Croatia: Tax Developments
Croatia
The Croatian Parliament has adopted Amendments to the Personal Income Tax (PIT) Law which came into force as of 1 July 2010 (National Gazette (Narodne novine), 80/10). Some of the more significant amendments are summarized below.
PIT Rates
The PIT rates and monthly band rates applicable as of 1 July 2010, are as follows:
The monthly basic personal allowance remains HRK 1,800.
Abolition of Tax Reliefs
As of 1 July 2010, the following tax reliefs are abolished:
• health services;
• voluntary and additional health insurance;
• insurance premiums paid in respect of life insurance with a retirement savings component;
•certain costs for the purchase or construction or maintenance of a first main (principal) residence, as well as interest expenses paid for these purposes; and
• rental costs for a main (principal) residence.
Non-Taxable Income
Employer Payments to Pension Funds – Payments by employers made to Croatian voluntary pension funds (pillar III pension insurance) on behalf of employees up to a maximum of HRK 500 monthly per employee will be treated as non-taxable income for PIT purposes (and as a corporate profits tax deductible expense for the employer).
Other PIT Rate Changes
Annual PIT Return
Furthermore, the rules to determine an individual’s obligation to submit an annual PIT return and employer’s obligation to prepare annual calculations for their employees have changed.
Partial Abolition of Special Tax as of July 2010
The Croatian Parliament has adopted Amendments to the Law on Special Tax on Salary, Pensions, and Other Receipts and the Law on Special Tax on Self-employment Income and Other Receipts (National Gazette (Narodne novine) 56/10).
The Special Tax was introduced as a temporary anti-crisis measure. The amendments relate to the earlier partial abolition of the Special Tax; these are summarized on the following page.
Special Tax on Net Salaries, Pensions and Other Receipts
• Special tax at the rate of 2 percent which applies on net income in the range from HRK 3,000 to HRK 6,000, is applicable only to 30 June 2010;
• Special tax at the rate of 4 percent which applies on net income above HRK 6,000, is applicable only to 31 October 2010;Special Tax on Self-employment Income and Other Receipts
• Special tax at the rate of 2 percent which applies on net income from HRK 3,000 to HRK 6,000, will be abolished as of 1 September 2010; and
• Special tax at the rate of 4 percent which applies on net income above HRK 6,000, will be abolished as of 1 January 2011.
Source: KPMG
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