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ADVICE #91

Peculiarities of the tax system in Croatia

Despite the fact that almost all European countries are committed to the unity of laws and integration in the areas of economic and social policies, tax systems of European countries do not differ by unity.

 

Russian analysts of the consulting company “TexArt Group” researched the tax system 38 European countries with developed market economies, and weak, still “wobbly” after the collapse of the socialist States.

 

Some of the investigated countries are already EU members, others are candidates for membership in the single currency area, but in the meantime, in most States, a United Europe, you may encounter drastic differences in tax systems and the principles of taxation.

 

If you are going to live abroad and operate your business, you should carefully review the tax code of the country: what size of income tax in this country; the amount of tax “at the source”; VAT; what are the taxes levied on the income of individuals and their property, and more.

 

We offer to your attention an analytical report with detailed information about the economy, the characteristics of the market, as well as tax rates and the criteria for levying taxes in each country of Europe.

 

Croatia is a country with a relatively high level of taxation. The increased investor interest directly related to the dynamic development of tourist business in this country. Croatia provides tax break for yacht owners, because of the geographical features of the location of the country.

 

It is a member of the European Union since 2013, but not part of the Eurozone.

The income tax

Income tax in Croatia are subject to both residents and non – residents in terms of income from the source of payment in Croatia.

The rate of income tax in Croatia is 20%. However, a number of income exempt from taxation, such as dividends and other profit shares, investments, exceeding 3 million Croatian kunas (HRK) ( ~400 000 €). The amount of capital gains (capitalgains) are included in the tax base for profit tax. Dividend income is not taxed.

The rate of the profit tax of 15 % applies on certain types of payments to non-residents, including interest payments, payments for intellectual property rights, market research, tax consulting, business Advisory and audit services.

Croatia has national legislation regulating transfer pricing.

In Croatia there are no rules governing the taxation of profit of controlled foreign companies.

Withholding tax

The distribution of dividends to non-residents is taxed at source at the rate of 12%, unless otherwise provided SODNOM or EU PSD.

Interest payments and royalties are taxed at 15%, unless otherwise provided by legislation of the EU or SODNOM. In addition, if the interest or royalties are paid to the address of the resident of a jurisdiction outside the European Union, which Croatia has no agreements on the exchange of information, and the General rate of income tax in this jurisdiction does not exceed 12.5%, the rate of withholding tax is increased to 20%.

VAT

As a VAT taxpayer subject to registration of the company with an annual turnover of more than 230 thousand HRK (~30 000 €) or on a voluntary basis. Persons with a turnover of up to 800 thousand HRK (~105 000 €) are accountable for VAT on a quarterly basis, in excess of such trafficking, as well as foreign legal entities on a monthly basis.

The standard VAT rate is 25%. Provides a number of reduced rates, for example 5% on Newspapers and magazines, some food, books and medicines; 10% service hotels, certain types of products; 13% for services libraries, other cultural institutions. VAT-exempt medical services, financial and insurance operations, educational services.

The tax to incomes of physical persons

Residents of Croatia shall pay tax on worldwide income, non-residents pay tax on income at source, in Croatia. A resident of Croatia is defined as a person residing or having a house on the Croatian territory.

The tax rate on income (salary, income from property, investment income, etc.) progressive: when income to 26.4 thousand HRK (~3 500 €) – 12%; in respect of income from 26.4 thousand HRK to 105.6 thousand HRK(~13 700 €) – 25%; for more income is 105.6 thousand HRK – 40%.

This provides for the exemption from taxation of certain categories of income, including dividends received by individuals resident 12 thousand HRK (~ 1 500 €) per year.

Municipalities and cities may levy an additional tax, called the city income tax.

Property taxes

The tax on the use of state land and a tax on country cottages is a local. Depends on the square of land and buildings, respectively, and ranges from 5 to 15 HRK (~ 0.5€ to 2€) depending on the municipality. Also subject to the transfer of real property in the amount of 5%, the payer acts as the buyer.

 

The text prepared by the Russian consulting company TaxArt Group LLC specifically for Banki.ru

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