Tax changes in application from January 1st 2021

From January 1st. 2021, tax changes are introduced based on amendments and supplements to the Income Tax Act, the Corporate Tax Act and the Value Added Tax Act, from which we present the most significant changes in the following text.

The amendment to the Income Tax Act reduces taxation rates

  • From 24% to 20% for yearly income up to 360.000 HRK, or monthly income up to 30.000 HRK
  • From 36% to 30% for yearly income over 360,000 HRK, or monthly income over 30.000 HRK, and
  • From 12% to 10% for flat-rate taxation of activities, such as apartment renting, which in practice means that private income will rise from approximately 60,00 HRK to more than 1,000,00 HRK, due to lesser taxation rate, depending on the amount of salary and other specific circumstances.

For renters, it is important to note that from January 1st 2021, notaries public are obligated to declare income tax from rent of movable and immovable property, of course in relation to the contracts certified or concluded before them.

The private sector has been significantly unburdened with amendments to the Corporate Tax Act, which reduced the taxation rates from 12% to 10% for yearly income up to 7,5 million HRK, i.e. approximately 1 million EURO, which directly affects over 90% of business owners. This means that an individual business owner, depending on the level of income, will be able to save up to 150,000 HRK, i.e. approximately 20.000,00 EUR annually due to lesser taxation rates. However, it is to be underlined that the law is by application only from January 1st 2021, meaning the new rate will be applied to income generated in 2021, that is to say, the income that will be paid to company members in 2022.

As a result of the significant impact of the pandemic crisis on performers, tax rates have been reduced from 15% to 10% for performances of foreign performers, such as artists, athletes and entertainers.

Substantial changes have also been made in the amendments to the Value Added Tax Act (VAT) increasing the threshold for VAT calculation based on paid fees from current 7,5 to 15 million HRK, that is to say, from 100 000 EUR to 200 000 EUR.

At the regional level of the European Union, presumably in response to the increase in the internet market due to the effects of the pandemic crisis, a change has been introduced that will affect citizens who buy online and will be required starting from July 1st 2021, to pay VAT for small shipments imported into the EU (the value of which is less than 22,00 EURO), which were previously exempt from VAT.

In conclusion, for workers who work for minimum wage, it should be noted that on October 29th , 2020 the Government adopted the new Regulation on minimum gross salary of 2021 amounting to 4.250,00 HRK, which will increase the minimum net wage by 4.6% or from the earlier 3.250,00 HRK in 2019 to 3.400,00 HRK in 2021.