By enacting the Law on the Collection of Tax Debt of Individuals, which has been in force since May 9, 2013, the Ministry of Finance continues its activities to reduce debts based on unpaid taxes, contributions, customs duties, fees, and other public levies whose collection is under the jurisdiction of the Tax Administration.
Previous regulations were aimed at enabling legal and natural persons engaged in registered activities to overcome problems with delays in the payment of public levies, and the Law on the Collection of Tax Debt of Individuals also facilitates outstanding tax obligations for citizens.
The benefits regulated by this law can be utilized by citizens who do not engage in any registered activity, farmers who are registered as holders of agricultural holdings in the registers of the relevant state bodies, and individuals engaged in fishing activities and are registered accordingly. Craftsmen and those who previously performed freelance activities and closed their craft or ceased to perform freelance activities before the law came into force can also benefit from the more favorable tax debt payment models prescribed by the law.
Why installments if there is no work? Since the law came into force on May 9, 2013, craftsmen and freelancers who closed their craft or requested deletion from the relevant public registers by May 8, 2013, can also request the Tax Administration to apply this law to the tax debts that remained unpaid after closing their activities. Since, according to the Crafts Act and special laws governing freelance activities, it is not possible to deregister activities retroactively, craftsmen and freelancers who deregistered their activities on May 9, 2013, and thereafter will not be able to utilize these benefits.
The tax debt for which an individual can request a more favorable settlement method includes debts for all types of taxes, contributions for social security, customs duties, and fees, except for contributions for pension insurance of individual capitalized savings (contributions for the second pillar of pension insurance). Citizens generally owe property transfer tax, tax on holiday homes, annual tax on road motor vehicles and vessels, while former craftsmen and individuals registered as freelancers owe value-added tax, income tax or profit tax, social contributions, membership fees to tourist boards, and more. The debt consists of the principal and default interest recorded in the Tax Administration on the date of the application submission.
Two Models An individual is allowed to choose one of two models for more favorable payment of the total debt: 1) waiver of interest while simultaneously restructuring the principal, with interest calculated on the restructured principal during the repayment period; or 2) waiver of interest with a one-time payment of the principal debt. Thus, in both models of more favorable payment of tax debt, the individual is granted exemption from the obligation to pay default interest.
In the first model, the waiver of default interest with restructuring of the principal, the individual is allowed to pay the principal debt in monthly installments. The number of monthly installments depends on the size of the debt and amounts to a maximum of 60 months. For example, a debt of 100,000.01 to 200,000 kuna can be repaid in a maximum of 48 installments, a debt of 200,000.01 to 500,000 kuna in 54 monthly installments, and a debt exceeding 500,000 kuna in 60 monthly installments. Interest is paid on the restructured principal at a rate of 4.5 percent per annum.
In the second model, default interest is also fully waived, and the individual is required to pay the principal debt within 30 days of receiving the decision approving the waiver of interest with a one-time payment of the principal. This deadline can only be exceptionally extended for a maximum of 60 days if the individual requests it at the time of application and justifies the reasons for requesting a 60-day period for the payment of the total principal debt.
