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29. januarja, 2019

CROATIA: Country tax newsletter – January 2019


With the amendments of the tax regulations that came into force on 1 January 2019 year, significant changes were introduced in the taxation of salaries and the calculation of compulsory contributions from salaries and wages:

  • Non-taxable rewards may be paid to employees up to 5.000,00 HRK per year – by an employer to employees, but it can also be paid out to themselves by the craftsmen and by all those who have registered independent business activities.
  • There remains the possibility of paying non-taxable gifts in the annual amount of 2,500.00 HRK (Christmas gifts and similar).
  • Reduction of contributions for compulsory insurance in case of unemployment and contributions for health protection at work.
  • Increase in health insurance contribution to 16.5% on the basis of gross salary.
  • Change in tax brackets – In the calculation of personal income tax, the rate of 24% will be applied to the monthly tax base of up to HRK 30,000.00 and the tax rate of 36% on the monthly tax base above HRK 30,000.00. The annual tax base for the application rate of 24% is increased to 360,000.00 HRK, and the annual amount of the base exceeding 360.000,00 HRK will be taxed at a rate of 36%.
  • Personal allowance for support of family members – stepmothers and stepfathers will be able to use an increased personal allowance for support of their stepdaughters and stepsons, as well as stepchildren will be able to use it for support of their stepmothers and stepfathers.
  • The list of receipts that are not taken into account when calculating the annual limit of 15,000.00 HRK of total receipts that can be realised by supported family members and taxpayer’s children, while still retaining the status of a supported family member. They may, amongst other things, make unlimited amounts of indemnity compensation due to serious injury and formally recognised disability, scholarships paid by legal and physical persons, non-profit institutions, etc., scholarships and awards for excellence granted to students disbursed from the state budget, funds and programs of the EU and other international donor funds for the purpose of education and professional training, and support for a child up to the age of 15 or up to the end of elementary school education paid to the children of former employees who have died or completely disabled for work.
  • Certain public transport costs in the place of business trip should not be paid out of the business trip allowance and are deemed a non-taxable income to an employee.
  • Receipts from optional purchase or grant of company shares is now considered an income from capital and taxed at a rate of 24%.
  • Benefit in kind received based on more favorable interest rates –considered as the difference between the contracted lower and the newly prescribed interest rate of 2%.
  • The obligation to keep records and reports on paid insurance premiums that are not subject to income tax and paid out income from the insurance have been abolished. The last DMO form should be submitted for payments made by the end of 2018 year.
  • Income received on the basis of gifts from legal parties and physical persons, or receipts for the reimbursement of costs of transportation and accommodation in a health institution is no longer considered as taxable.
  • Textbooks and notebooks granted by local and regional government institutions to elementary and high school students and formal and informal education programs for unemployed and other socially vulnerable persons financed from the EU budget and EU funds and similar international funds are no longer considered as income.


According to the announcements, a number of VAT provisions have been amended and come in force in 2019 year. Some of the changes that must be mentioned are:

  • The rate of 5% now applies to all books and daily newspapers and to all drugs and remedies (not just those given to a doctor’s prescription).
  • The rate of 13% applies to fresh and frozen meat, vegetables, fruit, animal feed, baby diapers and all newspapers and journals published periodically (including electronical format).
  • Along with a regular VAT form, VAT taxpayers must also regularly submit the Book of Incoming Invoices, in a special format. The only exemption are taxpayers without headseat in the Republic of Croatia who perform only occasional road transport of passengers and small taxpayers.
  • Taxpayers who provide international road transport of passengers prior to performing any service in the territory of Croatia must make an official report to the Croatian Tax Authority.
  • After crossing the limit of deliveries in the amount of 300,000.00 HRK in one year, an entrepreneur must be registered with the Register of VAT payers from the first day of the following month.
  • Taxpayer who does not carry out the activity over a period longer than 12 months will be removed from the Taxpayer Register.
  • Recognition of 50% of pretax is only possible for personal cars, not for other personal transportation means if they are not used solely for the purpose of business activity. In this case, 50% of pretax on tax base (acquisition value) exceeding 400,000.00 HRK may also be recognised in VAT calculation.
  • The obligation to take over a tax liability (»reverse charge«) from a taxpayer who does not have a registered office, residence and habitual abode in the Republic of Croatia but has been registered with the Croatian VAT system is hereby abolished. This applies to deliveries whose place of VAT taxation is in Croatia. Because of that, foreign companies with the Croatian VAT number are no longer required to submit INO-PPO form.
  • In the event of any doubt as to the validity of the PDV ID, the Tax Authority may require the taxpayer to submit a payment instrument for a maximum of 12 months. If the taxpayer does not comply with the claim, the VAT number is terminated and the appeal does not delay the enforcement of the decision on termination.
  • The Tax Authority or the Customs Authority may apply for a VAT payment insurance instrument when acquiring used transportation vehicles from another EU member country, prior to their registration.


