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Croatia

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European Parliament gives go-ahead to include the Port of Rijeka into Baltic-Adriatic Corridor.
The Baltic-Adriatic Corridor is one of the most important trans-European road and railway axes.
In fact, it represents the connection between the Baltic and the Adriatic Sea linking Southern Poland, Vienna and Bratislava, as well as the Eastern Alpine region and Northern Italy.
It is now on the European Commission to decide on the whole issue.
The Port of Rijeka is the biggest seaport in Croatia. The city of Rijeka is also the second economic center of the nation and third largest Croatian city.
The Port of Rijeka is also the most convenient transit hub for Croatia, Hungary, Austria, Czech Republic, Slovakia, the western part of Ukraine, the southern part of Poland and the southern part of Germany.

 

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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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Croatia: Withholding Tax Taxation

Alessandro PasutWithholding tax taxation is governed by the provisions of the Corporate Income Tax and corresponding Regulations and the provisions of Agreements on Avoidance of Double Taxation. Upon Croatia’s accession to European Union, certain provisions contained in EU directives relating to the treatment of payments made between EU Member States come into force.
The main change affects certain payments between related companies established in the EU, which would be exempt of withholding tax.
Provisions of the EU Directive require that related parties must have one of the forms to which the common system of taxation is applied to, and which is valid for to the parent companies and subsidiaries of different EU Member States. They must be, for tax purposes, considered as a resident of a EU Member State in accordance with the laws of that country and be subject to one of the taxes to which the common system of taxation applicable to parent companies and related parties of different EU member states is applied.
The changes affect especially the payment of interests and royalties made between related parties of different EU Member States.

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Croatia: VAT questions

Alessandro PasutThe current cash accounting scheme was cancelled and VAT payers subject to personal income tax are not longer be able to postpone the VAT payment to the period in which consideration is collected from the buyer. The Croatian VAT identification number is made up of HR followed by the Personal Identification Number (OIB) which contains eleven digits. Taxpayers that supplied goods and services (including VAT) with a total value not exceeding HRK 800,000 (approximately EUR 106,000) in the previous year will have to apply monthly reporting if they make supplies within the EU, otherwise they can apply quarterly reporting. The deadline for VAT refunds to foreign taxable persons outside the EU has been extended from six months to eight months from the date on which the Croatian Tax Authorities receive the refund request.  Requests for refund have to be filed by 30 June of the calendar year that follows the year the requests refer to.

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Croatia: VAT

Alessandro PasutWith the accession to the EU, VAT on intra-community acquisitions is chargeable upon invoice issuance, or if invoice has not been issued, it should be charged no later than the 15th day of the month following the month in which the acquisition occurred.
The supply of goods to final customers within the EU will be taxable in Croatia, unless the value of the supply in question exceeds the distance selling threshold prescribed by the respective Member State. The proposed threshold for Croatia is HRK 270,000 (approximately EUR 35,700). The supply of land for construction will no longer be VAT exempt.
Invoices for the intra-community supply of goods should be issued no later than the 15th day of the month following the month in which the sale occurred. In case the supplier fails to issue the invoice in time, the acquirer is obliged to self-assess the VAT. Simplified invoice for the supply of goods and services not exceeding HRK 700 (approximately EUR 90) has been introduced. It will also be possible to issue collective invoices for several supplies made in the same month.

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Croatia: changing the corporate income tax

Alessandro PasutFollowing the recently passed amendments to the corporate income tax act, the Ministry of Finance issued amendments to the corporate income tax bylaw.
Tax prepayments. Following the changes made to the Corporate Income Tax Act, the provision of the respective bylaw on how to calculate corporate income tax prepayments has been changed. The basis for the calculation of the prepayment, should be determined in order not to reduce the tax base by the amount of tax relief granted for reinvested profit or for the amount of state aid for education and training. This method will inevitably lead to higher prepayments.
Forms. In accordance with the amendments to the Corporate Income Tax Act and bylaw, the form for filing the corporate income tax return has been changed.
The Croatian Parliament has also passed amendments to the VAT bylaw which entered into force last year.

 

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Croatia: new tax law proves to be effective

Alessandro PasutNew tax law proves to be effective: the rigorous new measures implemented by the Croatian tax administration prove to be effective. In the tourism industry tax inspectors are implementing the new tax law aimed at controlling the grey economy by cracking down on businesses that avoided paying sales taxes. Several hotels, bars and restaurants were closed for some days due to financial irregularities. According to Finance Minister Slavko Linic the new measures adopted this year have been successful for the tax administration, bringing in much-needed revenues to the State, but the process known as “fiscalisation” is only beginning. In the six months since the start of the fiscalisation, the state recorded increased revenues of 1.73 billion euro against the same period last year, the tax administration reported.

The president of the Croatian Employers’ Association supports the finance ministry in the implementation of the new tax regulation. He said entrepreneurs who do not meet all the fiscal obligations constitute unfair competition to others.

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Croatia: Mercator has been sold to Croatian Agrokor Group

Slovenian retail chain Mercator has been sold to Croatian Agrokor Group, according to reports today by the Croatian media citing the announcement of the Slovenian news agency STA.

Trade consortium of majority shareholder of Mercator concluded the agreement with Agrokor Group to sell 53% of Mercator shares, priced at 86 euros per share. In recent weeks, there were increased pressures of certain political and other circles so that the contract wouldn’t be realized.
NLB (New Ljubljana Bank) as a bank, which is 100% owned by the Slovenian state has about 10% of Mercator shares.

Mercator and Agrokor confirmed today that all the conditions for the conclusion of the transaction were fulfilled so that the majority stake in Slovenia’s retail chain can be sold to the largest Croatian food Group. The agreed price per share is 86 euros, meaning that Agrokor for a majority stake in Mercator will have to pay 172 million euros. Agrokor will also make a capital increase in Mercator with 225 million euros, of which 200 million will go to pay off the debt, and 25 million for operating capital.

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Croatia: Reporting the salary payments to non-residents to the Croatian National Bank

The Croatian National Bank has introduced a reporting obligation for salary payments to non-residents. According to the National Bank such reporting is also required for Croatian companies’ outbound assignees who reside abroad for more than 12 months. Such assignees are considered for these purposes non-residents.

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Croatia: Real estate tax

Croatia new Real estate tax. The Ministry of Finance has presented the new real estate tax, which is expected to come into force on 1 April 2013. With the introduction of this new tax, communal fees, the vacation house tax and the city tax will probably be cancelled.

Real estate, both that has already been built and that is under construction will be subject to tax. Individuals and companies that have taxable real estate at their disposal will be liable to pay this tax.

A tax rate of 1.5% will apply to 70% of the fiscal value of the real estate in question. The fiscal value is defined as the market value of real estate and once defined it is applied without change up to the following mandatory legal assessment (five years).

The Croatia Real estate tax envisages the following allowances on the taxable base (defined as 70% of fiscal value): permanent residence (from 88% up to 95% of the taxable base), occasional residence (from 70% up to 85% of the taxable base), business use (80% for real estate related to industry and manufacturing, health care, education, real estate of non-profit organizations provided that they are engaged in a business activity, 60% for real estate in lease, construction, transport and warehousing, catering industry, 40% for commerce, 20% for other real estate used for a business activity).

Allowances are applicable to legally registered real estate only. Property tax paid will have to be paid on an annual basis in monthly instalments.

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