Personal Income Tax

1. Personal Income Tax

2. Personal income tax - PIT • PIT is paid on worldwide income in case of tax residency in Croatia

3. Resident taxpayers • Resident taxpayer – a person who registered his/her residence in Croatia who intends to spend more than 183 days over a period of two years in Croatia

4. Non-residents • A non-resident is a person who has neither a legal residence nor a customary habitat in Croatia, but earns a taxable income in Croatia • A legal residence, according to tax laws, is the ownership or use (note: a lease contract applies) of a housing unit for at least 183 days continuously – actual occupation of the unit is not necessary. • A customary habitat is implied when the circumstances lead to the conclusion that the tax payer’s residence is not temporary. In the sphere of tax laws, this is concluded after a continuous residence of at least 183 days

5. New tax rates • The Croatian Government has published the new Personal Income Tax Act (the Act). The Act is in force from 1 July 2010. • The new tax rates are 12%, 25% and 40%, applied progressively as follows: • 12% to the monthly tax base of up to HRK 3,600; • 25% to the monthly tax base of HRK 3,600 – 10,800; and • 40% to the monthly tax base of above HRK 10,800.

6. Surtax • On the total amount of thus calculated pay, a surtax is charged in certain municipalities (18% in Zagreb)

7. Personal non-taxable allowance • Each individual has the right to a personal non-taxable monthly allowance of HRK 1,800 and further allowances for a dependent spouse and children residing in Croatia

8. Taxable base • Income tax is based on the income earned by a taxpayer for paid work, independent activities and from property rights • Paid work: salaries and pensions • Independent activities: freelance work, crafts, agriculture • Property rights (renting, intellectual property rights)

9. Income tax is NOT levied on interest earned on hard currency and Croatian current and savings accounts, dividends on shares and costs of various kinds of social care

10. Fringe benefits • Employers may give employees certain benefits that qualify as non-taxable earnings under tax regulations

11. Benefits in kind • Benefits in kind received by an employee from his employer are subject to income tax. These include: • the use of business buildings and means of transportation • Low interest on loans granted by the employer • Gifts and entertainment provided by the employer • Shares received from the employer

12. Vocabulary • Legal residence – prebivalište • Customary habitat – uobičajeno boravište • Personal allowance – osobna olakšica • Dependent spouse – uzdržavani supružnik • Freelance work – rad na temelj ugovora o djelu • Current account – tekući račun • Fringe benefits – beneficije iz radnog odnosa • Benefits in kind – nenovčana davanja zaposlenicima

13. Complete the following text: • All taxpayers are entitled to a personal a________ in the a________ of 1,800.00 kn per month, while taxpayers who support a s_______, children and other family members, can, in addition to the basic personal allowance, also d______ from their taxable i_______ the personal allowances for supported family members.

14. All taxpayers are entitled to a personal allowance in the amount of 1,800.00 kn per month, while taxpayers who support a spouse, children and other family members, can, in addition to the basic personal allowance, also deduct from their taxable income the personal allowances for supported family members.