Amendments to Croatian personal income taxation and new double tax treaties
Tax News, January 2016
Taxation of capital gains
Amendments to the Personal Income Tax Act related to capital gains are in place from 1 January 2016. These Amendments were published in the Official Gazette 136/2015.
Capital gains are taxable from 1 January 2016. The above Amendments change the deadline for the payment of the capital gains tax. Before the Amendments were enacted, the taxpayer would have been required to calculate and pay tax within 8 days from the income receipt date, or on income receipt date in case the tax calculation and payment obligation had been taken over by the security fund manager. The Amendments change the filing deadline to a single date, which is 31 January of the current year for the previous tax year.
Amendments to the Personal Income Tax Regulations
Amendments to the Personal Income Tax Regulations were published in the Official Gazette 137/2015 and are in force from 24 December 2015.
Annual income tax return procedure
Under the changes, certain taxpayers are still required to file an annual income tax return: self-employed, international shipping vessel crew members and taxpayers that have not reported either taxable or non-taxable receipts during the tax year.
For all other taxpayers the Tax Authorities will apply the automatic procedure for annual personal income tax assessment, i.e. the Tax Authorities will assume the responsibility for the preparation of the annual tax return on behalf of those taxpayers who are either statutorily required or entitled to file tax returns, and realized:
- employment income received from two or more employers at the same time and/or
- income received directly from abroad and/or
- any other type of income, if the filing of an annual personal income tax return would result in a tax refund for the taxpayer,
provided that the employer, income payer or the taxpayer themselves (e.g. for income received from abroad) has reported the income on the prescribed form (JOPPD).
The above procedure will not apply to taxpayers not required to file an annual tax return if the voluntary filling would result in an additional tax liability.
The taxpayers to whom the above procedure applies and who wish to realize certain entitlements prescribed by the Personal Income Tax Act (e.g. increased personal tax allowance for dependants, allocation of personal tax allowance for dependants or foreign tax credit, etc), may apply for these entitlements on the ZPP-DOH form. The deadline for the application is the last day of February of the current year for the previous tax year.
The Tax Authorities are required to issue a tax assessment to the taxpayers to whom the above procedure applies by 30 June of the current year for the previous tax year. Taxpayers can appeal the assessment by 31 July.
Other changes and amendments to the Personal Income Tax Regulations:
- A business trip is defined as a trip lasting up to 30 days continuously.
- The non-taxable amount of daily allowance and fieldwork allowance when the employer provides meals to the employee has been regulated. If a single meal is provided on a business trip/fieldwork (lunch or dinner) the non-taxable part of daily allowance or fieldwork allowance is decreased for 30%. If two meals are provided (lunch and dinner), the non-taxable part of the daily allowance or fieldwork allowance is decreased for 60%.
- The list of requested documents for proving the defacto partnership allowing the entitlement to the dependants has been provided.
- Professional examination reimbursements made by an employer to individuals who are engaged in professional work training without formal employment is defined as a non-taxable receipt.
- The obligation to report the accommodation, transportation and road user charges costs on business trips on the JOPPD form is abolished. Reporting the cash reimbursements of daily allowances and private car use is still required.
New Avoidance of Double Taxation Agreements
The new Agreement on Avoidance of Double Taxation (“Treaty”) between Croatia and the United Kingdom, replacing the previous Treaty between Yugoslavia and the United Kingdom, is in place from 1 January 2016.
New Treaties are also in place with India, Portugal and Turkmenistan from 1 January 2016.
If you carry on business with any of the above countries, please contact us as there may be an impact to your business activities.