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Sample calculation of salary on monthly basis - Croatia as of 01 January 2019 according to the announced tax reform

Sample calculation for a Croatian employee, resident in Zagreb with one dependent family member



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Sample calculation of salary on monthly basis - Croatia as of 01 January 2017 according to the announced tax reform

Sample calculation for a Croatian employee, resident in Zagreb with one dependent family member


      HRK % coeff. HRK EUR
1 gross salary       10.000,00 1.320,13
  contributions out of salary          
2 contributions to pension insurance, 1st pillar   15,00   1.500,00 198,02
3 contributions to pension insurance, 2nd pillar   5,00   500,00 66,01
4 contributions to pension insurance - total       2.000,00 264,03
5 gross salary reduced by contributions to pension insurance       8.000,00 1.056,11
6 personal tax-exempt amount     1,00 3.800,00 501,65
7 personal tax-exampt amount for dependents     0,70 1.750,00 231,02
8 total tax-exampt amount       5.550,00 732,67
9 monthly taxable base (1-4-8)       2.450,00 323,43
  tax brackets          
10 income tax, tax rate 24%, tax bracket 17.500,00 24,00   588,00 77,62
11 income tax, tax rate 36%, tax bracket 0,00 36,00   0,00 0,00
12 total amount of tax (10+11)       588,00 77,62
13 amount of municipal tax ("prirez")   18,00   105,84 13,97
14 total amount of personal income tax (12 + 13)       693,84 91,60
15 net salary (5-14)       7.306,16 964,51
16 remuneration in kind       0,00 0,00
17 net salary for payment (15-16)       7.306,16 964,51
  employer's contributions (on salary)          
18 contribution to health insurance   15,00   1.500,00 198,02
19 contribution to public unemployment insurance   1,70   170,00 22,44
20 contribution to accident insurance   0,50   50,00 6,60
21 total amount of employer's contributions   17,20   1.720,00 227,06
22 total costs of salary (1 + 21)       11.720,00 1.547,19


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New Act On Accounting

The new Act On Accounting was published in the Official Gazette Number 78/15 on
17th July 2015, this is a consequence of the Accounting Directive 2013/34/EU which has come into force. The most significant changes of the Act shall enter into force on 01st January 2016 and are as follows:

1. The Classification of undertakings and the definition of the conditions for the classification of undertakings
New and different classifications of undertakings have been stipulated for:

- micro entities,
- small entities,
- medium sized and
- large entities.

According to the new Act, the term micro entities refer to all undertakings which only fulfil two (2) of the three (3) listed conditions:

- a balance sheet total up to 2,6 million HRK (Croatian kuna)
- net turnover up to 5,2 million HRK (Croatian kuna)
- the average number of employees does not exceed 10 during the financial year

Small entities are undertakings which fulfil only two (2) of the three (3) listed conditions:

- a balance sheet total up to 30 million HRK (Croatian kuna)
- net turnover up to 60 million HRK (Croatian kuna)
- the average number of employees does not exceed 50 during the financial year

Medium sized entities are undertakings which fulfil only two (2) of the three (3) listed conditions:

- balance sheet total 150 HRK (Croatian kuna)
- net turnover till 300 HRK (Croatian kuna)
- the average number of employees does not exceed 250 during the financial year

Large entities are undertakings which fulfil all the above mentioned indicators in at least two of the three listed conditions as well as banks, savings banks, building societies, etc.
Net turnover refers to the amounts derived from product sales and service provisions after deducting sales rebates, value added tax and other taxes directly linked to turnover.


2.    Accounting documentation and issuing of invoices
Furthermore, the Act stipulates that each accounting document must be authentic, orderly and prepared in such a way as to ensure a timely monitoring with the signature of the responsible person. However, invoices which serve as accounting documents and were released/given by the authorised person, do not need to be signed if they:

- contain all elements required by tax regulations and
- include the name and surname of the person responsible for its issuance.

Electronically issued invoices (e-invoice) or electronic records are explicitly permitted by the new Act which has not been the case so far. This implementation will lead to a substantial improvement of e-business.

