HOK submitted 31 comment on the proposals of five tax laws

The Croatian Chamber of Trades and Crafts (HOK) announced on Thursday that it has submitted 31 comments on the amendments to five key tax laws, proposing, among other things, a modification of the basic personal deduction and its linkage to the amount of the minimum wage, and reiterating the proposal to raise the threshold for entering the VAT system to 50,000 euros.

HOK states that they submitted 11 comments on the proposed amendments to the Income Tax Act, in which they welcome the increase in the basic personal deduction, but emphasize that due to the current amount of the minimum wage, as well as possible increases in the same, not all citizens in the Republic of Croatia will have the same net income derived from the minimum wage in the future (due to different income tax rates).

HOK therefore proposed a modification of the basic personal deduction that would be ’80 percent of the amount’ of the minimum wage.

– This would make the personal deduction variable, but it would ensure the same net income amount for all individuals receiving the minimum wage – explains the Chamber of Trades and Crafts.

With the proposed amendments to the Income Tax Act that the Government submitted to the Parliament, the amount of the basic personal deduction would increase from 530.90 euros to 560 euros, and the amount of the basic personal deduction for dependent members would also increase.

The proposed amendments would also abolish the surtax on income tax, and local units would be allowed to determine the rate of income tax by their decisions. Currently, income tax rates are 20 and 30 percent, and according to the Government’s proposal, the City of Zagreb, which currently has a surtax of 18 percent, could set a lower income tax rate in the range of 15 to 23.6 percent, and a higher rate from 25 to 35.4 percent.

Municipalities, which can currently set a surtax of up to 10 percent, would in the future be able to set a lower income tax rate of 15 to 22 percent and a higher rate of 25 to 33 percent. For cities with up to 30,000 inhabitants, which can currently set a surtax of up to 12 percent, the new range for determining income tax is between 15 and 22.4 percent for the lower rate and 25 and 33.6 percent for the higher rate, while for cities with more than 30,000 inhabitants, which could have a surtax of up to 15 percent, the range is from 15 to 23 or 25 and 34.5 percent.

HOK welcomes the Government’s intention to abolish the surtax, as it would directly affect the net salary of the majority of employees in Croatia.

– However, considering the right of local self-government units to define the income tax rate themselves, it has been proposed that the Government further limits the upper limit of lower and higher rates for all representative bodies of local self-government units in order to fully achieve the planned tax reform – emphasizes HOK.

Their comment also relates to the issue of incentives for young craftsmen, given that under the Income Tax Act, young people up to 25 years old are exempt from paying 100 percent of the annual income tax, and for young people up to 30 years old, the exemption is 50 percent, but only if they are employed as workers under an employment contract.

This excludes young people who are self-employed in crafts and thus create opportunities for the employment of others, HOK notes, adding that the Contributions Act does not provide for an exemption from paying mandatory health insurance for craftsmen under 30 years old, as the measure also applies only to workers.

HOK also submitted eight comments on the proposed amendments to the Cash Transactions Fiscalization Act, highlighting that the proposed monetary fines are too high and proposing ‘reductions of the upper and lower thresholds by at least 50 percent’.

In comments on the proposed amendments to the Value Added Tax Act, the Chamber of Trades and Crafts reiterates the demand that the threshold for entering the VAT system be set at 50,000 euros, in order to strengthen the competitiveness of Croatian crafts.

The Government proposed in the legislative changes that the threshold for entering the VAT system be set at 40,000 euros.

HOK also proposed that a reduced VAT rate of 5 percent be applied to traditional and artistic crafts, as crafts that require knowledge of craft skills and are predominantly performed by hand, but also that the lowest rate (according to the suggestion of the EU directive) be applied to the activities of hairdressers and beauticians, they emphasized from the Croatian Chamber of Trades and Crafts.

Finance Minister Marko Primorac, when responding to a journalist’s question about whether the Government took into account any comments made during the public discussion on the tax amendment package, replied ‘that nothing has been taken into account so far’, adding that there were a lot of comments, predominantly related to VAT or the expansion of the scope of application of the lower rate.