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VAT

Amendments to Tax Regulations

12/1/2020
VAT

A brief overview of the major amendments to tax regulations which were adopted on 25 November 2020 by the Croatian Parliament are provided below.

Value Added Tax (“VAT”)

Alignment with EU VAT Directives:

  • Special taxation scheme applied to telecommunication services, services of radio and television broadcasting and electronically supplied services (so-called Mini One Stop Shop (“MOSS“) scheme) is extended to the provision of all types of services to individuals not registered for VAT within the EU.
  • Application of the above special taxation scheme is also extended to the distance sale of goods to the individuals not registered for VAT within the EU. The obligation to issue invoices for these supplies is abolished.
  • Also abolished is: The minimum value rule according to which VAT was not paid for imported consignments from non-EU countries valued less than EUR 22 (HRK 160.

Other amendments:

  • Application of reverse-charge mechanism on import of goods.
  • Increase of the threshold for application of taxation procedure upon payment of invoices from HRK 7.5 million to HRK 15 million.

Corporate Profit Tax (“CPT”)

  • Reduction of the CPT rate from 12% to 10% for taxpayers who generate revenues up to HRK 7.5 million.
  • Reduction of withholding tax rate on payments of dividends and shares in profits from 12% to 10%.
  • Write-off of receivables by credit institutions from uncollectible credit placements to citizens and entrepreneurs which were previously value adjusted and provided for is deductible expense for CPT purposes.

Personal Income Tax

  • Reduction of the tax rates as follows:
    • from 24% to 20%,
    • from 36% to 30%, and
    • 12% to 10%.
  • Introduction of the so-called national reimbursement (in Croatian, nacionalna naknada) in the amount of HRK 800 per month for individuals over 65 years of age who have not accumulated (minimum) 15 years of working experience (which is conditional for obtaining the right to receive a pension).

All the above-mentioned amendments will enter into force as of 1 January 2021, except for the amendments related to the alignment with the amendments to the EU VAT Directives which will enter into force of 1 July 2021.