Mazars Tax Newsletter, January 2021

Tax Measures Implemented Due to Disaster Caused By Recent Earthquake 

Write-off of Personal Income Tax and Corporate Income Tax advances

The Tax Authority will ex officio determine monthly advances of Corporate Income Tax and Personal Income Tax in the amount of HRK 0.00 to all taxpayers based in the Sisak-Moslavina, Zagreb and Karlovac counties in which the earthquake disaster was declared (Petrinja, Sisak, Glina, Lekenik, Sunja, Donji Kukuruzari, Majur, Hrvatska Kostajnica, Dvor, Gvozd, Topusko, Ivanić Grad, Jastrebarsko, Velika Gorica, Zaprešić, Kravarsko, Pisarovina, Pokupsko). This possibility will apply for all PIT/CIT advances that will be due starting from announcement and up until the deadline for the submission of CIT (until the end of April 2021) and PIT return (until the end of February 2021.

Also, the Tax Authority will write off PIT and CIT advances to the taxpayers (closed by the Decision of the Civil Protection Headquarters) which are the applicants for reimbursement of the fixed operating costs. In case of approved application, the Tax Authority will write off the PIT and CIT advances to those taxpayers for December 2020 and January 2021 (write-off will be made subsequently after processing the application).

In addition, it should be noted that other taxpayers affected by the earthquake, and not recognized as such, may contact the Tax Authority to receive this measure.

Tax treatment of a donation intendent to reduce a negative impact of a catastrophe caused by an earthquake

The Tax Authority published an instruction in which it referred to the tax treatment of donations given for the purpose of reducing the negative impact of the catastrophe caused by the earthquake.

Corporate and Personal Income Tax

For all donations (in cash and / or in kind and / or food) given directly to legal persons and individual or humanitarian associations:

• CIT taxpayers can determine tax-deductible expenses regardless of the amount of income generated in the previous year, i.e.
• PIT taxpayers, i.e. self-employed, can determine tax-deductible expenses regardless of the amount of generated receipts.

Furthermore, donation given to the employees for the purpose of reducing negative impact of the earthquake is considered as non-taxable receipt if the employer provide donation in a transparent manner to all employees who have suffered damage.

It is important to note that taxpayers have to keep records of the necessary information on donations and documentation that will be considered credible on the basis of acts issued by the competent headquarters or other available documentation that they can obtain.

Value Added Tax

The recently adopted changes to the General Tax Rulebook introduced possibility of the VAT exemptions on donations intended for areas greatly affected by the earthquake. Namely, taxpayers are exempt from VAT on supplies of goods and services made without compensation or consideration and intended for reducing the negative impact of the earthquake in the areas where the disaster was declared in accordance with the relevant decision of the authorised body.

It should be noted that taxpayers who apply the VAT exemption have the right to deduct input VAT for donated goods, i.e. services provided without compensation or consideration.

The VAT exemption applies to all donations made from December 2020 and up until the end of 2021.

In addition, it should be noted that in the case of supplies that are paid from the received monetary donations, VAT exemption does not apply and the supplier is obliged to charge VAT.

Other measures

Enforcement proceedings

The Tax Authority will not issue warnings or initiate enforcement proceedings on the debtors which reside in the areas greatly affected by the earthquake until July 12, 2021, regardless of which debt enforcement proceedings should be initiated and their due date.

This applies primarily to tax debtors which had their registered office or residence in the towns of Petrinja, Glina, Sisak, Hrvatska Kostajnica and the municipalities of Lekenik, Sunja, Donji Kukuruzara, Majura, Dvor, Topusko, Gvozd, Kravarsko, Pisarovina and Pokupskog on 29 December 2020.

Also, other tax debtors from the Sisak-Moslavina, Karlovac and Zagreb counties will be considered debtors from the areas affected by the earthquake if they prove that they suffered damage as a result of the earthquake, which prevents them from settling the tax debt. In order to exercise this possibility, debtors should contact the collection and enforcement service at the competent regional office of the Tax Authority.

More details on this can be found on the official website of the Tax Authority.

The Croatian Chamber of Commerce membership fee

The Croatian Chamber of Commerce passed a Decision on the temporary abolition of the obligation to pay membership fees for taxpayers which had their registered office or residence in Sisak Moslavina County and which are unable to conduct their activity. The decision is valid from January 1 to March 31, 2021.

Also, temporary abolition from the membership fee will be provided to other taxpayers based in Karlovac and Zagreb counties, which were prevented from doing business due to the damage caused by the earthquake, based on the previously approved request.

In addition, due to the epidemic caused by the Covid-19 virus, the Croatian Chamber of Commerce passed a Decision on the temporary abolition of the obligation to pay membership fees. The decision is valid from January 1 to January 31, 2021. The temporary abolition of the obligation to pay membership fees relates to the following activities:

• C3240 Manufacture of game and toys
• H4931 Urban and suburban passenger land transport;
• H4939 Other passenger land transport n.e.c.
• I5610 Restaurants and mobile food service activities;
• I5629 Other food service activities;
• I5630 Beverage serving activities;
• J5914 Motion picture projection activities;
• N8230 Organisation of conventions and trade shows;
• P8551 Sports and recreation education;
• P8552 Cultural education;
• R9001 Performing arts;
• R9002 Support activities to performing arts;
• R9003 Artistic creation;
• R9004 Operation of arts facilities;
• R9200 Gambling and betting activities;
• R9311 Operation of sports facilities;
• R9312 Activities of sport clubs;
• R9313 Fitness facilities;
• R9319 Other sports activities;
• R9321 Activities of amusement parks and theme parks;
• R9329 Other amusement and recreation activities.

Other news

Extended deadlines for submission of financial statements for 2020

A notice was published on the Ministry of Finance website that the annual financial statements and other accounting documentation for 2020 will be submitted within the deadlines prescribed by the Rulebook on deadlines for submission of financial statements and accounting documentation in special circumstances.

In accordance with the Rulebook the annual financial statements for statistical purposes should be submitted by 30 June 2021. That deadline also includes the submission of a statement of inactivity, the declaration of a consolidation obligation, etc.

In addition, the annual financial statements for the purpose of public announcement have to be submitted within eight months of the last day of the business year. On the other hand, the consolidated annual financial statements for the purposes of public announcement within ten months of the last day of the business year.

It should be noted that the notice does not define whether the deadlines for submitting Corporate Income Tax returns and other related forms will be extended, so we expect that the Tax Authority will soon comment on the above.

Deadline for the submission of annual Personal Income Tax return

The Tax Authority has issued a notice that taxpayers who are obliged to file an annual Personal Income Tax return (form DOH) for 2020, can submit it through the eTax system or directly to the competent branch of the Tax Authority according to the taxpayer’s residence no later than March 1, 2021.

The stated deadline also applies to all individuals who wish to submit an application for the recognition of rights in a special procedure (Form ZPP-DOH).

Obligation to appoint a tax representative in the Republic of Croatia for taxpayers from the UK

Following the entry into force of the Agreement on Trade and Cooperation between the EU and the UK, the Tax Authority commented on the issue of the obligation to appoint a tax representative in the Republic of Croatia in order to obtain a VAT ID number for taxpayers from the UK. Namely, given the agreed Protocol on administrative cooperation and combating fraud in the field of VAT and mutual assistance in the collection of tax and customs claims, UK VAT payers will not be required to appoint a tax representative in the Republic of Croatia.