The Finance Minister, Zdravko Marić, on August 16, 2018, published draft bill on amendments to the Law on administrative cooperation in tax matters. This Act shall enter into force on the eighth day after its publication in the Official Gazette except for Articles 1 and 2 of this Act, which shall enter into force on January 1, 2021.

As of January 1, 2019, this Bill includes some amendments in Income Tax Act to implement measures of the EU Anti-Tax Avoidance Directive. A new interest deduction restriction of 30% in case of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), with a EUR 3 million safe harbor threshold and the ability to carry forward excess interest up to three years is also incorporated in this bill. There is also a proposal on about an exemption for taxpayers that are not part of a group and financial companies and an exclusion for loans used to finance long-term infrastructure projects.

This bill incorporates new controlled foreign company (CFC) rules. It gives the amount of tax for low-taxed CFC profits derived from dividends, interest, licensing and other IP income, financial leasing, etc. with some exceptions.

There is a proposal includes in the bill that standard VAT rate will be reduced from 25% to 24% effective January 1, 2020.

The bill provides an updated definition of permanent establishment (PE) to keep pace with existing tax treaties and the 2017 OECD Model Convention. It also contains dependent agent PEs and the division of business to avoid a PE.

This draft bill provides for the implementation of Council Regulation (EU) No. 904/2010 on administrative cooperation and the defeat value added tax (VAT) fraud. It had amended lastly Regulation (EU) No. 904/2010 on December 5, 2017 for administrative cooperation and combating VAT fraud.

The amendments to the Contribution Act eliminate the assistance for unemployment insurance and health protection at work and also raise the general health insurance, resulting in an overall reduction in social security contributions to 36.5% from 37.2%. This will effect from January 1, 2019.