October 2022 tax legislation amendments

Croatia

Aiming to further relieve the impact of the inflation on citizens’ wellbeing, Croatia introduced certain tax cuts that came into effect on 1 October 2022.

An increase in tax-free payments to employees should result in higher net income for inpiduals, while the reduced VAT rates should bring energy costs down.

Annual amounts employers can provide to employees free of tax

NEW

OLD

HRK

EUR

HRK

EUR

Christmas/vacation bonus

5,000

663.61

3,000

398.17

Severance payment upon retirement

10,000

1,327.23

8,000

1,061.78

Gift to the employee

1,000

132.72

600

79.63

Gift for each child up to 15 years of age

1,000

132.72

600

79.63

Performance and other bonuses

7,500

995.42

5,000

663.61

Lump sum meal allowance

6,000

796.34

5,000

663.61

Usage of private car for business purposes

3 per km

0.40 per km

2 per km

0.27 per km

Lower VAT burden

  • The reduced rate of 5% instead of 13% applies to district heating, firewood, pellets, briquette, and wood chip until 31 March 2023.
  • A 0% VAT rate has been introduced and applies to supplies resulting from the installation of solar panels on private residential dwellings and their surroundings and on public buildings and other buildings used for activities of public interest.

Changes announced to the Personal Income Tax Act

With a view to increasing inpiduals’ net income (in most cases – parents) and to encourage increased usage of renewable energy sources, the following amendments are expected to come into force soon:

  • An increase in the annual income that dependent family members may receive and still be treated as such for purposes of tax calculation for the guardian. This means that the guardian will be able to use a dependent family member tax allowance (i.e. decrease its taxable income) if the income of that family member is below HRK 24,000 / EUR 3,185.35 per year. Currently, this threshold is set at HRK 15,000.
  • Income that inpiduals generate from the sale of home-produced electricity will be taxed as income from self-employment.

For more details on the above or about any other tax question, please contact our CMS team in Croatia.