Proposals from the fifth round of Tax Reforms for year 2021

Proposals from the Fifth Round of Tax Reforms for year 2021

The Ministry of Finance – Tax Authorities have announced legal changes in the field of taxes for year 2021.

Below you can find an overview of the most important legal changes.

Proposed amendments to Personal Income Tax Act

  • reduction of income tax rates applicable to annual and final income from 24% to 20% and from 36% to 30%;
  • introduction of a national allowance for the elderly (non-taxable allowance that will not be taken into account when determining the right to personal allowance deduction for dependent family members);
  • abolition of taxation of 24% of other income up the amount of HRK 12,500;
  • income based on the difference between the value of the property and the amount of assets at which it was acquired – a change in the rate from 36% to 30%, but the tax thus calculated will be increased by 100% instead of 50%.

Proposed amendments to Corporate Income Tax Act

  • reduction of the tax rate from 12% to 10% for taxpayers who earn up to HRK 7,500,000.00;
  • reduction of the withholding tax rate from 12% to 10% for dividends and profit shares;
  • reduction of the withholding tax rate from 15% to 10% for performance fees of foreign performers (artists, entertainers and athletes);
  • amendments to the Act emphasise the need to verify and adjust the applicable transfer pricing for each tax period.

Proposed amendments to Value Added Tax Act

  • Expanding the possibility of applying the calculation category of VAT on imports. Criterion: the taxpayer, to whom the Customs Duty office has previously issued an authorisation on the basis of the submitted application for the payment of VAT on importation through a VAT return, is entitled to deduct input tax in full.
  • Increase of the threshold for the application of the taxation procedure according to the collected fees from HRK 7,500,000.00 to HRK 15,000,000.00.
  • Abolishing of the VAT exemption for small parcels imported from third countries into the EU with a value of less than EUR 22,00.

Harmonisation with Directive on the new VAT rules for e-commerce when customers are not taxpayers:

  • possible application of MOSS system for delivery of services and sale of goods on distance;
  • proposed threshold of 77,000 HRK (10,000 EUR) – up to the threshold, VAT of the supplier’s Member State is calculated.

Other changes to the law

  • For the period from 1 January to 31 December 2021, a new minimum gross salary was set in the amount of HRK 4,250.00. The stated amount of the minimum salary refers to the gross salary that is determined for the full-time employee. The minimum salary for part-time work is determined in proportion to the minimum wage for full-time work and the hours of work for which the worker is registered.
  • As of 1 January 2021, the obligation to carry out the procedure of fiscalisation of sales via self-service devices and the obligation to display QR codes on each issued and fiscalised invoice begins.

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