Gov't sends to Parliament bills from 5th tax reform round

Zagreb - The Government on Thursday sent to Parliament four tax reform bills which envisage cutting income tax from 24 to 20% and from 36 to 30% as well as profit tax from 12 to 10% for enterprises which make up to HRK 7.5 million a year.

The Government sent to Parliament for first reading bills of amendments to the laws on income tax, profit tax, VAT, and fiscalised cash transactions.

Prime Minister Andrej Plenković said they were a continuation of the policy of relieving households and enterprises and that the amount would now exceed HRK 10 billion.

Finance Minister Zdravko Marić said the effect of the four tax reform rounds to date, since 2017, surpassed HRK 8.2 billion. He announced that by the second reading, amendments would be drawn up to the law on the financing of local governments. They will regulate how the state will compensate for their losses due to the slashed income tax rates.


Income tax cut from 36 to 30% and from 24 to 20%

In the fifth tax reform round, the Government proposes cutting, as of January 1, income tax from 36 to 30% and from 24 to 20% as well as from 12 to 10% on annual incomes.

The reform envisages the introduction of a national HRK 800 monthly allowance for seniors which will be exempt from income tax.

In case a disproportion between income and assets is established, Marić said the income tax rate would be raised from 54 to 60%.


Profit tax cut for enterprises with annual revenue of HRK 7.5 million

The amendments to the Profit Tax Act envisage cutting from 12 to 10% the profit tax rate for enterprises that make up to HRK 7.5 a year. Marić said this would apply to more than 93% of entities that were obliged to pay profit tax.


Banks to get more favourable tax treatment when writing off or restructuring loans

Minister Marić said an important novelty was that a more favourable tax treatment was proposed for banks in cases when they had to write off or restructure loans.

The aim is to improve the position of debtors, citizens and enterprises, which is achieved by writing off receivables, and not by selling debts to debt collection agencies, the Finance Ministry said. Amendments to the Income Tax Act also envisage that the taxpayer takes account of the compensating adjustment of transfer prices before submitting a tax return.


As of July 2021 VAT on small consignments

In accordance with the European directive on distance sales of goods and imports of low-value goods, the amendments to the Value Added Tax Act envisage abolishing as of 1 July 2021 the VAT exemption for small consignments (up to €22) imported to Croatia from third countries.

The distance sale of goods is also regulated, in the way that once the value exceeds the HRK 77,000 threshold, it is taxed in the member state in which is the place of residence of the recipient of goods who is not a taxpayer.


As of next year cash register limit to be regulated by ordinance

Amendments to the Cash Transaction Fiscalisation Act have also been sent to the parliament, and the law will no longer prescribe a maximum sale amount for cash registers. Instead, the finance minister will issue an ordinance prescribing limits for cash registers according to certain categories of taxpayers.

The amendment should enter into force next year.

Maric recalled that as of 1 January 2021, after two years of adjustment, the obligation to fiscalise sales through self-service devices begins, as well as the obligation to display a QR code on every issued fiscal receipt.

The minister also announced that there would be amendments to the local government financing act.

(€1 = HRK 7.5)

Author: Hina