Tuesday, 15 February 2022

Tax Authority Gives Additional Explanations Regarding Tax Residence

ZAGREB, 15 Feb 2022 - After its call on citizens - Croatian residents to report income earned abroad in previous years, the Tax Administration on Tuesday published additional explanations given an increase in queries by Croatians living abroad and the incorrect information about tax residence in the public domain.

The authority said that tax payment is not determined based on citizenship or registered residence but based on tax residence as one's centre of interests. Persons with an immediate family (spouse and/or children) have tax residence where their family lives and where the family uses what it needs for everyday life (place of work, physician, school, kindergarten, etc.)

For a person who is single, tax residence is determined on the basis of the place where that person has resided for a period of more than 183 days, the Tax Administration said.

As for Croatian nationals who have left Croatia with their immediate family or as singles before 2016 or whose immediate family lives outside Croatia, they are presumed to no longer be Croatian tax residents and are therefore not obliged to report their total income in line with the principle of worldwide income in Croatia. Even if they own a property, which they have inherited or bought in Croatia, and which they possibly rent and pay taxes in Croatia accordingly, that does not make them Croatian tax residents, the Tax Administration says.

Due to incorrect information that has been circulating in public, many Croatians who have lived with their families outside Croatia for years are now wondering if they need to report anything in Croatia, so the Tax Administration stresses that they are not obliged to report their income in Croatia.

Only persons who have changed tax residence in the period since 2016 by having emigrated and transferred their centre of interests outside of Croatia but who have not deregistered from the Croatian tax residence register, must do so by submitting the TI form and a certificate of the other country's tax residence so that the change of tax residence could be determined retroactively, the Tax Administration says.

It also notes that the voluntary reporting of income from abroad is done by submitting an appropriate form and, if necessary, other forms available on the Tax Administration's website.

In the process of determining a possible tax obligation, in line with the voluntary reporting of foreign income, a method will be applied that is more favourable for the taxpayer, the tax authority said, among other things.

Sunday, 23 January 2022

Migrant Workers' Trade Union Accuses Tax Offices of Malpractice

ZAGREB, 23 Jan 2022 - On Sunday, the Croatian Trade Union of Migrant Workers, whose Croatian acronym is HSRM, accused local tax offices of malpractice and miscalculations in tax returns, claiming that such cases of negligence amount to violations of double tax avoidance agreements.

The HSRM says that it has come to this conclusion based on the findings made by its legal experts who analyzed cases of migrant workers whose tax returns were miscalculated.

The union issued a press release signed by union leader Franjo Lazar, stating that the state-level tax administration seems to be ignorant of cases of malpractice.

The union calls on its members to wait for some time before submitting their tax returns to the relevant authorities as negotiations are being conducted with the Finance Ministry, regarding the nine requests presented by the union with the purpose to improve the status of migrant workers.

According to the HSRM, an estimated 20,000 migrant workers come back to Croatia weekly or monthly and bring up to a half-billion euros annually.

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Tuesday, 12 October 2021

Record 1.6 Billion Kuna in Income Reported by Croatian Private Landlords

October the 12th, 2021 - September set an absolute record, with four times more income from Croatian private landlords who rent their accommodation out to tourists reported to the Tax Administration.

As Poslovni Dnevnik/Jadranka Dozan writes, experimental stories from the field and exact summary data shows that the post-season in Croatia this year well and truly exceeded the expectations of the past few weeks. The latest published figures of the Croatian National Tourist Board (HTZ), on arrivals and overnight stays in the first nine months, only confirmed this. There were 70 percent more arrivals and 52 percent more overnight stays than there were last year!

The last detailed picture of fiscalised receipts by activity/sector offers some clear indications of the financial effects of the strong growth of physical indicators at the end of the tourist season.

Four times more income reported than last year!

The Tax Administration claims that 1.6 billion kuna worth of fiscalised receipts were issued for accommodation services last month alone. Compared to last September, with a reported turnover of 420 million kuna, this is almost four times more. Moreover, September 2021's 1.6 billion kuna is also the largest ever fiscalised turnover for that month in that industry. In pre-pandemic 2019, 1.22 billion kuna was recorded in September, 1.19 billion was recorded back in 2018, and approximately one billion kuna was recorded two years before that. Apart from the Croatian private landlords who most directly reflect this truly excellent post-season, the data on fiscalisation in the catering and hospitality industry, primarily cafes and restaurants, also speaks volumes about it.

