Tax Administration: Every additional job must be registered and taxed

Additional jobs alongside regular employment can be a substantial way to supplement the household budget. When living costs are high and efforts are constantly made to reduce expenses, another source of income can significantly ease daily life. It is not uncommon for a hobby to grow into an additional job, even becoming the main source of income, prompting a person to change their employment. There are many jobs that can be performed this way: making jewelry, ceramics, and cosmetics, tutoring schoolchildren, babysitting, painting, sewing, hosting podcasts, influencing, recording videos, images, and music, graphic design, conducting online courses, assisting elderly individuals, growing fruits and vegetables, or establishing a family farm. However, one must not forget the legal obligations that also apply to additional jobs.

Profit or Income Tax

The methods of performing additional jobs or registering the conduct of activities are certainly important elements in determining the tax treatment of earned income, the Tax Administration notes. They explain that individuals who earn income from dependent work (salary) through employment can establish a company or engage in self-employment activities such as craft activities through a craft or as a home industry/secondary occupation, provided that the activity is performed through personal labor without employing workers. Depending on how they are registered for conducting activities, as a company or as self-employment, they may be subject to profit tax or income tax.

– If they have registered the activity as a company, then they are subject to profit tax, and if they have registered the activity as a craft and activities equivalent to crafts, they are subject to income tax. However, in certain cases, they may be obliged or choose to be taxed under profit tax. In both cases, they maintain business records and appropriately apply the General Tax Law, which stipulates that the recording of data in business records must be based on orderly and credible accounting documents, and postings and other records must be performed completely, accurately, timely, and orderly. In this regard, the provisions of the regulations on profit tax and income tax fully apply in the part concerning the taxation of self-employment activities and to taxpayers who perform self-employment activities alongside employment.

Thus, in cases where an individual performs self-employment activities, for example, through a craft or activities equivalent to crafts, they are obliged to pay income tax or profit tax, depending on their choice, on the determined income or profit. Additionally, in cases where an individual performs self-employment activities through a craft or activities equivalent to crafts, and is insured based on employment with the relevant insurance carriers in the Republic of Croatia, namely the Croatian Pension Insurance Institute and the Croatian Health Insurance Institute, they are obliged to pay contributions based on the performance of that self-employment (other) activity – the Tax Administration emphasized.

What is Other Income

They continue that the obligation of income tax and contributions based on the performance of other activities is determined and charged by the taxpayer themselves based on submitted tax returns or reports in accordance with the regulations on income and profit tax. If there is no registration of the conduct of activities, the Tax Administration stated, additional jobs can be performed based on, for example, a work contract. In that case, the earned income is taxed in the manner prescribed for other income.

– Namely, other income refers to those earnings that are not considered income determined based on: dependent work, self-employment, property and property rights, and capital. In that case, payers of income are obliged to report to the Tax Administration on the paid income based on which other income is determined and on withheld and paid public levies (obligatory contributions for pension and health insurance, advance income tax) using the prescribed JOPPD form. Since the obligation to report income and pay public levies lies with the employer, an individual performing additional jobs does not have to inform the Tax Administration about the earned income.

And since the Tax Administration, ex officio, performs the annual income and income tax calculation for each individual who earns annual income or income based on dependent work, self-employment, and other income, there may arise an obligation to pay income tax or a right to a refund of overpaid income tax, depending on the amount of income and paid advance income tax – the Tax Administration reminded.