News

Act on Amendments

Tax News, December 2013

The following regulations have been published in the Official Gazette 148/13:

  • Act on Amendments of the Corporate Income Tax Act;
  • Act on Amendments of the Value Added Tax Act;
  • Act on Amendments of the Personal Income Tax Act;
  • Act on Amendments of the Act on Contributions.

Amendments of the mentioned acts entered into force eight days from the date of publication in the Official Gazette with exception of certain provisions which are indicated below. Short summary of the amendments is presented next.

Act on Amendments of the Corporate Income Tax Act

Entered into force eight days from the date of publication in the Official Gazette:

  • Entertainment expenses do not include expenses of goods and merchandise adapted by a taxpayer for business entertainment purposes, which bear the label “not for sale”, and other promotional items bearing the name of the firm or merchandise or other advertising items (glasses, ashtrays, table cloths, mats, pencils, planners, lighters, pendants, etc.) disposed at the selling area of the purchaser. If such items are given to consumers, they will not be considered as entertainment provided that their individual value does not exceed HRK 160, excluding value added tax (previously set at HRK 80).
  • Loans received form related parties are also considered as shareholder loans and thin capitalization rules are also applicable to such loans.
  • Write-off of receivables for which statute of limitations has expired and which do not exceed HRK 5,000 per individual debtor who is not a private individual is considered as tax deductible provided that the receivables refer to unrelated parties.
  • Tax deductible write-off of those receivables related to housing loans and related interest provided by financial institution to unrelated private individual is possible for economic and socially justified reasons in line with criteria and procedures developed by the financial institution. The write-off is tax deductible in case such criteria and procedures are equally applied to all housing loan debtors. Additionally, financial institution can treat a write-off of receivables related to business loans and related interest as tax deductible if loan liabilities significantly threaten investment projects or continuation of business activity.
  • Withholding tax is paid at a rate of 20% for all services paid to enterprises with permanent establishment or headquarters in countries which are published in the list of countries issued by the Ministry of Finance.
  • Write-off of receivables from unrelated private individuals for which statute of limitations has expired is recognized as tax deductible up to HRK 2,000, if total receivable per individual debtor does not exceed HRK 2,000 and if write-off is conducted until 31 December 2013 at the latest.
  • Penalty provisions are amended.

Enter into force from 1 January 2014:

  • Calculation of Corporate Income Tax prepayments on the basis of the tax return submitted for the last tax period does not involve tax reliefs decreasing the tax base (with the exception of tax reliefs granted for several tax periods).
  • Tax reliefs are prescribed for taxpayers conducting activities in the areas of special concern. The relief, depending on the activity area, employment and residence of the employees, is granted as the tax exemption in the amount of 100% and 50% of the prescribed tax rate.

Act on Amendments of the Value Added Tax Act

Entered into force eight days from the date of publication in the Official Gazette:

  • VAT exemption for the supply of goods and services under diplomatic or consular arrangements and deliveries to international organizations and their members – when goods are not shipped outside the territory of the Republic of Croatia, will be realized by submission of claim for VAT refund. VAT exemption procedure, deadlines for VAT refund, minimum invoice amount and etc. will be prescribed by the regulations.
  • Extension of the list of goods which can be placed into tax warehouses and exemption from paying VAT on supplies of goods within the tax warehouses;
  • Clarification of the way how to determine taxable amount for the acquisition of goods from another Member State;
  • Simplification of the requirements for deduction of VAT charged upon the acquisitions of goods within the Member States in terms of possession of adequate invoice;
  • Application of domestic reverse charge mechanism for the supplies provided by a taxable person who is signed in VAT Registry, and not for the taxable person who has allocated VAT number but is not taxable person for VAT purposes;
  • A competency of customs office for procedures related to customs debt – procedures are conducted in accordance with customs regulations.

Enter into force from 1 January 2014:

  • The increase of reduced VAT rate from 10% to 13%;
  • It is envisaged that 13 % of VAT rate will be to be applied to the magazines, periodically issued by a publisher that does not hold a statute of a media, with the exception of those that entirety or mainly, contain advertisements or serve for advertising purposes;
  • Abolition of restrictions on the minimum range of at least 25,000 words for a journalistic authorial text in daily newspapers which are taxed at reduced VAT rate of 5%

Act on Amendments of the Personal Income Tax Act

Entered into force eight days from the date of publication in the Official Gazette:

  • Award of share option purchase of shares provided to the employees by the employer is considered benefit in kind on the basis of employment income.

Enter into force from 1 January 2014:

  • Abolishment of the right on increased personal allowance to residents with registered residence or habitual abode in the area of special national concern and mountain area except City of Vukovar.

Act on Amendments of the Act on Contributions

Act on amendments and changes in the Act on contributions implements provisions allowing implementation of the Regulation (EU) on the coordination of social security systems 883/2004 and 987/2009 relating to private persons performing business activity (as employee or self-employed person) in the EU area.

Among other changes, the Act abolishes employer’s requirement to calculate special contribution for health care abroad at the rate of 10% for the assignees sent on assignment to the other EU member state or state with which Croatia has signed Social Security Agreement.

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