On 11 December 2020, the Government published Tax Reform Law for the year 2021, which includes 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 Tax Reform Law includes the following measures:
- Companies having annual revenue of up to HRK 7.5 million (SMEs) are subject to 10% reduced corporate tax rate.
- A reduced 10% withholding tax (WHT) rate applies on dividends and profit shares.
- The WHT rate on fees paid to foreign performers is reduced from 15% to 10%.
- The two-bracket individual income tax rates are reduced from 36% and 24% to 30% and 20%.
- A 10% reduction in the individual income tax rate applies for lump-sum taxation of small and craft businesses.
- An increase in the threshold from HRK 7.5 million to HRK 15 million to apply the cash accounting scheme for VAT. 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- The VAT exemption is repealed for low value imported goods from third non-EU countries.
