Croatia – Amendments to Personal Income Tax Regulations
Croatia – Amendments to Personal Income Tax Regulations
In the last few years, significant amendments to Croatia’s personal income tax legislation have resulted in a reduction of the tax burden of many individuals. Continuing this trend, as of 1 September 2019, the range of “receipts” that can be provided to employees as non-taxable has been extended, and includes such things as employee meal costs, accommodation expenses, child-care costs, etc.
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In the last few years, significant amendments to Croatia’s personal income tax legislation have resulted in a reduction of the tax burden of many individuals.1 This trend, yielding a steady reduction in the once-heavy tax burden faced by Croatian taxpayers, continues. As of 1 September 2019, the range of “receipts” that can be provided to employees as non-taxable has been extended.
WHY THIS MATTERS
The changes could help to provide:
- additional possibilities for employers to (re)structure remuneration packages;
- a reduction in the tax burden for those employers that already provide their employees with reimbursements as noted in the table below;
- a positive impact on labour mobility and labour retention in Croatia;
- an enhanced competitiveness for Croatian employers; and
- a boost to foreign investment into Croatia, given that the costs of seconding foreign workers to work on projects in Croatia will be reduced.
Amendments in Effect from 1 September 2019
| Additional non-taxable payments2 | Amount | Additional requirements |
|---|---|---|
| Employee meal costs based on supporting documentation | Up to HRK 12,000 annually |
|
| Cash lump-sum payment covering the costs of an employee’s meals | Up to HRK 5,000 annually |
|
| Accommodation expenses | Up to the amount of actual expenses |
|
| Reimbursements of regular child-care costs (pre-school) | Up to the amount of actual expenses |
|
| Reimbursements for tourism, catering, and other service expenses for an employees’ holiday* | Up to HRK 2,500 annually |
|
An increase of the amount of the non-taxable daily allowances for business trips within Croatia > 12 hours |
HRK 200 (instead of previous HRK 170) |
|
> 8 to 12 hours |
HRK 100 (instead of previous HRK 85) |
* Personal income tax regulation provisions that relate to reimbursements for tourism, catering, and other service expenses for an employees’ holiday are not effective as of 1 September 2019. It will be possible to provide respective reimbursements as non-taxable, once regulated by the Croatian Ministry of Tourism.
FOOTNOTES
1 For prior coverage, see GMS Flash Alert 2019-020 (6 February 2019).
2 To see the Amendments on personal income tax bylaw (Official Gazette (Narodne Novine) 80/19) (in Croatian), click here.
HRK 1 = EUR 0.135
HRK 1 – USD 0.148
HRK 1 = GBP 0.1195
The information contained in this newsletter was submitted by the KPMG International member firm in Croatia.
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