Proposal of the Law on Extra Profit Tax

On November 17, 2022, the draft of the final proposal of the Law on Extra Profit Tax was published on the e-Savjetovanje website.

Extra profit tax

The Extra Profit Tax is a one-time tax for the year 2022, and according to the draft of the final proposal, the taxpayer becomes obliged to pay Extra Profit Tax for the year 2022 if he meets the following two criteria:

  1. achievement of a total income of more than HRK 300 million; and
  2. 20% increase in taxable profit in the year 2022 compared to the average taxable profit in the last four tax periods 2018, 2019, 2020 and 2021 year.

Extra Profit Tax will be applied only for one tax period, namely for the year 2022. For taxpayers whose tax period is not a calendar year, the calculation period starts after January 1, 2022.

The basis for calculating Extra Profit Tax is the positive difference between the taxable profit of the tax period and the average taxable profit of the four previous tax periods (years 2018, 2019, 2020 and 2021).

Taxable profit, in both cases, represents the difference between income and expenses increased and decreased in accordance with accounting regulations on corporate profit taxation.

Which income is excluded for the purpose of calculation?  

The total income does not include the income from the write-off of liabilities in pre-bankruptcy and bankruptcy proceedings resulting from the sale of assets to settle creditors and income from the sale of long-term tangible and intangible assets to an unrelated person.

The tax base is determined regardless of whether the taxpayer has a tax liability within the Corporate Profit Tax return in accordance with special regulations on corporate profit taxation in the tax period for which the tax return is submitted or in previous tax periods.

Extra Profit Tax is paid on the established tax base, at a rate of 33%.

A separate Extra Profit Tax return must be submitted, whereby the deadlines for submission of the Extra Profit Tax return and payment of the tax liability are identical to the deadlines for submission of the corporate profit tax return and payment of the corporate tax.

At the same time, the Law does not apply to newly established entrepreneurs in 2022 nor those who ceased business activities during 2022 (without transferring activities to other taxpayers).

Given that the process of calculating the corporate tax is a complex subject, but an important part of financial security and responsibility, for all tax questions contact CONFIDA Croatia, which provides professional assistance and comprehensive consulting services.

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