Mazars Tax News - October 2022

News from the Republic of Croatia

Tax Authority`s opinion - Inheritance taxation

The Tax Authority has received an inquiry regarding the taxation of residents of the Republic of Croatia with inheritance and gifts tax in the Republic of Croatia in case funds are inherited from abroad and are in the testator's bank accounts in foreign banks.

In its response, the Tax Authority states that the provisions of Article 4 of the Law on Local Taxes ("Official Gazette ", No. 115/16 and 101/17) stipulate that inheritance and gifts tax is paid on cash, monetary claims and securities and movable property if the individual market value of the movable property exceeds 50.000,00 HRK on the date of determination of the tax liability.

Exceptionally, inheritance and gifts tax is not paid if some other tax is paid on inherited or donated cash, monetary claims, securities and movable property according to a special regulation.

Further, according to the provisions of Article 5, Paragraph 1 of the Law on Local Taxes, the liable persons of inheritance and gifts tax are individuals and legal persons who inherit, receive as a gift, or acquire on another basis free of charge property on the territory of the Republic of Croatia that is subject to inheritance and gift tax.

The Tax Authority emphasizes that the payment of inheritance and gifts taxes is based on the territorial principle. In other words, inheritance and gifts tax is paid on cash, monetary claims and securities and on movable property (if the individual market value of the movable property on the day of determining the tax liability exceeds 50.000,00 HRK) acquired on the territory of the Republic of Croatia.

In line with the above, in the conclusion it is stated that the provisions of the Law on Local Taxes do not apply to the inheritance located abroad. Therefore, persons who inherit funds located in the testator's bank accounts in foreign banks are not liable to pay inheritance and gifts taxes in the Republic of Croatia.

Other News

Rulebook on amendments to the Rulebook on Fiscalization in Cash Transactions

The Ministry of Finance adopted the Rulebook on amendments to the Rulebook on Fiscalization in Cash Transactions on October 13, 2022.

Namely, in accordance with the added provision of the new Rulebook, entities subject to fiscalization are allowed to determine the prescribed amounts of the treasury maximum up to fourfold amount, which will be applied in the period of dual circulation governed by the regulation prescribing the introduction of the euro as the official currency in the Republic of Croatia.

Signed Convention between the Republic of Croatia and the Principality of Andorra on the elimination of double taxation with respect to income and property taxes and the prevention of tax evasion and tax avoidance

On October 14, 2022, the Croatian Minister of Finance and the Minister of Finance and spokesperson of the Government of the Principality of Andorra signed the Convention between the Republic of Croatia and the Principality of Andorra on the elimination of double taxation with respect to income and property taxes and the prevention of tax evasion and tax avoidance.

The entry into force of the Convention will provide various reliefs in the taxation of all types of income, improve the conditions for increasing the mutual exchange of goods and services, and increase the level of overall economic activity of the States concerned.

The signed convention must be ratified by the Croatian Parliament, which will be done by passing the Law on the Ratification of the Convention between the Republic of Croatia and the Principality of Andorra on the elimination of double taxation with respect to income and property taxes and the prevention of tax evasion and tax avoidance.

Notice to the entities subject to fiscalization - Introduction of the euro

On October 3, 2022, the Tax Authority issued a notice to the entities subject to fiscalization related to the introduction of the euro as the official currency in the Republic of Croatia, according to which invoices must be submitted to the fiscalization system in the currency that was used at the time of issuing the specific document.

According to the above, if the date of issue of the document is until December 31, 2022, the data should be reported and submitted in kunas. On the other hand, if the date of issue of the document is on or from January 1, 2023, the data should be reported and submitted in euros.

The account request dataset (XML schema) remains unchanged.