The Croatian Parliament has approved the IV round of tax reform which introduces numerous changes effective 1st January 2020. It is important to emphasize that the majority of the legislative changes will be explained in regulations which will be published by the Ministry of Finance during January 2020.

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  • VAT rate on food preparation and serving inside and outside of the restaurants is reduced from 25% to 13%.
  • The threshold for VAT liability assessment based on the collected receivables principle has increased from HRK 3m to HRK 7.5m.
  • VAT exemption applies on public interest supplies (e.g. medical treatments, education, social care, service supplies in relation to culture, etc.) if performed by the persons without public authorisation (institutional VAT exemption is abolished).
  • Correction of VAT liability per corrected invoices issued to foreign customers is simplified. It is now sufficient that the customer informs the supplier in writing that he did not request a VAT refund per invoice received.
  • The standard VAT rate remains 25% (it was announced that the standard rate will be reduced to 24%).

Harmonization with the EU VAT Directive 2018/1910

  • Simplification in taxation of transfer of goods. Transfer of goods from Croatia to the warehouse of the customer or a third person in another Member State is not considered taxable supply. Taxable supply occurs when goods are taken over by the customer. The imposed deadline for this is 12 months. Taxable supply also occurs in case of shortages, losses or thefts of the goods transferred
  • In case of chain transactions which involve intermediaries, supply made to the intermediary is considered exempt supply. As an exception, if the intermediary gives to the supplier VAT ID number of the Member State from which the goods are dispatched or transported, then the supply made by the intermediary is considered exempt supply.
  • Administrative requirements in relation to transportation documents in case of supply of goods with transport will be prescribed in more detail in the VAT Regulations.
  • VAT ID number becomes important condition (not only a formal one) to apply VAT exemption in case of intra-community supplies.


  • The revenue threshold for application of the corporate profit tax rate of 12% is increased from HRK 3m to HRK 7.5m. Taxpayers who in 2019 had revenue below HRK 7.5m pay tax advance payments for 2020 at the rate of 12%.
  • Self-employed individuals (craftsmen) become corporate profit taxpayers when their total annual receipts exceed HRK 7.5m (previously HRK 3m).
  • The revenue threshold for payment of corporate profit tax according to the cash principle is increased from HRK 3m to HRK 7.5m.
  • The revenue threshold for payment of corporate profit tax on a lump-sum basis by non-profit organisations earning income from profitable activities is increased from HRK 3m to HRK 7.5m.
  • Bad debts up to HRK 5,000.00 from unrelated persons who pay personal income tax based on self-employed activity (craftsmen) will be considered tax deductible expense.
  • Donations for transportation and hospital accommodation costs are considered tax deductible donations if up to 2% of the previous year revenue.
  • Deadline for filing tax return in case of mergers and divisions is reduced to 30 days (previously 4 months). In case of initiating liquidation/ bankruptcy process, the deadline is also reduced to 30 days (previously 4 months). Deadline for filing tax return at the end of the liquidation/ bankruptcy process is reduced to 8 days (previously 4 months).
  • Bankruptcy and liquidation assets, as legal successors of the liquated company, are subject to corporate profit tax.
  • If on the last day of liquidation or other process by which the company ceases to exist all company’s assets are not sold, deemed income from sale must be included in the tax base.

Harmonization with acquis of the EU – Rules against tax avoidance

  • In case of transfer of assets from the registered seat of the taxpayer to a permanent establishment in another EU Member State or a third county, and vice versa, the difference between the market and the tax value of the assets is subject to tax. This also applies in cases of transfer of tax residency to another EU Member State or third country,
  • Rules against so-called “Hybrid mismatches” (i.e. rules for the avoidance of double tax deduction) and rules in case of “Tax residency mismatches” (i.e. rules for taxation in case of dual residency) are introduced.

  • The aforementioned changes will generally apply upon filing 2020 corporate profit tax return, or, for the tax periods which begin from 1st January 2020.


