Set of bills from fifth tax reform round sent to parliament for second reading

The government has sent to parliament for second reading bills from the fifth round of tax reform, proposing also changes to the law on financing local government units to regulate an increase in those units' share in income tax revenue and that the Fiscal Equalisation Fund be taken over by the state.

After on Thursday four bills from the tax reform set - on income tax, profit tax, VAT and fiscalisation in cash transactions - received support in first reading, they were forwarded today by the government to the parliament for a second reading. A bill on the financing of local and regional government units will be discussed under fast-track procedure.

The government has proposed lowering income tax rates from 24% to 20% and from 36% to 30%, and since income tax constitutes the revenue of local government units, it means that they will be left short of around two billion kuna.

Nonetheless, Finance Minister Zdravko Maric reiterated today that the total cost of the proposed changes to income tax in the amount of two billion kuna equaled the cost of proposed changes to the bill on the financing of local government units.

Tax exemptions for digital nomads regulated

Maric said that compared to the bills in first reading, the amended legislative set now defined tax exemptions for incomes of digital nomads.

The new Aliens Act introduces the term digital nomad, that is, a foreign national who performs work using IT from Croatia, but for employers that are not based in Croatia.

Since those are highly qualified foreign nationals and IT experts, the proposed legislative changes would provide for tax exemptions for incomes they earn based on their status of digital nomads so as to encourage them to choose Croatia as a place to work and live in, Maric said.

The bill on profit tax reduces the standard tax rate for all businesses with an annual income of less than HRK 7.5 million from 12% to 10%.

The withholding tax rate for dividends and profit shares would be reduced from 12% to 10% and the withholding tax for remuneration to foreign artists, entertainers and athletes would be reduced from 15 to 10%.

The legislative amendments also envisage more favourable tax treatment for banks in case of loan write-offs or rescheduling.

Text: Hina

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