Mazars Tax News - March 2022

News from the Republic of Croatia

The Minister of Finance issued the Rulebook on the termination of the Rulebook on deadlines for the submission of financial statements and accounting documentation in special circumstances, which entered into force on 22 February 2022.

Accordingly, the deadlines for the submission of financial statements for 2021 are returned to the standard deadlines, i.e. financial statements for statistical purposes should be submitted by the 30 April 2022, and for the purpose of public release by the 30 June 2022. Regular deadlines will also apply to the notice on consolidation obligations and public release for the branches for 2021.

Mazars comment: Given the abolishment of extraordinary deadlines for submission of annual financial statements, we do not expect that the deadlines for submission of annual corporate income tax return (CIT return) will be extended (the deadline for submission of CIT return is 4 months after the end of the tax period, i.e. when the business year is the same calendar year, the deadline for submission of CIT return is April 30, 2022, for 2021).

Draft Proposal of the amendments to the Value Added Tax Act

In order to mitigate negative impacts of the growth in energy prices related to households, businesses and farmers, amendments to the VAT Act were recently proposed through the E savjetovanje platform.

In the line with the above the following amendments to the VAT Act are proposed:

• Extending the application of a reduced VAT rate of 5% to baby food, edible oils and fats, butter and margarine, supply of live animals, supply of fresh and chilled meat and edible slaughter products, supply of fish and fresh or chilled fish, crabs, mollusks and other aquatic invertebrates, supply of fresh or chilled vegetables, roots or tubers, supply of fresh and dried fruit and nuts, supply of fresh poultry eggs (in shell), seedlings and seeds, fertilizers and pesticides, animal feed, concert tickets, sports and cultural events;
• Extending the application of a reduced VAT rate of 13% to natural gas and heating from heating stations, firewood, pellets, briquettes and wood chips and menstrual supplies.

Exceptionally, the supply of natural gas made in the period from 1 April 2022 to 31 March 2023 will be subject to a reduced rate of 5%.

Other News

Tax Authorities’ opinion - Extension of the period of exemption from employer’s contributions for a young person

The Tax Authority issued an official opinion in which it explained the possibility of extending the period of exemption from employer’s contribution (i.e. health care contributions) for a young person and how the calculation of the period of extension is made.

Namely, the Rulebook on social security contributions stipulates that for a young person which exercises the right to salary compensation at the expense of the state budget or whose employment is in non-active status due to the voluntary military service in the Armed Forces of the Republic of Croatia during the five years of employment, period of exemption of five years at the same employer, will be extended in proportion to the number of days for which the right to salary compensation is exercised, that is, in which employment relationship has non active status.

In subject case the employee was insured as a young person under an employment contract with indefinite duration from 8 December 2016 on basis of which the employer used the exemption from paying contributions for the period of five years. In the period from 1 April 2020 to 2 May 2020, the employee was on a sick leave due to complications in pregnancy, from 3 May 2020 to 9 November 2020 she used the right to maternity leave, from 10 November 2020 to 31 July 2021, she used the right to parental leave, and from August 1, 2021, she used the right to half-time parental leave.

In this regard, as the period of exemption from the calculation of employer contributions was used by the employer for up to five years, and the employment contract was concluded for an indefinite period on 8 December 2016, the period of five years of exemption from contributions ends on 8 December 2021.

Moreover, in this period the employee exercised her rights from compulsory insurance from 1 April 2020 to 31 July 2021 (16 months) and from 1 August 2021 to 8 December 2021 on a part-time basis (4 months and 8 days).

Accordingly, as the employee used the right to work a part-time in the latter period, and in accordance with the above provision of the Rulebook, the five-year period of employment with the same employer is extended by a number of days proportional to the full-time work, that is, two months and four days.

Accordingly, the total period of extension of the period for the use of exemption from employer’s contributions is a total of 18 months and four days.