  • Basic non-taxable personal allowance is increased from HRK 3.800 to HRK 4.000.
  • Tax reliefs are introduced for persons up to 30 years of as reduction of their annual personal income tax liability, in the following percentages:
             - For persons up to 25 years: 100%; and
             - For persons from 26 to 30 years: 50%
      The respective tax reliefs can be used up to the annual personal income tax liability of HRK 360,000.00. The tax reliefs cannot be used for self-employment income.
  • The following categories of non-taxable income have been introduced:
             - Rewards to students during apprenticeship up to the prescribed amounts; and
             - Compensations to students during dual education up to the prescribed amounts.
  • Additional and supplementary medical insurance premiums paid by employers to employees up to the certain amounts are not considered taxable income.
  • Donations to individuals collected through humanitarian and publicly announced activities are not considered taxable income.
  • In order to prevent tax evasion, certain arrangements will be taxed as employment arrangements. More detailed definition of such arrangements and conditions will be prescribed by the Regulations.
  • In order to ensure correct assessment of taxes and contributions, the current employer will have insight into the employee’s non-taxable receipts effected during the tax period.
  • Tax treatment of bad debt write offs by self-employed taxpayers (crafts) liable to personal income tax is equalised with the tax treatment of bad debt write offs prescribed for the corporate profit taxpayers.
  • Self-employed taxpayers (crafts) liable to personal income tax on a lump-sum basis will no longer pay tax based on the received tax resolutions. The tax liability will be assessed based on so called PO-SD form submitted by the taxpayers to the Tax Authorities.
  • Tax on income from renting a property in principle will be payable according to the property location.

Preventing utilisation of the tax benefits against the purpose of the law

  • Utilisation of tax benefits against the purpose of the law and tax avoidance are strictly prohibited, specifically if:
             - An employer who for the work which should be agreed as an employment agrees on different type of job arrangements in order to avoid payment of higher taxes; or
             - An entrepreneur frequently changes legal form of conducting his business activities with the purpose of paying tax at the lower rates; or
             - An entrepreneur enters into related party transactions solely with the purposes of using a lower tax rate.

In the above cases, taxes will be assessed as the benefits had not been utilised.

Related party transactions

  • Related party transactions will be recognised only if unrelated parties would enter in the same transactions under the same or similar conditions.

Selection of the taxpayers for the tax audit

  • When selecting taxpayers for the tax audits, the Tax Authorities will prioritise: large taxpayers, taxpayers who utilise prohibited tax benefits and taxpayers who enter in transactions with related parties to utilise certain tax benefits.


  • From 1st April 2020, invoice related documents issued prior the respective invoices (e.g. offers, orders, fee quotes, etc.) which are marked “This is not a fiscalised invoice” and contain payment details, must be fiscalised as well as the respective invoice.
  • Fiscalisation of supporting documents does not exclude obligation to fiscalise the related invoice as well (Tax Authorities will link supporting documents with the fiscalised invoices).
  • Taxpayers who issue invoice related documents that need to be fiscalised are obliged to report that to the Tax Authorities via prescribed fiscalisation form until 31st January 2020.
  • From 1st January 2021, QR code must be stated on every fiscalised invoice, primarily to ease checking fiscalised receipts by citizens. Taxpayers who are not obliged to issue so called fiscalised invoices (i.e. the invoices are not subject to payments in cash and/ or credit cards) are not obliged to state QR codes on their invoices.


  • Operators in commercial railway transportation of goods and passengers can request refund of excise duties on diesel fuel.
  • Electric energy used for running trains and trams is exempt from excise duties.
  • Introduction of special measures of control over energy-generated products, i.e., every person who sells, supplies, buys for further sale or disposes of energy-generated products must obtain special approval from the relevant Customs Authority.


  • If next of kin (e.g. father and son) acquires used motor vehicle based on donation agreement, exemption from payment of stamp duty is possible only if this vehicle was previously registered on the donator.


  • Special tax is levied on beverages with high contents of sugar, caffeine and additives, such as metal-ksantin and taurine. Calculation of special tax will be prescribed by a separate decree.