Have you reached the limit of HRK 300,000 of annual income? Here are the new changes

Until 2018, mandatory entry into the VAT system in case you reach the annual limit applied from the beginning of the next calendar year. This meant that the entrepreneur could achieve double the turnover of the allowed limit in one year and keep the status of a small entrepreneur throughout the year. As of January 1, 2019, this is no longer possible. After the entrepreneur reaches the limit of HRK 300,000, he is obliged to enter in the register of VAT payers on the first day of the month following the month in which the deliveries of goods and services are above the amount of HRK 300,000.00 were made, by force of law.

The limit of HRK 300,000 includes the value of deliveries of goods and services made from January 1 of the current year, whether they are supplies that would be taxable if they were made by an entrepreneur in the VAT system or certain deliveries exempt from VAT. When it comes to VAT-exempt supplies, the threshold for compulsory entry into the VAT system includes deliveries of exports of goods and those considered to be equivalent to exports, movable property services, international transport services, and certain brokerage services performed on behalf of and for the account of another person. As soon as it reaches the prescribed limit, the entrepreneur is obliged to register in the register of taxpayers via the P-VAT form, from the first day of the following month.

When we talk about input tax, the entrepreneur acquires this right according to the input purchases from the date of entry into the VAT system. He has the right to recognize part of the pre-tax based on existing stocks of goods in previously acquired fixed assets. What exactly does this refer to? Existing stocks refer to finished products, merchandise, raw materials, and others and a list of stocks should be compiled with the date of entry into the VAT system. Recognition of pre-tax on fixed assets is possible if no more than 10 years have passed since the acquisition or more than five years for other fixed assets.

For an entrepreneur who is a taxpayer of profit tax, entering the VAT system does not change anything regarding the base and rate of profit tax.

Individuals who are liable to pay income tax and natural persons who rent tourist accommodation units (apartments, camps, and holiday homes) are in the same tax position at the time they become VAT payers. Entering the circle of VAT payers can automatically mean a change in the method of determining income tax, but this does not apply to all sources of income. A craftsman or farmer who paid a lump sum income tax before entering the VAT system, after entering it in the register of VAT payers, determines the tax liability based on actual receipts and expenditures. Also, on the prescribed tax base, income tax is no longer paid at the rate of 10 percent increased by surtax, but at the rate of 20 and 30 percent, depending on the annual base, increased by the surtax.

The payment of social security contributions is also subject to changes in the method of income taxation, so liabilities are increased on this basis as well.

Thus, natural persons who rent tourist units are not entitled to pay income tax in a lump sum per bed or accommodation unit in the camp but are obliged from the date of entry into the VAT system to determine the tax liability based on actually collected receipts and paid expenses.

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