In order to prevent the alleged abuse of the right to use health and pension insurance, compulsory pension and health insurance for members of the management and liquidators is prescribed as a minimum monthly basis, which represents the average gross salary, and for 2019 year it amounts to 8.448,00 HRK. Registration on compulsory pension and health insurance must be made no later than 8 days from the date of entry into the Court Register if the person is not insured on some other basis.

Insurance costs should be incurred by directors/liquidators personally, these are not considered to be the costs of the company. If these compulsory contributions are settled from the company’s assets, then are considered a taxable net income of directors/liquidators and are taxed as Other income.

Management Board members, executive directors, managers and liquidators who are employed with the company (either in which they perform the function or with any other company), or are secured on some other basis, are in a better position. The minimum monthly base in this case is multiplied by the average salary and the coefficient 0.65, which amounts 5.491,20 HRK.

If for any of the persons holding mentioned functions compulsory contributions are calculated on a monthly base lower than the one prescribed by law, the Tax Authority will determine their annual base and calculate the annual amount of the contribution due as the difference between the prescribed and paid amounts during the year.

Board members, directors and liquidators who are foreigners also have the obligation to register with the compulsory insurance if they are not insured in their country or there is no Social Security Agreement between their home country and the Republic of Croatia.

Confirmation on the existence of social  insurance in their home country should not be older than 6 months. Most countries issue such a certificate in Form A1. Confirmation A1 is kept by a foreigner during his stay and work in the Republic of Croatia.


New amendments to the General Tax Law introduced some changes and new provisions concerning the taxation in the Republic of Croatia. The most interesting changes relate to new provisions regarding the taxation procedure (tax inspection) rules:

  • A taxpayer who is in a process of tax inspection or another tax procedure, may engage an authorised person, expert assistant and/or tax advisor. Authorised person may be a certified tax advisor or an attorney.
  • The Customs Authority is introduced as a body that can conduct the verification procedure and the determination of the facts relevant to the taxation of taxpayers, along with the Tax Authority.
  • The Minutes on Tax Inspection, issued by the Tax Authority following the tax inspection procedure, may be issued in electronic form and delivered to the parties electronically.
  • A taxpayer is given the opportunity to waive a right to the Objection to the Minutes on Tax Inspection.
  • The taxpayer is obliged to report to the Tax Authority the number of any business bank account outside the Republic of Croatia and other facts for which reporting is prescribed by law and are not available to the Croatian Tax Authority through the exchange of data with other public law institutions.


When issuing documents containing payment information, and prior to issuing a fiscalised invoice, such as a quotation, bill, calculation, order etc., on them should be added a note “THIS IS NOT A FISCALISED INVOICE”.

The note does not have to appear on documents that precede the issuance of an invoice that will surely not be paid by cash neither will be fiscalised (transactional invoice).


With the aim of reduction of tax burden, the rate of the Real-Estate Tax has been reduced to 3% and is applied to real-estate transactions not subject to VAT, starting from 01st January 2019 year.


Should you need more information on the subjects mentioned above, please feel free to contact us.

Biljana Stanković, Certified Tax Advisor


Venkomir Horvatić, Country Manager