News from the Republic of Croatia
Rulebook on Extra Profit Tax
On February 14, 2023, the Rulebook on Extra Profit Tax (hereinafter: "Rulebook") was published in the Official Gazette. The Rulebook prescribes the procedure for determining the amount of total revenue for 2022 and the amount of taxable profit for 2022, as well as previous four tax periods relevant for determining the base of Extra Profit Tax.
Furthermore, the criteria for determining the gain from the sale of tangible and intangible fixed assets, profit and unrealized losses of financial asset, decrease of Extra Profit Tax liability, the procedure for determining newly established entrepreneurs, the payment of solidarity contribution prescribed by the Council of the EU Regulation (2022/1854) and likewise were prescribed.
An integral part of the Rulebook is application form for Extra Profit Tax i.e., solidarity contribution for 2022 (DPD form – Extra Profit Tax Return) which is to be submitted to the Tax Authority together with the Form PD – Corporate Income Tax Return. The DPD form needs to be submitted by all taxpayers who have generated revenues above HRK 300 million in the tax period.
The application of Extra Profit Tax i.e., solidarity contribution is submitted for the period started as of January 1, 2022.
Salary and receipts of workers based on the employment
On 21st of February 2023, the Ministry of Labor issued an opinion with an additional interpretation of the legal provisions relating to the salaries and receipts of workers on the basis of employment, from which below follows:
- In order for a certain receipt to be considered as a salary, it is important that it can be allocated to a specific working month and that it is a regular receipt (occasional payments cannot be considered as a part of the monthly salary);
- It is necessary to take into account the way in which the right of workers are defined as one of the sources of rights;
- Taxation is not an important criterion in the context of the definition of salary according to the Labor Act.
Namely, salary can also be deemed as a receipt that depends on the work performance of the worker, where such an allowance must correspond to the definition of salary, which requires cumulative fulfilment of both criteria i.e., that it is a receipt for the work performed and that it is a receipt for a certain month.
For example, if the employer pays a non-taxable receipt as a work performance reward on a regular basis (monthly, a total of up to an annual non-taxable amount) in order to optimize the variable part of the worker's salary, such a reward for work results will be considered as a part of the monthly salary and needs to be taken into account when calculating the average. However, if the reward for work results was paid one-time up to the amount of the annual non-taxable bonus, it would not be considered as a part of the salary and would not be included in the calculation of the average.
It is important to note that Article 90a of the Labor Act defines that receipts representing reimbursement costs are not considered to be regular salary but as receipts on the basis of employment. It follows from the above that a significant number of non-taxable receipts defined in the Personal Income Tax Rulebook are excluded from the definition of salary. Such receipts would be reimbursements for transport costs to and from work, flat-rate compensations to cover the costs of workers meals, costs of workers meals based on relevant documentation, costs of accommodation of workers based on relevant documentation, allowances for the costs of regular care of workers` children, flat-rate compensation to cover the costs of workers who work at an isolated place of work. For all other receipts, a separate analysis would be required in accordance with the criteria listed in the Labor Act.
Finally, we believe that there are still certain unclarities related to this topic and we expect additional opinions on this topic in the future.
Tax Authority's opinion – May an account opened at Revolut Bank UAB be used as a business account of a self-employment businesses?
On January 31, 2023, the Tax Authority has issued an opinion related to opening of an account for self-employment business purposes in Revolut Bank UAB.
The opinion states that there is no obstacle to the payment of receipts to accounts opened at Revolut UAB Bank. This is related to the fact that in June 2022 the Croatian National Bank issued an authorisation to extend the provision of Revolut UAB services.
Regarding the information that Revolut Bank UAB has the authority to provide services of opening and managing current and giro accounts in the Republic of Croatia, the transactions of self-employment businesses through an account opened in Revolut Bank UAB can proceed smoothly.