Amendments of Tax Legislation

Amendments of Tax Legislation

The most important amendments applicable from 1 January 2020.



The Croatian Tax Authorities will after the year-end provide a refund (through an annual tax assessment) of personal income tax paid on employment income to the following taxpayers:


Tax rate

Tax refund

Up to 25



Up to 25



26 – 30



26 – 30




Annual tax assessments have historically been issued in June for the previous year, such that eligible taxpayers could expect a tax refund for the 2020 year in June 2021.

Basic monthly personal allowance is increased from HRK 3,800 to HRK 4,000.

The personal allowance for dependent family members remains the same. Parents who are using additional personal allowances for supported children can keep this right even if their children are receiving awards to pupils during practical work and apprenticeships or compensation to pupils during dual education.

Additional non-taxable benefits are introduced, such as insurance premiums which employers may pay for their employees based on additional and private health insurance, up to the prescribed amount (the non-taxable amount will be prescribed by the Personal Income Tax Regulations).

New provisions are prescribing criteria how to determine whether specific activities should qualify as employment activities for taxation purposes. These provisions were introduced to avoid situations where individuals who are actually performing employment activities are using the favorable tax treatment prescribed for performing self-employment activities.

Employers will have access to data related to non-taxable employment receipts already paid to a specific employee (from more than one employer) during a tax period through the “ePorezna” system, in order to ensure that non-taxable employment receipts are computed correctly.

Employers may use personal allowances during the payment of a last salary to a former employee, provided that the employer has access to the “PK” tax card of the former employee.



Standard VAT rate will remain at 25%.

Reduced VAT rate of 13% will also apply to:

  • Services of preparation and serving meals (including take away); and
  • Services and related copyrights of phonographic right holders;

which was previously taxed at the standard VAT rate of 25%.

The threshold to charge VAT on the cash basis is increased from HRK 3,000,000 to HRK 7,500,000.

VAT exemption of supplies of public interest is granted to all entities regardless of their institutional form.

A taxpayer will be able to adjust VAT if the acquirer of the goods and services without establishment, permanent or habitual residence in Croatia notifies the taxpayer in writing that a VAT refund was not requested.

VAT Quick Fixes in EU transactions regarding:

  • Call-off stock arrangement, i.e. movement of own goods;
  • Chain supplies;
  • Conditions for application of VAT exemption on intra-community supplies.


A threshold of HRK 7,500,000 (of realized annual revenues) is determined for:

  • the payment of corporate profit tax at the lower rate of 12%;
  • mandatory entry of a sole trader into the corporate profit tax system;
  • the flat rate taxation of business activities performed by a non-profit organization; and
  • the application of the cash principle in determining the tax base.

Costs of transportation and accommodation in health facilities will be considered as tax deductible donations for health purposes.

Value adjustments of trade receivables will be considered as tax deductible also in cases of settlement with a debtor that is not a corporate profit tax payer.

Upon conclusion of liquidation, or other procedures by which business activities are terminated, the taxpayer is obliged to finalize business books, prepare financial statements and determine tax liabilities as at the last day of the tax period.  The tax base must include amounts that would be included if all assets were converted into cash.

Rules regarding acquisition and valuation of rights in statutory changes are defined in more detail.

Taxpayers that initiate procedures such as transfers of headquarters, statutory changes and the conclusion of liquidation are obliged to notify the Tax Authorities of these procedures within 30 days from the start of formal activities before competent authorities.

Deadlines for filing a tax return in the case of initiating bankruptcy and liquidation procedures has changed:

  • 30 days for the period from the beginning of the tax period until the start of the bankruptcy procedure / liquidation; and
  • 8 days for the period of bankruptcy / liquidation

According to EU Directives 2016/1164 and 2017/952 (so called Anti-Tax Avoidance Directive or ATAD) the following is introduced:

  • exit taxation, which represents taxation of capital gains realized in certain cases where business activities or assets are transferred cross-border; and
  • hybrid mismatch rules which define tax treatment of cross-border hybrid mismatch arrangements.



Introduction of the concept of use of tax benefits that are contrary to the purpose of the legislation. This is mostly related to:

  • an activity that has employment characteristics, but which is structured so that it is taxed at lower rates;
  • frequent changes of the manner of performing business activities; and
  • use of related parties to avoid paying taxes or to reduce tax liabilities.

Situations involving the use of tax benefits contrary to the purpose of legislation are included within priority tax inspections.

Voluntarily disclosure is introduced for foreign sourced income, where personal income tax and social security contributions liabilities will arise at the date of voluntary disclosure.

Agreements and business relationships between related parties will be recognized only if these are made under the same conditions as would be agreed with unrelated parties.


  • An individual who acquires a used motor vehicle donated to that individual by his/her spouse, first-degree relative, adopter or adoptee is exempt from administrative duty only if that vehicle was previously registered on the donor's name.



  • As of 1 April 2020, supporting documents issued to a customer prior to an invoice, based on which payment from the customer is requested, will be subject to the fiscalization process.
  • As of 1 January 2021, the QR code will be a mandatory invoice element.


Paul Suchar             
Tel. +385 1 5390 032

Maja Maksimović
Tel. +385 1 5390 147

Tomislav Borošak
Tel. +385 1 5390 171

Kristina Grbavac
Tel. +385 1 5390 069

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