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Changes in Tax Regulations in Force Starting March 1, 2012


  1. VAT Act

·         A new general VAT rate of 25% is introduced, in place of the current rate of 23%

·         Exceptions are: oils, fats, sugar, water delivery, baby food and food for infants, where middle tax rate of 10% will be applied

·         One cannot use pre-tax on purchase of personal automobiles, on all expenses related to personal transportation (rent-a-car expenses, fuel, service etc.), and on representation

·         Penalties for responsible persons at the tax payer’s have been increased from 10,000.00 kn to 40,000.00 kn, and from 20,000.00 kn to 50,000.00 kn.

  1. Law on Profit Tax
    • Taxation of dividend and net profit at a rate of 12% per withholding has been introduced (this means that tax is paid at the same time with the payout of profit to the owners), on amounts over 12,000.00 kn annually; no matter the year in which the profit was realized.
    • This withholding tax isn’t paid only in the case when recapitalization of the company (instead of payout) is done with the achieved profit. In this case, it’s necessary to deliver a proof that recapitalization has been registered in the Register of the competent Commercial court, no later than October 31 of the year in which profit tax return was filed.
    • Tax base (according to the current provisions of the Law) can be reduced on the tax return application for all receivables the entrepreneur didn’t manage to collect, if over 120 days have passed from maturity date of those receivables until the end of the tax period for which the tax return is being filed, and if they haven’t been collected by the 15th day before filing tax return (so-called value adjustment of receivables)

This deadline has been abbreviated to 60 days (from the maturity date to 31st December). However, this abbreviated deadline applies only to receivables incurred after March 1, 2012. For other (older) receivables the deadline remains 120 days.

  •            If a natural person – a stakeholder – has been paying out net profit  

advance payments to themselves during the year, and at the end of the period it’s established that the profit doesn’t suffice to cover the paid out advance payments, they must calculate and pay tax at a 40% rate on this difference

  •            The only net profit one doesn’t pay tax on is the one realized by

           December 31, 2000.

  1. Law on Income Tax
  • Personal deduction has been increased from 1,800.00 kn to 2,200.00 kn
  • Personal deduction of retirees has been increased from 3,200.00 kn to 3,400.00 kn
  • Tax rates have remained the same, tax classes have been changed: income of up to 2,200.00 kn is taxed at a 12% rate, from 2,200.00 kn up to 8,800.00 kn a 25% rate is calculated, and amounts over 8,800.00 kn are taxed at a 40% rate
  • A dependent family member (a dependant) is considered to be a member whose annual receivings are under 11,000.00 kn
  • Pensions from abroad are also taxed (retirees must take care of calculating and paying tax themselves, within 8 days from receipt of pension)
  • If, at the end of the year (due to taxation system change), and according to the final payroll account for employed workers, there is a difference in tax payment which incurred exclusively due to the change of the law, then the employer isn’t liable to do the annual tax calculation and pay the incurred difference.
  • The obligation of filing DU form to Tax authorities is cancelled (which was, by the way, supposed to be delivered to Tax authorities by February 15, 2012 for the first time)
  1. Contributions Act

·         Health insurance contribution rate is reduced from 15% to 13%

·         Government of the Republic of Croatia is authorized to prescribe the way of implementing payment of contributions through a special Ordinance, as well as who is liable to file reports, deadlines and ways of reporting, i.e. the ˝rules˝ related to collecting contributions from and on wages

·         Fines from 100,00.00 kn up to 1,000,000.00 kn are foreseen for taxpayers who don’t implement payment of contributions in accordance with the above stated Government Ordinance, plus fines of 5,000.00 kn up to 20,000.00 kn for responsible persons within the legal person.



Published 17/02/2012


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