The new tax reform

The sixth circle of tax reform, and what does Dante have to do with it?

Krešimir Lipovšćak, Partner
The new tax reform

According to Dante's La Divina Commedia or Divine Comedy, the sixth circle (of hell) is reserved for heretics and separated from the following circles of hell by a stinking moat.

The sixth circle of the new tax reform is, luckily, not reserved for such horrors, but for salary increases as well as changes in the tax legislation which went almost unnoticed by the public.

In this article, we will briefly explain the most significant changes of the new tax reform that impact employees, entrepreneurs, and local government. 

Circling back to Dante, his great-grandson founded the first pharmacy in Zagreb Upper town, and according to the legend, the great-grandson's heir poisoned Dora Krupić from Šenoa's novel Zlatarevo zlato (The Goldsmith's Treasure). This might be one of the first anecdotes about three foreign workers in Croatia. 

The issue of foreign workers, or rather, the issue of retaining domestic workforce, was one of the main issues addressed by this tax reform. In 2022.,120,000 work permits for foreign workers have been issued in the Republic of Croatia. 


What should change on January 1, 2024? 


The tax changes that have been announced concern not only employees but also entrepreneurs.

All the mentioned changes are not ratified by the Parliament yet, and it is expected that the changes will enter into force on January 1, 2024.


1. Income tax

  • Increase in personal allowance
  • Abolishment of city surtax 
  • Changes to contributions for pension insurance
  • Better tax treatment of tips 
  • Increase of tax-free amount for donations
  • Depreciation of small inventory
  • Better treatment of stock options in LLC 

2. Corporate Profit Tax

  • Depreciation of small inventory
  • Increase of tax-free amount for donations
  • Introduction of a fixed payment date 


3. Withholding tax  

  • Withholding tax on market research and business consulting services is abolished.
  • Withholding tax on dividends paid to entrepreneurs from the European Economic Area 

4. Value Added Tax (VAT) 

  • Possibility of VAT refund even in case where the entrepreneur could not collect receivables.
  • Threshold increase for registration in the register of VAT payers.

5. Holiday homes 

  • Holiday home tax range increase per m2 of holiday homes and apartments. 


Any change that leads to lower taxes is welcome. Employees have hoped that their salaries would increase significantly, but one should never lose hope - after the rain, the sun always comes out.

For a detailed overview with calculations download our complete guide to the new tax reform.