ZAGREB, August 16, 2018 - The Finance Ministry on Thursday put to public consultation several draft bills which envisage expanding the application of the 13% VAT rate as of 2019, reducing the general VAT rate from 25 to 24% as of 2020, and reducing real estate trade tax from 4 to 3%.
Three VAT rates are currently applied in Croatia, the general 25% rate and two reduced ones, of 5% and 13%. In order to relieve the tax burden on the business sector, the draft bill of amendments to the VAT law envisages reducing the general rate to 24% as of 1 January 2020.
Prime Minister Andrej Plenković said earlier this month that the first two rounds of the tax reform resulted in relief totalling some 4 billion kuna and that the new package of laws would enable additional relief totalling 2.7 billion kuna as of 2019. This, he said, is expected to increase personal consumption, employment, investment, budgetary revenues, and economic growth.
As of next year, the 13% VAT rate would also apply to nappies, fresh meat, fish, fruit and vegetables. Finance Minister Zdravko Marić has said recently that, if the prices of those products are corrected, an average family would save 872 kuna annually.
Since the 13% VAT would apply to a larger number of products, it is expected that the state budget will receive 1.4 billion kuna less from VAT annually.
Amendments to the real estate trade tax law, reducing it from 4 to 3% as of next year, are expected to result in relief totalling 100 million kuna. Last year, this tax was which was reduced from 5 to 4%.
The draft bill of amendments to the law on contributions on salaries envisages revoking the 1.7% mandatory insurance contribution in case of unemployment and the 0.5% contribution for safety at work, as well as increasing the health insurance contribution from 15 to 16.5% with the aim to alleviate the health sector's financial difficulties.
Revoking those two contributions will reduce contributions on salaries from 37.2 to 36.5%, reducing employers' salary outlays by 0.7 percentage points, or 900 million kuna according to projections, which would create room for raising salaries, the Finance Ministry says.
A bill of amendments to the law on fiscalisation is also in public consultation. On average, 6.4 million receipts pass through the fiscalisation system daily. Their number in 2017 was 0.03% higher than in 2016 and their total amount was 7% higher. The ministry says the amendments are aimed at creating a fairer and more competitive tax system and increasing fiscal discipline.
With the draft bill of amendments to the profit tax law, Croatia is complying with its obligation to align its legislation with the European Union's Anti-Tax Avoidance Directive as of next year.
A draft bill on excise taxes is also in public consultation.
Public consultation on all bills lasts until September 6.