In September 2021, the catering and hospitality industry issued receipts worth a massive 1.9 billion kuna, which is an increase of more than 70 percent when compared to the same month last year, when they reported 1.1 billion kuna. If September alone is observed, this is a record number for the activity of preparation and serving food and beverages, because, for example, in that month back in 2019, 1.7 billion kuna passed through the fiscalisation system, 1.6 was recorded one year earlier, and a year before that, the figure stood at 1.4 billion.

For more, make sure to check out our dedicated business section.

Wednesday, 11 August 2021

Croatian Receipts Issued in 2021 Nearing Value of Those Issued in 2019

August the 11th, 2021 - The Croatian economy is recovering slowly but surely from the heavy blow it was struck by as a result of the coronavirus pandemic. When looking at the monetary value on Croatian receipts and bills issued in the last week, we can see some more than encouraging numbers and percentages.

As Poslovni Dnevnik/Jadranka Dozan writes, the value of Croatian receipts issued last week by all those enterprises in the fiscal system exceeded their amount in the comparable week last year by as much as a third, marking a significant step forward for the domestic economy in light of the unprecedented situation we continue to find ourselves in.

When it comes to trade, which was less affected last year than, for example, tourism, catering and hospitality and related activities, fiscalised turnover increased by 18 percent compared to the same week of 2020, while in the provision of accommodation, food preparation and serving, the value of issued Croatian receipts issued increased by as much as 67 percent.

Compared to the comparable week of pre-pandemic, record 2019, the total fiscalised turnover last week was 13 percent higher, with 10 percent more traffic being fiscalised in trade and 13 percent more in the hard-hit tourism and hospitality sector.

The Tax Administration also offered an overview for the period from the last week of February 2021, with which we can realistically compare the start of the pandemic last year. In the past five and a half months of this year, the total fiscalised turnover increased by 24 percent, which is, among other things, the result of 17 percent higher reported turnover in trade and an increase of 61 percent in tourism, hospitality and catering.

A comparison of this period of this and pre-pandemic 2019 shows that the amount of Croatian receipts issued is practically at the same level as before the pandemic, which is encouraging indeed.

However, while trade exceeds pre-crisis turnover by 4 percent, when it comes to accommodation, food preparation and serving, the recorded turnover still lags behind by approximately one fifth (-21 percent).

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Sunday, 20 December 2020

Vecernji List: HRK 15.5bn in Time-Barred Tax Debt Written Off Since 2017

ZAGREB, Dec 20, 2020 - A total of HRK 15.5 billion in tax debt, including HRK 6.8 billion on account of principal and HRK 8.7 billion on account of interest, owed by 346,570 taxpayers, has been written off since 2017 because the debt became time-barred, the Vecernji List daily wrote on Sunday.

The fact that a large part of the written-off debt is on account of interest shows that these are debts for which the Tax Administration kept data in tax records but for which it was not possible to enforce debt collection due to lack of assets, it was said in response to the daily's question. The daily had asked the Tax Administration for data on the total number of time-barred tax debts, the amount that had been written off because of that, and whether there was a need for any normative or organisational intervention in the tax system.

The data submitted is from 2017 because as of 1 January that year an important systemic change has been in force. Since then the statute of limitations for the right to collect taxes has been monitored ex officio, so taxpayers no longer have to submit a request.

Any tax debt that was not collected after six years, through the taxpayer's application or a decision of the tax authority, is written off from tax records.

As of 2017, if a tax debt has not been collected using all available enforcement proceedings during six years or if the debt is not secured by a pledge or mortgage, the tax authority is obliged to write off the time-barred debt from tax records.

Based on this, the Tax Administration conducts a systemic debt write-off once a year for debts that fall under the statute of limitations on 1 January that year.

Friday, 4 December 2020

HRK 8 bn will Have Been Disbursed for Support to Employers by Year's End

ZAGREB, December 4, 2020 - Labour and Pension System Minister Josip Aladrovic said on Friday that HRK 7.6 billion from the state budget had been disbursed so far for job retention grants and shortened working hours, and the amount could climb to HRK 8 billion until the end of this year.

Aladrovic told reporters that the government had already outlined three measures to bail out the economy.

They are job retention grants of HRK 2,000 to 4,000 as a monthly allowance for workers which means that if an employer is shut down for more than 14 days they receive HRK 4,000 for each employee. In this case, employers are also exempt from paying contributions, which amount to about HRK 470 million. The Croatian Employment Service (HZZ) updated that measure today, he added.

