The Finance Minister has presented a tax reform package on 27th October 2016 for simplifying the tax system. The key elements are listed below:
Corporate income tax
- The corporate income tax rate will be reduced from 20% to 18%.
- In case of small businesses and farmers, the applicable corporate rate will be 12%.
- Business entertainment expenses like gifts, meals and refreshments, holidays, sporting activities and recreation will be deductible from 30% to 50% of the cost.
Individual income tax
- The personal income tax rate will be reduced from 25% to 20% in the second tax schedule bracket and from 40% to 36% in the top bracket.
- Basic personal allowance will be increased from HRK 2,600 to HRK 3,800 to all taxpayers.
- An average city 12% surtax will be available for parents with dependent children.
Transaction tax for immovable property
Persons who obtaining their first immovable property will no longer be exempt from immovable property transaction tax. However, the tax rate will be decreased from 5% to 4%.
Other measures
From 2018, the communal utility charge will be eliminated and replaced by the tax based on the age and condition of the immovable property.
