Croatia: Tax Update 2018

27. February 2018

Value Added Tax

  • It is possible to deduct 50 % of input VAT when purchasing and leasing passenger vehicles and other means of passenger transport for amounts exceeding HRK 400.000 per vehicle (including all related costs).
  • Threshold for VAT registration is increased to HRK 300,000 (ca. EUR 40,000).
  • For taxpayers who import machinery and equipment listed in Addendum to VAT Act with a value exceeding HRK 1million, the reverse charge mechanism would apply.

Personal Income Tax Act

  • Accommodation and food that employers provide for employees with fixed term seasonal employment agreements, and who perform their work in a location which is not their place of residence or habitual abode is no longer considered as income. In order to apply this exemption, costs of accommodation and food must be invoiced to the employer and cannot be paid in cash.
  • Water and other non-alcoholic drinks provided by an employer to its employees during working hours free of charge are not considered a taxable benefit in kind.
  • Changes to the taxpayers’ Tax Card (PK) can be made electronically.
  • The annual limit for non-taxable benefits in kind amount (gifts, services/goods provided without remuneration etc.) to employees is increased from HRK 400 to HRK 600.
  • The RPO form for taxpayers who receive income from abroad can also be filed by the employer and not only by the taxpayer.

Corporate Income Tax

  • Non-deductible vehicle costs have been increased from 30 % to 50 %, so the tax base will be increased to 50 % of the vehicle costs.

DTT Kosovo

  • The Double Tax Treaty (DTT) between Croatia and Kosovo came into force on 4th December 2017 and became effective on 1st January 2018.
  • The applicable tax rates according to the DTT are as follows:
    ƒƒ   Dividend:
    ƒƒ      5 % if the beneficial owner holds at least 25 % of the shares
    ƒƒ      10 % in all other cases
    ƒƒ   Interest: 5 %
  • Eligible tax residents of Croatia and Kosovo will be able to enjoy preferential DTT rates as of 1st January 2018.

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