The second measure relates to covering a portion of all fixed costs during lockdown and that measure could amount to about HRK 250 million. A fall in turnover of more than 60% in regard to the comparable period last year (Dec 2020 to Dec 2019) makes businesses eligible for that measure. The Tax Administration will soon hammer out the criteria for this measure.

The third measure is a new package of COVID loans through the Hamag-Bicro agency amounting to HRK 1.3 billion.

This encompasses all branches that the government considers will be most exposed due to the anti-Covid epidemiological restrictions that are in force until December 21, said Aladrovic.

"We will monitor the epidemiological measures, evaluate their effect and accordingly upgrade economic measures, if necessary, in an effort to keep jobs and business activities," he added.

He underlined that negotiations with employer associations provided a series of proposals and one of them was to include micro enterprises that depend on all those who have been shut down.

"We have included them in the measures, however they have to prove a fall in revenue and that they have business connections with those sectors that are in lockdown," Aladrovic explained and added that they will be eligible for the job retention measure.

Compensation of fixed costs only applies to those who are in lockdown until December 21, he underlined.

According to Aladrovic there are three various sources to finance the jobkeeping measures, the state budget, the EU Sure programme which has provided a loan for Croatia of just over one billion euro and EU funds, or one part of the resilience programme which will provide €530 million.

He added that in the earlier phase, between March and May, Croatia absorbed HRK 1.3 billion in funds from the European Social Fund and that it plans to absorb another portion of that fund for the jobkeeping measures.

The total effect on the budget regardless of all these sources of funding at the moment is HRK 7.6 billion, which is how much has been spent on support and by the end of the year that amount could be HRK 8 billion. About 60% of that will come from the state budget and 40% from EU funds, he explained.

(€1 = HRK 7.545450

Wednesday, 30 September 2020

Croatia Initiates Procedure to Conclude Double Taxation Convention with USA

ZAGREB, Sept 30, 2020 - The Andrej Plenkovic government on Wednesday launched procedures to conclude the double taxation convention between Croatia and the USA for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Finance Minister Zdravko Maric told the press before the government's meeting that the conclusion of the Convention would lead to many benefits in the taxation of all kinds of income and to the improvement of conditions for boosting bilateral trade.

"This is a great signal for investors. We are tackling the matter that has been present for more than two and a half decades," the Croatian minister said.

In October, the country's Tax Administration will open preliminary talks on holding negotiations on the document.

The convention will be beneficial to all industrial sectors, notably the IT sector.

Companies' income will be taxed in their countries of residence, the draft convention reads.

It will enable Croatian air and shipping companies that transport goods between the two countries to pay profit tax in Croatia only.

Croatian builders operating in the USA for less than 12 months will not pay taxes in the USA.

The convention regulates the taxation of income from real property, income, and salaries of athletes, artists, and so on.

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Sunday, 30 August 2020

Tax Administration Confirms 25% Tax on Parcels from Third Countries in 2021

The tax administration isn't exactly the most popular institution in Croatia, and it will likely become even less popular for those who are fans of ordering cheap goods from China, as a 25 percent tax is about to be slapped on each parcel entering the Republic of Croatia.

As Poslovni Dnevnik writes on the 29th of August, 2020, as of next summer, more precisely from the 1st of July 2021, every single shipment ordered from third countries - including the production giant China, will have have a 25 percent value added tax paid on it.

As things currently stand here in Croatia, small shipments worth less than 22 euros are exempt from the payment of any VAT, but in less than a year such shipments will require the payment of both VAT and customs duties, so will small, ie cheaper packages ordered from the likes of China, marking an increase in price by 25 percent.

The increase in the price of shipments from third countries has been talked about for some time now, and yesterday the Ministry of Finance and the Tax Administration officially confirmed this to the journalists of Bug who sent them an inquiry on the matter.

Among other things, the reply from the Tax Administration states: Alignment with these directives will take effect from the 1st of July 2021, with the aim of simplifying certain rules regarding the supply of services and the distance selling of goods and ensuring a level playing field for European Union taxpayers in relation to taxpayers from third countries, given the fact that the VAT exemption for small consignments imported into the European Union with a value of less than 22 euros is abolished.

From next summer onward, we will pay 25 percent VAT on packages sent from China and third countries worth less than 22 euros (160 kuna), which will be charged directly to the seller of the imported goods.

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