On 1 January 2021, amendments to the Profit Tax Act, the Income Tax Act, the Value Added Tax Act and the Cash Transaction Fiscalization Act, which were adopted as part of the 5th round of the tax reform implemented by the Government of the Republic of Croatia to create a competitive and stimulating business environment, will enter into force.
Changes to the Income Tax Act inter alia:
• reduce personal income tax rates from 24% to 20%, from 36% to 30%, and from 12% to 10%
• introduce a non-taxable income from the work or activity of a “digital nomad”
Changes to the Profit Tax Act among other things:
• reduce profit tax rate from 12% to 10% for entrepreneurs having the annual turnover up to HRK 7.5 million – the reduced rate will cover more than 93% of taxpayers
• reduce the withholding tax rate on the payment of dividends and profit shares to foreign persons who are not natural persons from 12% to 10% due to amendments to the Personal Income Tax Act which reduces the tax rate for capital income (dividends and profit shares) from 12% to 10%
