Our Croatia experts give debrief on some of the bigger changes affecting businesses in the country this year
Taxpayers and employers in Croatia are directly affected by legislation changes coming into force over the next 12 months. Among the taxes and legislation affected are both personal and corporate income tax, value added tax (VAT), the property transaction tax and the law on professional rehabilitation and employment of disabled persons.
The briefs below give the basics on these changes; speak with your corporate services provider for more information about how they could affect you and your business.
Property transaction tax act
The current law on property transactions featured some sections that needed clarity. So, the provision related to the subject of taxation, tax basis, tax exemptions when registering property with a company, determining and charging tax and criminal provisions is changing to align with the provisions of the Value Added Tax Act.
As of 1 January 2015, supply of building lands and so-called constructed properties will be subject to VAT when the delivery is performed by the taxpayers registered in the register of VAT payers. Consequently, land and real estate will be taxed as a single entity - however the buildings, and the land will be subject to value added tax and no longer subject of taxes on property.
Corporate income tax
Croatia is moving to a system of corporate income tax payment which includes:
- Using tax benefits for reinvested corporate income when investing fixed assets, and
- The payment of dividends to foreign legal entities out of corporate income achieved by 29.02.2012.
The law is amended to comply with the Directive of the EU Council 2014/86/EC from 07.08.2014 regarding the common system of taxation applicable to parent companies and subsidiaries of different EU member states.
Personal income tax
Changing tax grades and increasing the basic personal allowance disposable income of the middle class will likely cause an increase in consumption and contribute to positive economic trends, as well as reduce the tax burden of pensions and encourage the return of emigrants. It will also increase state revenue by taxing interest on savings. New tax grades are being introduced; the definition of “dependent person” is now expanded; there is a tax on savings’ interest; and the difference between assets value and the amount of acquired funds as other income will be taxed.
Value added tax
The most important of the forthcoming changes relate to the possibility of taxation based on collected payments for all taxpayers, including a provision for taxation of telecommunication services. The new regulations places the onus on the tax payer to whom the goods or services are delivered to be a guarantor payer in the cases of VAT frauds and the elimination of the obligation of submitting VAT-K form.
The changes also establish further compliance with the Directives of the EU, especially with the Directive of EU Council 2006/112/EZ, legislative framework for implementation of the program of taxation of services in one place (MOSS), general reduction and cost reduction of filing the applications, and development of small and medium enterprises and better liquidity.
There are various amendments here, including:
- Exemptions from contribution payments on the basis of salary payments for persons younger than 30 years of age during the period of five years
- New solutions without monthly payments for persons who pay a determined amount and persons with professional status
- Rationalisation of the operations of tax administration
- Encouraging the voluntary fulfilment of tax obligations without additional burdens, and
- Simplifying the procedure for determining the amount of the contributions.
Law on Professional Rehabilitation and Employment of Disabled Persons
This change in law extends the obligations of the quota of employment of persons with disabilities and the real sector. It means that from 1 January 2015, all employers who employ at least 20 employees will be obliged to employ a certain number of people with disabilities, depending on the total number of employees and activities they perform.
Employers who do not meet the quota will be obliged to pay compensation in the amount of 30% of the minimum wage for each disabled person that they were obliged to employ; those funds will be used to develop the system of professional rehabilitation and employment of people with disabilities.
The new law eliminates the problem of the lack of evidence of definitions of disability, and is more detailed in its exercise of rights of priority in employment in a way that stipulates the responsibility of individual inspections, their powers and limits of action in case of violation of rights. In accordance with the above amendments, misdemeanour provisions are also harmonised.
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