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New Croatian Profit Tax to Undo Effects of Important Reforms

By 3 December 2022

December the 3rd, 2022 - The highly unpopular new Croatian profit tax has already been raked over the coals by many, but it seems that it will go as far as to undo all of the very important reforms that have been successfully implemented so far.

As Poslovni Dnevnik/Marija Brnic writes, over the weekend, Finance Minister Marko Primorac will have the opportunity to study a number of proposals that came up in the public debate on his, controversial to many, legal proposal for a new additional income tax.

 Even before that, Primorac repeated to journalists that he wouldn't give up on the introduction of this new Croatian proft tax, which is in fact tax on extra profit, as well as that there should be no exemption of certain sectors from paying this new tax.

Proposals were submitted by numerous large Croatian employers, as well as some smaller ones, consulting firms, banks, associations, and even economic analysts. Marijana Ivanov, a professor at the Faculty of Economics in Zagreb, was among the most active individuals in this debate, and among others, she has been calling for the application of this new Croatian profit tax to be moved to 2023.

Although, it seems, the minister isn't remotely inclined to single out and ''show mercy'' to certain sectors, part of the proposal regards precisely those appeals for him to do so. Along with the Viktor Lenac shipyard, which has warned that it will be the only one in the entire EU to will be burdened with this, a similar cry comes from the Croatian association of shipowners - Mare Nostrum.

With this new Croatian profit tax, they warn, shippers who have chosen to participate in the tonnage tax system will be imposed such a tax incompatible with the tonnage tax system, thus putting them in an unequal position compared to competing EU shippers.

For the Medjimurje-based company Muraplast, an important correction would be to exempt companies using the Investment Promotion Act from paying additional tax, or to propose that, otherwise, the requested amount of additional tax be taxed as normal profit tax, which can be reduced by a certain amount through the Investment Promotion Act . They're also standing up for the protection of energy-intensive companies, which did manage to make somewhat of a profit this year.

The Croatian Chamber of Commerce (HGK) is also active in this regard. In their proposal, they present the case of a member from the automotive industry, which, after coping with some bad times, is already having to deal with a 20 percent drop in orders for next year.

AmCham also joined the debate that literally erupted recently, warning that the announcement of this new Croatian profit tax actually goes against the positive results achieved by the Republic of Croatia through several rounds of tax reform, as well as the efforts the government has made so far to achieve tax stability and predictability. They fear the move will do nothing but call the positioning of Croatia as an investment destination into question once again.

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