Changes in tax Law

Changes in Law – what can we expect in year 2020?

The new round of tax reform brings some changes in the taxation system from next year. Based on the proposal of the Government of the Republic of Croatia, below you can find an overview of the most important news that we can expect.

Personal income tax

  • Tax benefits are proposed for young persons under 30 years:
  • For persons under 25 years there will be a 100% reduction in personal income tax on the basis of self-employment; and
  • For persons between 26 and 30 years, there will be a 50% reduction in personal income tax on the basis of self-employment.

These deductions will be applicable up to the amount of 360.000,00 HRK and it will be calculated on an annual basis.

  • The amount of minimum net salary shall be increased from 3.000,00 HRK to 3.250,00 HRK;
  • Taxpayers who are paying lump-sum taxes will no longer receive tax resolutions related to the same;

Profit tax

  • The profit tax rate at 12% shall be expanded for all taxpayers who are achieving total income up to the amount of HRK 7.500.000,00. That is, the current threshold of HRK 3.000.000,00 is raised to HRK 7.500.000,00. All other taxpayers should use a rate of 18%. The proposed measures DO NOT relate to the tax application for the year 2019. Namely, they should apply in the process of filing a tax application for the year 2020 and onwards, i.e. for a tax period starting from 1st January 2020.
  • It is proposed that any physical person who is liable to personal income tax shall become a profit income taxpayer under the “force of law” if in the preceding tax period his/her total receipts exceeded HRK 7.500.000,00.

Value-added tax

  • The VAT rate shall be reduced from 25% to 13% for the preparation and serving of meals in catering establishments.
  • Conditions under which goods within the European Union can be delivered without VAT – Article 41, paragraph 1, item a) shall be prescribed more detailed and clearer. It is also proposed to prescribe the provision when the exemption for supplies within the European Union cannot be applied.

Among other changes we would like to emphasize the following:

  • The deadline for submission of a tax return shall be shortened to 30 days after the initiation of bankruptcy or 8 days after the termination of the liquidation process: and
  • It is proposed to determine tax liability through assessment in case the tax return is not filled.

Measures that will be adopted by the Croatian government will be additionally published.

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