Forvis Mazars Tax News - May 2024

Tax changes

Amendment to the Value Added Tax Act

In April 2024, amendment to the Value Added Tax entered into force, extending the applicability of 5% tax rate until March 31, 2025 on:

• supply of natural gas, including fees related to that supply;
• supply of heating from thermal stations, including fees related to this supply; and
• supply of firewood, pellets, briquettes and wood chips.
   

Amendment to the Forest Act

Following amendments to the Forest Act which entered into force in April 2024, among other things, the fee for use of general functions of forests is reduced from 0.024% to 0.015% of the total revenue and the obligation to calculate the fee is assumed by the Ministry of Agriculture based on data from annual financial statements.

According to the proposal of the Rulebook on the method of calculation and payment of fees for use of general functions of forests, which was under consultation until recently, the fee will be calculated based on data from the annual financial report provided by the Financial Agency, meaning that the taxpayers will not have to draft and submit the OKFŠ form. Additionally, according to the proposal, the fee will be due four months after the end of the business year.

Persons liable to pay tax on holiday homes based on the Decision on approval for the provision of household accommodation services

The Tax Authorities published an opinion in which they have confirmed their standing from previously published opinions, specifically:

• tax on holiday homes is paid by holiday homeowners, and the criterion for determining the status of a vacation home is its occasional or seasonal use, for which the burden of proof rests with its owner. Property that is a permanent residence of the owner is not subject to the payment of the holiday home tax. However, the declaration of residence on that property is not conclusive evidence that it is used for permanent residence. In case that a taxable person who has a formally declared residence on immovable property, but does not permanently reside there, the declaration of residence does not in itself prove that the house is not holiday home and the house would be subject to the payment of holiday home tax;
• the flat-rate income tax is determined based on conducting the rental activity; and
• the fact that someone is liable to pay income tax on the basis of the rental activity does not affect the determination of the status of the holiday home, that is, it does not exempt the owner of the holiday home from paying taxes on holiday homes.

Other news

Income tax refund based on the annual income tax calculation for 2023

Payment of income tax refunds based on the annual income tax calculation for 2023 began on May 2, 2024.
Starting with April 22, 2024, citizens began to receive notices of temporary tax rulings in connection with the return of income tax for 2023 in their user mailboxes in the eGrađani system and the Tax Administration will start delivering the rulings by mail to the addresses of residence or habitual residence. 

It is expected that most of the refunds for the annual income tax calculation for 2023 in a special procedure will be paid out by the end of May 2024. More information available at the link.

Corporate Income Tax return for 2023

Only a few days before the CIT return submission deadline, the Tax Authorities issued Guidelines, i.e., amendments to the previously issued guidelines, which apply in the process of filing Corporate Income Tax return for 2023.
Among other, the amendments refer to conversion into euros, benefits, donations, calculation examples for non-deductible expenses under item 5 and 7 of the Corporate Income Tax return and grants for education and training and research and development projects, tax losses, tax reliefs and advances.

Double Taxation Treaty negotiations with Australia and Saudi Arabia

In February 2024, the Minister of Finance Marko Primorac met with the Ambassador of Australia Richard Rodgers to start negotiations on signing the Double Taxation Treaty between the Republic of Croatia and Australia. Both parties expressed their willingness and desire to complete the process of negotiations and signing of the Double Taxation Avoidance Agreement as soon as possible. More information can be found at the link.
Additionally, in May 2024, negotiations for the Double Taxation Treaty between the Republic of Croatia and Saudi Arabia were completed. Both countries will now initiate their own internal procedures that enable the signing of the treaty and its subsequent ratification in the parliaments of both countries. More information at the link.

Directive on Faster and Safer Relief of Excess Withholding Taxes (FASTER)

The Council of the EU (i.e., the EU Member States) reached political agreement on the Directive on Faster and Safer Relief of Excess Withholding Taxes. The main points of the Directive include:

• a common EU digital tax residence certificate (eTRC);
• a choice of “relief at source” system and/or “quick refund” system; and
• a common reporting system.

EU Member States have to transpose the Directive into national legislation EU by 31 December 2028.