Investing in Croatia 2021

 

What investors & companies need to know!

What tax changes will 2021 bring in Croatia? What should investors pay attention to in the future – and which decisions will benefit them? TPA’s experts have summarized the most significant tax news for Croatia for you. The beginning of 2021 has seen changes mainly in the PIT and CIT area. Please see below for the overview of the most important changes: Croatia Tax News 2021!

Personal Income Tax

Act The personal income tax rate of 36% would be reduced to 30 %, and the rate of 24 % to 20 %.

Reduction of the rate from 12 % to 10 % applicable to the taxation of annual and final income (e.g. profit distributions) and lump-sum taxation of activities (e.g. rental of apartments or flats).

It is proposed to abolish taxation at annual rate of 24 % of taxpayers who have received additional income on the basis of other income up to the amount of five times the amount of the personal allowance base (HRK 150.000).

Stricter tax treatment is provided for cases when the disparity between income and assets is determined. The percentage of increase of the personal income tax rises from 50 % to 100 % when determining income tax based on the difference between the value of the income and the amount of assets with which it was acquired. This would mean that, after lowering the maximum tax rate, the tax on income earned in this way would be calculated at a rate of 30 % instead of 36 %, and the tax thus calculated would be increased by 100 % (the total tax rate would be 60 %).

Corporate Profit Tax Act

Reduction of the corporate profit tax rate for entrepreneurs with income up to HRK 7.5 million from 12 % to 10 %.

Reduction of the rate of withholding tax on payment of dividends and profit shares to foreign non-natural persons from 12 % to 10 %.

Reduction of the withholding tax rate for performances by foreign performers (artists, entertainers, athletes, etc.) from 15 % to 10 % when the fee is paid by a domestic or a foreign payer under a contract with a foreign person who is not a natural person and in that case there is no obligation to calculate the personal income tax and social security contributions for the performer.

A more favourable tax treatment for banks in case of loan write-offs or reprogramming of loans, i.e. to recognize as tax-deductible expense for credit institution the amount of write-off of receivables from unrelated natural or legal persons on the basis of approved credit placements with values in accordance with the special regulations of the Croatian National Bank.

Value Added Tax Act

Increase of the threshold for the application of the VAT cash accounting scheme from the current 7.5 to 15 million HRK.

Removal of the VAT exemption for distance selling of goods to non-taxable persons (natural persons) where goods are imported from third countries in parcels of small value up to 22 EUR.

Regulating the Distance selling of goods in such a way that after exceeding the threshold of HRK 77,000, the sale is taxed in the Member State in which the recipient of the goods who is not a taxable person has residence. Therefore, foreign taxable person will pay the Croatian VAT when the total value of distance selling of goods and telecommunications services, radio and television broadcasting services and electronically performed services exceeds the threshold of 10,000 euros and vice versa, Croatian taxable persons will pay VAT in another Member State when the value of these supplies exceeds the threshold of HRK 77,000.

Publications

TARIFFS GREEN POWER by country

Global dealmakers: Cross-border M&A in 2021

Real Estate Investments in CEE/SEE

Taxes in residential projects for rent

Transfer pricing

2020 Global R&D Guide

Bulgaria

Belgium

Austria

Croatia