Personal Income Tax Personal income tax PIT l

Personal Income Tax

Personal income tax - PIT l PIT is paid on worldwide income in case of tax residency in Croatia

Resident taxpayers l Resident taxpayer – a person who registered his/her residence in Croatia who intends to spend more than 183 days over a period of two years in Croatia

Non-residents l l l A non-resident is a person who has neither a legal residence nor a customary habitat in Croatia, but earns a taxable income in Croatia A legal residence, according to tax laws, is the ownership or use (note: a lease contract applies) of a housing unit for at least 183 days continuously – actual occupation of the unit is not necessary. A customary habitat is implied when the circumstances lead to the conclusion that the tax payer’s residence is not temporary. In the sphere of tax laws, this is concluded after a continuous residence of at least 183 days

New tax rates l l l The Croatian Government has published the new Personal Income Tax Act (the Act). The Act is in force from 1 July 2010. The new tax rates are 12%, 25% and 40%, applied progressively as follows: 12% to the monthly tax base of up to HRK 3, 600; 25% to the monthly tax base of HRK 3, 600 – 10, 800; and 40% to the monthly tax base of above HRK 10, 800.

Surtax l On the total amount of thus calculated pay, a surtax is charged in certain municipalities (18% in Zagreb)

Personal non-taxable allowance l Each individual has the right to a personal non-taxable monthly allowance of HRK 1, 800 and further allowances for a dependent spouse and children residing in Croatia

Taxable base l l Income tax is based on the income earned by a taxpayer for paid work, independent activities and from property rights Paid work: salaries and pensions Independent activities: freelance work, crafts, agriculture Property rights (renting, intellectual property rights)

l Income tax is NOT levied on interest earned on hard currency and Croatian current and savings accounts, dividends on shares and costs of various kinds of social care

Fringe benefits l Employers may give employees certain benefits that qualify as non-taxable earnings under tax regulations

Benefits in kind l l l Benefits in kind received by an employee from his employer are subject to income tax. These include: the use of business buildings and means of transportation Low interest on loans granted by the employer Gifts and entertainment provided by the employer Shares received from the employer

Vocabulary l l l l Legal residence – prebivalište Customary habitat – uobičajeno boravište Personal allowance – osobna olakšica Dependent spouse – uzdržavani supružnik Freelance work – rad na temelj ugovora o djelu Current account – tekući račun Fringe benefits – beneficije iz radnog odnosa Benefits in kind – nenovčana davanja zaposlenicima

Complete the following text: l All taxpayers are entitled to a personal a____ in the a____ of 1, 800. 00 kn per month, while taxpayers who support a s_______, children and other family members, can, in addition to the basic personal allowance, also d______ from their taxable i_______ the personal allowances for supported family members.

l All taxpayers are entitled to a personal allowance in the amount of 1, 800. 00 kn per month, while taxpayers who support a spouse, children and other family members, can, in addition to the basic personal allowance, also deduct from their taxable income the personal allowances for supported family members.