How to Choose the Best Tax Option

The monthly base, and thus the monthly contribution obligation, depends on the method of tax payment. It is lowest if the seasonal craftsman pays income tax in a flat amount, but this is only possible if his total income from craft activities does not exceed 149,500 kuna.

Craft activities can be carried out throughout the year or can be registered as a seasonal craft and conducted only during part of the year. Examples include construction crafts, providing various services in tourism and hospitality, and even retail trade can be seasonal if it is related to tourism, etc. Any activity that can be performed under the Crafts Act can be registered as a seasonal craft. A craftsman intending to register a seasonal craft must meet all the conditions that are otherwise prescribed as a condition for performing a specific craft. For related crafts, it is necessary to meet the condition of professional qualification, appropriate secondary vocational education, or passing a master’s exam. If the craftsman does not meet the required professional qualification, this condition can be compensated by employing a worker who has the appropriate education, provided that the worker must be employed full-time. Individuals with a university education can perform related crafts as they have higher education than the required conditions.

Flat Rates and Limits

For example, a graduate economist can also perform hospitality activities, even if he has not completed hospitality school, etc.
The period of performing a seasonal craft is recorded in the Crafts Register, which is maintained by the competent service for economic affairs and cannot exceed six months. The activity can only be performed within that period or shorter. During the period recorded in the Crafts Register as the period of seasonal craft, the seasonal craftsman is entitled to pension and health insurance and is obliged to pay contributions for that period. If his craft activity is his only or main occupation, he is obliged to pay contributions for pension insurance, health insurance, and employment on the prescribed base every month.

Base for Contributions

The monthly base, and thus the monthly contribution obligation, depends on the method of tax payment. It is lowest if the seasonal craftsman pays income tax in a flat amount. Then the monthly contributions amount to 1,195.91 kuna and are paid based on the decision of the Tax Administration. The obligation is higher and amounts to 1,943.35 kuna per month if the craftsman keeps tax books according to the Income Tax Act, and it is highest if instead of income tax he pays profit tax, which amounts to 3,288.74 kuna per month. A craftsman who determines tax based on business books is obliged to submit form JOPPD to the Tax Administration every month for the contributions he pays for his personal insurance.

Evidently, a seasonal craftsman can minimize the contribution obligation if instead of keeping business books he pays income tax in a flat amount, which is only possible if his total income from craft activities does not exceed 149,500 kuna per year. Craftsmen engaged in trade and hospitality activities cannot pay tax in a flat amount. For a seasonal craftsman who can choose flat taxation, the criterion of 149,500 kuna applies to the period of seasonal craft operation. If it happens that before the expiration of the seasonal activity period in that tax year he exceeds the income amount of 149,500 kuna, from the first day of the following month he ceases to be a flat-rate taxpayer and for the period until the end of the year, or until the end of the season if the seasonal craft ceases before the end of the year, he must keep business books. When transitioning from flat taxation to taxation based on business books, his contribution obligation automatically increases, but not retroactively, only for the remaining months spent in insurance based on that.
Although the seasonal craft activity is performed only during part of the year, the annual income tax or profit tax return is submitted within the same deadlines and according to the same rules as for a craftsman who operates all year round. A craftsman who pays tax in a flat amount does not submit an annual tax return, a craftsman who keeps books according to the income tax regulations submits the return by the end of February, and a craftsman who pays profit tax by the end of April of the following year.

Alongside Employment

A seasonal craft can also be performed alongside employment. A craftsman can be employed by a legal entity or another individual and, in addition, during the time after or before the work done in employment, carry out craft activities in his name and for his account. In such cases, his obligations related to the method of determining and the amount of tax from craft activities are generally the same as for a craftsman for whom the craft is the only occupation, but contributions are paid according to different rules. Contributions are paid once a year based on the annual income earned from craft activities, up to the amount that the craftsman would pay if his craft activity were his only occupation.