related persons
  • Changing The taxation model of soft drinks: calculated on volume and content of sugar, taurine and methyl xanthine

Excise duties

  • Prescribing the right to a refund of excise duty on diesel fuel in commercial transport by rail
  • Exemptions from excise duty on electricity used for the purpose of commercial transport
  • Removal of the obligation to disclose data in the monthly report of taxpayers on tobacco products

Administrative cooperation

  • Extending the scope of mandatory automatic exchange of information to potentially aggressive cross-border tax arrangements

General Tax Act

  • Extension of provisions preventing the use of tax benefits contrary to the purpose of the law (on illicit legal transactions)
  • Modification of misdemeanor provisions due to perceived deficiencies
  • With the exception of special tax regulations, a taxpayer who voluntarily declares a foreign receipt for payment of due taxes and contributions, a tax liability arises on the day the foreign receipt is declared independently when the receipts have actually been received

Corporate Profit Tax

  • New threshold is being introduced – annual revenue of HRK 7.5m for:
    • 1. tax relief – application of the 12% rate from 2020
    • 2. administrative relief – natural persons engaged in self-employment activity (craftsmen) decide whether they will pay personal income tax or income tax; entrepreneurs can choose how to determine the tax base on a monetary basis; for non-profit organizations’ economic activity is provided flat-rate taxation
  • Alignment with changes in other regulations
  • Shortening the deadline for submitting a PD application for bankruptcy and status changes to 30 days, for termination of business to 8 days
  • Proscribing the obligation to announce certain actions leading to the termination of business, transfer abroad or in case of status changes – 30 days before starting
NEWSLETTER_1/2020