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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: Miscellaneous

Croatia - flag


Foreign exchange regulations. Amendments to the Foreign Exchange Act have come into force on 1 January 2011. According to the new rules, residents are allowed to open bank accounts in banks and other financial institutions abroad without approval and authorization by the Croatian National Bank.
Residents can also receive loans from foreign financial institutions without having to transfer the granted loan into a Croatian bank account. This provision applies both to enterprises and private persons.
Pursuant to the amendments the Croatian National Bank lifted the administrative restrictions on cash payments and reimbursements in business transactions between residents and non-residents in HRK and foreign currencies.
The Prevention of Money Laundering and Terrorism Financing Act, however, still contains rules limiting cash payments by all enterprises and private persons performing a registered activity. Within Croatia, cash payments are limited to the amount of 105,000 HRK or in business transactions with non-residents to the amount of 15,000 euros.

Tax deductions. The Personal Income Tax Act in force since 1 July 2010 has abolished tax deductions that can decrease annual tax base and result in potential tax refund, with the exception of paid compulsory health insurance up to the amount of prescribed compulsory health insurance contributions and gifts in cash and in kind transferred to the current account for specific purposes, up to 2% of taxpayer’s income in the annual tax return submitted and the annual income tax assessed in previous year.
However, in the annual tax return for 2010 deductions referring to payments made until 30 June 2010 can be claimed up to a total amount of HRK 6,000. These deductions are granted for interest paid on housing loans, investments in real estate, paid rent, paid premiums of life insurance and additional health insurance, voluntary pension insurance, and payments made for healthcare.