Croatia: income tax

Alessandro PasutThe Constitutional Court of the Republic of Croatia has issued a resolution providing for the suspension of the execution of all individual acts and actions of the Croatian Tax Administration and other addressees concerning the collection of income tax from all income taxpayers, who realized their income on the basis of dividends and/or profit shares derived out of equity, achieved by the entry into force of the Law on Amendments to the Law on Personal Income.
The Law on Amendments to the Law on Personal Income regards taxation of all income amounts exceeding the  HRK 12,000 annual threshold paid on the basis of dividends or on the basis of equity participation.
The Croatian Employers’ Association filed an appeal with the Constitutional court because it deems the Law on the amendments to be discriminatory. The appeal of the Employers’ Association further specifies that the disputed provisions violated a number of constitutional principles such as the prohibition of retroactive effect of law, the principle of proportionality, the principle of non-reduction of acquired rights on the basis of capital investment and the principle of equality and fairness of the tax system.
The resolution of the Constitutional Court is an interim measure, thus the disputed provisions will not apply until the final decision of the Court regarding the conformity of the contested rules with the Constitution. The relevant national authorities (tax authorities) will have to refrain from applying the disputed provisions (assessment and collection of tax liabilities arising from the disputed provisions) until the final resolution of this case.
It is important to emphasize that the Constitutional Court’s decision does not in any way prejudge its final decision in this matter, which will be made after the full implementation of the constitutionality review process.

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