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PERSONAL INCOME TAX LAW

  • Amendments to income tax rates, which are determined within the following ranges: a lower rate from 15% to 23%, and a higher rate from 25% to 33%, depending on the size of the local municipality. If the local municipality unit does not pass a decision on the tax rates by the le-gally prescribed deadline (February 28, 2025), the lower rate of 20% and the higher rate of 30% will be automati-cally applied. Additionally, the threshold for the annual in-come tax bracket for applying the higher income tax rate is increased from EUR 50,400 to EUR 60,000.
  • The personal allowance is increased from EUR 560 to EUR 600. Consequently, the amounts of the increased personal allowance for supported family members and determined disability also rise, along with other non-taxable receipts that are calculated based on the personal allowance (monetary rewards for work performance, sev-erance pay, jubilee awards, etc.).
  • New ranges for the lump-sum tax on short-term rentals (so-called “tourist rental” or “daily rental”) have been pre-scribed, in accordance with the tourist development in-dex, as follows (from the most developed to the least developed category): Category I EUR 100 - 300, Category II EUR 70 - 200, EUR Category III 30 - 150, and Category IV EUR 20 - 100.
  • Introduction of a tax incentive for returnees. Croatian citizens who have spent at least two years abroad are granted the right to a five-year 100% of the tax relief on the employment income. Additional provisions related to the implementation of this incentive will be prescribed by the Personal Income Tax Regulations.

SOCIAL SECURITY CONTRIBUTIONS LAW

  • Exemption from payment of health insurance contribu-tions for employees under 30 years old for a period of 5 years is being abolished. Employers may still apply this incentive for employees hired by December 31, 2024, until the expiry of 5-year period.
  • Exemption from payment of health insurance contribu-tions for a period of one year can be applied for any individual that is entering permanent employment con-tract for the first time, regardless of their prior em-ployment history (such as fixed-term contract, other in-come, etc.).
  • Employers who enter fixed-term employment contracts with individuals can no longer use the incentive for first-time employment.

VALUE ADDED TAX LAW

  • The threshold for entering the VAT system is increased from EUR 40,000 to EUR 60,000.
  • A new provision allows for the deduction of input VAT based on a resolution from the Croatian Tax Authori-ties (CTA). If the VAT liability is determined based on a CTA resolution, the taxpayer may issue a revised invoice, which the recipient of the supply can use to claim the in-put VAT deduction.
  • A provision is introduced allowing taxpayers from EU member state to apply for VAT exemption in Croatia based on SME scheme, provided the required conditions are met. Additionally, SME taxpayers in Croatia can opt an exemption from VAT registration in other member states, subject to the specified conditions.
  • The right to a VAT refund is introduced for taxpayers without a registered seat in the EU, eliminating the reci-procity condition for VAT refunds for taxpayers from non EU countries.
  • Services for virtual access to cultural, artistic, sporting, and similar events are no longer taxed based on the location of the event but rather according to the recipi-ent’s place of establishment or in the member state of consumption.

GENERAL TAX LAW

  • The provisions regarding the permissibility of tax au-dits and statute of limitations have been expanded. Tax audits can now be conducted for periods where the stat-ute of limitations for determining tax liabilities has not yet expired (a six-year period). This applies to procedures in-volving investigations on business operations abroad, re-lated parties, as well as cross-border transactions, trans-fer pricing, tax arrangements, and similar cross-border transactions and operations involving multiple jurisdic-tions or countries, as well as in cases where there is rea-sonable suspicion of committing certain offenses.
  • The responsibility of company shareholders for not submitting monthly and annual tax returns has been extended. The scope of the provision regarding the liabil-ity of company shareholders is extended in situations where the required monthly and annual tax returns of the taxpayer are not filed.
  • The obligation to submit tax returns and supporting documentation necessary for taxation via ePorezna has been expanded to include additional categories of tax-payers.
  • Delivery of tax documents and other notices – the par-ticipant provides explicit consent for receiving tax docu-ments and other notices electronically by registering or logging into the ePorezna system.
  • The statute of limitations for collecting tax liabilities, interest, and enforcement costs does not apply in cas-es where the CTA was unable to initiate the collection process.
  • Conclusion of administrative agreements – simplifica-tion of the procedure for entering into administrative agreements between taxpayers and the tax CTA in cases prescribed by law.

 

Željka Videk                
Director, Tax Consulting Department
zvidek@kpmg.com

Mihaela Koren Šola
Lawyer
mkoren@kpmg.com

Violeta Đebro
Senior Manager, Tax Consulting Department
vdebro@kpmg.com


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