3.    Storage of business records and accounting documents
Changes have been made as well in terms of deadlines for the storage of accounting documents and records. The retention period so far was at least 7 (seven) years and it has been extended to at least 11 years now, as follows:

- payroll lists, i.e. records of employee earnings that are paid by mandatory  contributions, must be kept permanently,
- accounting documents are based on the data which are entered into the journal, general ledger and subledger must be kept for at least 11 years,
- business books  or journals and general ledgers as well as subledgers must be kept for at least 11 years.


4.    Certified accountant for the business
The Act includes a provision that "if an entrepreneur entrusts their accounting services and accounting functions to other legal entities or individuals, these must be licensed for performing such activities on the basis of a special law".  It stipulates that an entrepreneur is solely responsible for all these activities, and also that the audit done by the supervisory authorities is carried out smoothly. This obligation of licensing shall enter into force on 01st January 2018 and the deadline for getting the license for providing accounting services to other legal entities and individuals is 31st December 2017.

5.    Yearly financial statements
Deadlines for closing the business books or due date for submission of yearly financial statements for publication is reduced to no later than 30th April of the following year for the previous year, which is now in compliance with the deadlines for the submission of the report for statistical and other purposes, and the Tax Administration.
The responsibility for the preparation and publication of financial statements is extended, where are, except persons authorized to represent the undertaking, the financial statements are required to be signed by all board members (directors), and all executive directors. In addition to the board of directors, all members of the supervisory board are responsible for the financial statements under their legally prescribed responsibilities.
According to Act balance sheet is now called "statement of financial condition".

6.    Stocktaking of assets and liabilities
The stocktaking during the year is omitted and it has to be obligatory carried out at the end of the business year.

The Croatian Parliament passed on 27 February 2015 an amendatory act changing the Croatian General Tax Act.

The new Act brings the following innovations and changes:

1. Binding Rulings of the Tax Authorities: For the first time the tax authorities can (but need not) issue binding rulings on request of the tax payer about future business transactions. The cost of issuing the binding ruling must be borne by the tax payer. The amount to be paid is not yet determined. The Minister of Finance is expected to issue a bylaw defining the amount and other details of the procedure (e.g. deadlines).

2. Corrections of Tax Returns:

a) Prolonged deadlines: Tax returns can now be corrected without penalties after the deadline for regular correction expired, if the tax authorities request so. Therefore, tax returns can now be corrected in the course of current tax audits before the protocol of the tax audit has been made.

b) Shortened deadlines: The deadline for correcting tax returns because of findings of a tax audit or court decisions is shortened to 15 days, for the taxpayer only. For the tax authorities there is still no corresponding obligation to book, e.g. court decisions in favour of the tax-payer.

3. Tax Settlement: The legal institute of a settlement is new to the Croatian General Tax Act. Subject of a tax settlement between tax-payer and tax authorities can be:

a) an estimated tax base: If the tax authorities must estimate the tax base, this estimation can be subject of an Tax Settlement,
b) reduction of penalty interest,
c) deadlines for the payment of taxes
d) Not initiating misdemeanour offence procedures: The tax authorities can agree with the tax-payer not to initiate a misdemeanour offence procedure against the tax-payer. Thus, the tax authorities abstain from an additional punishment of the tax-payer and individuals.

4. Public-law contract: Public-law contracts regarding the full or partial payment of tax liabilities are no longer the responsibility of the Minister of Finance, but are now the responsibility of the head of the responsible tax office. Therefore, the conclusion of such contracts should become easier. The tax-payer needs to formally request the conclusion of a public-law contract in writing. The public-law contract can last no longer than 24 month and interrupts the prescription period.

5. Garnishment becomes easier for the tax authorities: The administrative procedure of garnishment of financial recourses by the tax authorities in order to compound tax liabilities of not more than HRK 5.000 is simplified in favour of the tax authorities. A formal decision of the tax authorities notifying the tax-payer in advance is not any longer needed.