Starting from 1st December 2018 a new Ordinance about changes and additions to income tax Ordinance has been put into effect. According to the new Ordinance employers can, in addition to Christmas bonus of 2.500,00 kunas and gifts for children up to 600,00 kunas, give additional bonuses for work results/accomplishments and other bonuses up to 5.000,00 kunas to their employees.
New nontaxable income can be paid exclusively to the current account and employers themselves set the criteria for bonuses according to collective agreements or work rule books. Employers can also set the dynamic (payment schedule) of bonus payments. It is possible to make one time payments or multiple payments during the tax year, or even monthly bonuses exclusively as an addition to the agreed monthly wage. According to the described directives, employers can pay additional amount of 416,66 kunas during 2019 as a regular nontaxable addition to monthly wages for regular work hours.
It should be noted that the employee can receive a total bonus amount of 5.000,00 kunas from all employers combined. This means that if an employee is contracted part time to multiple employers, he has to give a statement about the amount of nontaxable income received from other employers. If a bonus is paid by one employer, the other one can only pay the difference up to regulated amount of 5.000,00 kunas.
Nontaxable income is displayed in JOPPD form as usual under number 15.1. page B with code 63 – Bonuses for work results/accomplishments and other forms of employee bonuses (additional wage, addition to the monthly wage, etc.).
Independent entities (trade crafts and similar) who are liable to income tax or for profit tax, can’t pay nontaxable bonuses to themselves, but they can pay it to their employees.
The goal of introducing new nontaxable income is to unburden employers/business, which should result in wage growth and alleviation of negative trends in the labour market.
