Amendments to Tax Regulations


Below is a brief overview of the latest changes and proposed amendments to tax regulations.

Coronavirus test

The cost of testing for coronavirus or other infectious diseases paid by employers for their employees is not subject to personal income tax and social security contributions.

Non-cash payment of import VAT

VAT on import of goods imported until 31 December 2020 can be paid based on the reverse-charge mechanism i.e. without physical payment.

Amendments to VAT regulations in accordance with EU Directives

In accordance with the amendments to the EU VAT Directives, Croatia as a Member State is obliged to apply the following amendments to the VAT regulations which will enter into force in 2021:

  • Special taxation scheme for telecommunication services, services of radio and television broadcasting and electronically supplied services, i.e. the so-called MOSS scheme, will also apply for distance sale of goods within the EU.
  • The minimum value rule according to which VAT was not paid for imported consignments from non-EU countries valued less than EUR 22 is abolished. VAT will be paid on all supplies, regardless of their value.

Proposed amendments to tax legislation

The Ministry of Finance has proposed amendments to VAT, Personal Income Tax and Corporate Profit Tax legislation. Please see below brief overview of proposed amendments.

Value Added Tax

  • Introduction of a permanent possibility for application of reverse-charge VAT on import of goods.
  • Increase of the threshold limit for application of taxation procedure according to which VAT is reported in the period of payment of invoices from HRK 7.5 million to HRK 15 million.

Personal Income Tax

  • Reduction of the tax rates from 24% to 20% and from 36% to 30%.
  • Reduction of the tax rate for taxation of annual and “final” income as well as business activities which are taxed at the flat rate from 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.

Corporate Profit Tax

  • Reduction of the tax rate from 12% to 10% for taxpayers who generate revenues up to HRK 7.5 million.
  • Reduction of the withholding tax rate on dividend payments from 12% to 10%.

The proposed amendments to tax legislation have yet to be submitted to the parliamentary procedure prior to adoption. We will subsequently inform you on the accepted amendments to tax legislation.