As of January 1, amendments to the VAT Law and the new Excise Duty Law come into effect

Legislative regulation of consumer crediting, changes in the taxation of VAT on financial services, a series of new institutes in the excise duty system, and the introduction of taxation on winnings from lotteries and betting games exceeding 30,000 kuna are some of the novelties that will be applied from January 1, 2010, when a series of new laws come into effect.

With the beginning of 2010, the second phase of the implementation of the personal identification number (OIB) begins, and the OIB becomes the basic identifier of individuals in communication with public authorities, to be used in tax returns and payment transactions. In the tax system, as of January 1, 2010, amendments to the VAT Law and the new Excise Duty Law come into effect. Amendments to the VAT Law introduce a number of novelties, for example, in the taxation of so-called own consumption, where it prescribes a limitation on the right to deduct input tax, so taxpayers will not be able to deduct 70% of input tax on representation costs and 30% on the purchase of cars. Significant changes are also related to the taxation of financial services, given that the previous VAT system applied an institutional concept of tax exemption, so banks were exempt from VAT for all services they provided, while from January 1, a functional concept is introduced in which certain banking, financial, and insurance services are exempt from VAT regardless of who performs them.

Thus, for example, account management services, interest on loans provided by banks will remain exempt from tax, but entrepreneurs in mutual loan or credit relationships will not charge 23% VAT on interest. On the other hand, banks will charge and collect VAT on some of their services, such as renting safes, starting from the new year. For banks, the amendment to the Deposit Insurance Law is also important, which reduces the deposit insurance premium rate from 0.40% to 0.32% annually. With the implementation of the new Excise Duty Law, a number of new institutes will come into effect, such as excise warehouses, authorized holders of such warehouses, a payment deferral system, and similar. The Excise Duty Law regulates the taxation of three groups of products – alcohol and alcoholic beverages, tobacco and tobacco products, and energy products and electricity, so with its application, the laws on special taxes on alcohol, beer, tobacco products, and petroleum derivatives will cease to apply.

Some of the novelties include changes in the calculation base, for example, beer based on the percentage of the actual alcohol content contained in one hectoliter of the finished product, unlike previously calculated per hectoliter of the finished product regardless of the percentage of the volume share, resulting in non-alcoholic beer no longer being subject to excise duty. The base is also changing for wine and other beverages obtained through fermentation and intermediates, while the excise duty on wine remains zero kuna. A novelty is the introduction of excise duties for small producers of alcoholic beverages, so individuals who distill brandy for their own needs will pay excise duty based on the volume of the still – 100 kuna for a still with a capacity of 40 to 100 liters, and 200 kuna for over 100 liters.

In the excise duty system for cigarettes, there are no changes compared to the current system, while the introduction of excise duties on electricity is postponed until entry into the EU, etc. The state can expect higher revenues next year based on the new Gambling Law, which introduces a new revenue – a tax on winnings (above 30,000 kuna) from lotteries and betting games at a rate of 15% on winnings from 30,000 to 500,000 kuna, and on all winnings above half a million kuna at a rate of 20%. The law also allows for the organization of games of chance via the internet, phone, and other interactive communication devices, i.e., the organization of lotteries, betting games, and games of chance in casinos through interactive sales channels of online gaming, with the obligation to establish continuous and immediate supervision (online), i.e., direct connection of the Ministry of Finance to the organizer’s information system.

Changes are also related to compensation systems, so for example, in lottery games, VAT is abolished and a monthly fee of 10% of the value of sold tickets, or received payments for each game is introduced. From 2010, the Consumer Credit Law will also apply, which among other things gives consumers the option to withdraw from the credit agreement within 14 days without stating a reason, and regulates the issue of credit intermediaries who will need to obtain approval from the Ministry of Finance to perform this job.

The beginning of 2010 also marks the implementation of the new Labor Law, which is aligned with European legislation, and according to which, among other things, fixed-term employment is limited to three years, regardless of whether it concerns the same or different jobs with a particular employer. The law defines a weekly working time of 40 hours, a maximum of 48 hours including overtime, the institute of redistribution of working hours, and extends the annual leave time, which will last at least four weeks, instead of the previous minimum of 18 days, etc. Several other laws in the field of the economy will come into effect on January 1 of the following year, such as the Water Law, which protects water through the institute of common good and excludes the possibility of privatizing rights to water resources, then the Law on Financing Water Management, the Law on Structural Support and Regulation of the Fisheries Market, the Law on Combined Transport, or amendments to the Law on Credit Institutions, amendments to the Law on Official Statistics, etc. (H)