Croatia – recent changes to tax legislation


Reduced VAT on heating

Based on a temporary measure from 2022, supplies of natural gas, district heating, firewood, pellets, briquettes and wood chips are subject to a VAT rate of 5% instead of 13%.

This measure was initially planned to last until 31 March 2023. However, as inflationary pressures have not subsided, the Croatian Government decided to keep the 5% rate until 31 March 2024.

The respective amendments to the Croatian VAT Act will come into force on 1 April 2023.   

Changes to the Contributions Act

To reduce inflationary pressures and improve citizens’ well-being, the anti-recession measures introduced in 2009 have now been abolished:

  • Relevant to independent artists whose mandatory social contributions are paid from the state budget, the coefficient used for calculating the contributions is increased from 0.8 to 1.2. This should effectively lead to higher pension and health contributions paid on their behalf.
  • Pensioners who have been paying additional health contributions at the rates of 1% and 3% on pensions will no longer have to do so. This should have a positive effect on the net income of 32 thousand pensioners.

The amendments to the Contributions Act will come into force on 1 April 2023.

The transposition of DAC 7 rules into domestic legislation complete

After receiving a letter of formal notice for not fully transposing the Directive (EU) 2021/514 into national legislation on time, Croatia completed the implementation of DAC 7 rules by transposing the Annex V of the Directive. DAC 7 rules are now part of the Act on Administrative Cooperation in the Field of Taxes and the Bylaw on the Automatic Exchange of Information in the Field of Taxes.  

In line with DAC 7 rules, platform operators are obliged to report certain information, including income that the sellers earn from transactions realized through a digital platform. The following activities will be subject to reporting: sale of goods, rental of any mode of transport, personal services and rental of immovable property.

The Act further introduces the framework for and main principles of a joint audit, supplementing existing provisions on the presence of officials from another Member State in administrative offices, participation in administrative enquiries, and simultaneous controls. This should enable the easier transfer pricing controls but also improve other areas of common interest to the authorities of Member States. Royalties are added to the categories of income and capital for mandatory automatic exchange.

Although the transposition of DAC 7 rules into the domestic legislation has been finalized in March 2023, note that they apply from 1 January 2023 onwards.