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Croatia

16 December 2020

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Croatia Publishes Tax Reform Laws for 2021

On 11 December 2020, Croatia published its tax reform laws for 2021, including the Law on Amendments to the Income Tax Law, the Law on Amendments to the Corporate Tax Law, and the Law on Amendments to the Value Added Tax Law. The main measures include the following:

  • A reduction in the two-bracket individual income tax rates from 36% and 24% to 30% and 20%;
  • A reduction in the individual income tax rate for lump-sum taxation of small and craft businesses from 12% to 10%;
  • A reduction in the individual income tax rate on dividends and profit shares from 12% to 10%;
  • A reduction in the corporate tax rate for SMEs from 12% to 10%, which applies for SMEs with annual revenue of up to HRK 7.5 million;
  • A reduction in the withholding tax rate on dividends and profit shares from 12% to 10%;
  • A reduction in the withholding tax rate on fees paid to foreign performers from 15% to 10%; and
  • Several VAT amendments including:
    • an increase in the threshold to apply the cash accounting scheme for VAT from HRK 7.5 million to HRK 15 million, with the transitional provision that taxpayers that did not exceed the new threshold in 2020 may submit a statement to the tax authority by 20 January 2021 to apply the scheme;
    • the repeal of the VAT exemption for low value imported goods (EUR 22) from third non-EU countries; and
    • various measures to harmonize domestic VAT rules with EU directives, including in relation to distance sales and sales through the use of an electronic interface.

The amendments generally apply from 1 January 2021, although certain VAT amendments apply from 1 July 2021.

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