Proposal for the Additional Corporate Income Tax Act

The Proposal for the Additional Corporate Income Tax Act (the "Proposed Act") was published and is open for public consultation until 1 December 2022. Below we present the main points of the Proposed Act:

• Additional corporate income tax:
  • applies to all taxpayers (legal entities or individuals subject to corporate income tax) with annual revenue above HRK 300 million in 2022;
  • will be paid on the additional corporate income tax base representing a positive difference between the taxable profit of the tax period (2022) and the average taxable profit of the previous four tax periods (namely, years 2018, 2019, 2020 and 2021) increased by 20%;
  • will be paid on the tax base mentioned above at a rate of 33% and would apply to the tax period starting in 2022;
  • base should be assessed regardless of whether the taxpayer has a corporate income tax liability under the Corporate Income Tax Act. Tax shields prescribed by special regulations, such as the right to investment incentives or the use of tax losses brought forward from earlier periods, should not be considered when determining the additional corporate income tax base. Accordingly, it is possible that some taxpayers will not have corporate income tax liability based on tax losses carried forward but will be subject to the additional corporate income tax. On the other hand, there may be cases when taxpayers will not only pay corporate income tax at 18%, but also the additional corporate income tax at the rate of 33%.
• If a taxpayer recorded a tax loss in one of the previous four tax periods, the taxable profit of that tax period will be zero (0) for the purposes of calculating the additional corporate income tax. As a result, taxpayers who recorded a tax loss in all four previous tax periods and recorded annual income of more than HRK 300 million in 2022, will have the entire taxable profit stated on lines 36 or 39 of the corporate income tax return subject to additional corporate income tax.

• The deadline for filing of the additional corporate income tax return is the same as the deadline for the filing of the corporate income tax return.

• The Proposed Act also foresees taxpayers who will be exempt from paying the additional corporate income tax. Specifically, the Proposed Act stipulates that these are newly founded legal entities that commenced business in 2022 and legal entities that are terminating their business operations in 2022.

• In addition, income items that would be exempt from the additional corporate income tax base are:
  • income resulting from write-offs of liabilities by creditors in pre-bankruptcy and bankruptcy proceedings;
  • income in bankruptcy proceedings resulting from the sale of assets and creditor settlements;
  • income or profit from the sale of long-term tangible or intangible assets used in a manufacturing process and the provision of services to a third party.
• If a taxpayer is obliged to pay a solidarity contribution in accordance with Council Regulation (EU) 2022/1854, this taxpayer will not be additionally subject to the additional corporate income tax.

• If the above discussed Proposed Act enters into force, the tax return form and other details, will be regulated by the regulation issued by the Minister of Finance, within 90 days from the Additional Corporate Income Tax Act’s entry into force.

Contacts:

In case of any questions, comments, or suggestions regarding amendments to the Proposed Act, please feel free to contact us.

Natko Sertić
Partner
nsertic@deloittece.com

Ida Zrilić
Director
izrilic@deloittece.com