ZAGREB, November 2, 2020 – The American Chamber of Commerce (AmCham) in Croatia on Monday welcomed the four tax reform rounds to date as well as tax changes announced for 2021, presenting its recommendations for tax reforms with a series of tax exemption measures, including more significant income tax cuts.
AmCham appreciates the government’s efforts in tax relief for the economy and entrepreneurs doing business in Croatia and welcomes the measures thus far through four rounds of tax reforms as well as those announced which are expected to enter into force at the start of 2021, AmCham Executive Director Andrea Doko Jelusic said.
According to Doko Jelusic, AmCham works on proposals for further tax relief aimed at attracting investments and boosting the competitiveness of Croatian employers in attracting and keeping workers.
AmCham has recently presented “Recommendations for Tax Reform in 2020” which contain a number of measures to improve the functionality of the taxation system, including measures for income tax reliefs and other types of income.
AmCham says that it has new proposals regarding changes to the tax treatment of “remuneration in kind” and option plans.
AmCham for increase in non-taxable part of income
AmCham suggests that the non-taxable income amount should be increased from HRK 4,000 to HRK 4,800 and that the 24% income tax rate should be reduced to 12% while the 36% tax rate should see a more significant reduction. That would lead to greater purchasing power, increased consumption and greater economic activity, AmCham said.
Reducing the 24% income tax rate to 12% would further relieve the tax burden on “middle” income earners, while the reduction of the 36% tax rate would boost investments, attract regional corporate headquarters and increase the share of higher-income professions. The 36% tax rate should significantly be reduced or applied only to gross monthly earnings of more than HRK 75,000, said AmCham.
It also recommends changes to the tax treatment of “remuneration in kind” so that the market value of remuneration in kind be considered as its gross value for the purpose of tax and contribution payment.
AmCham further suggests that the amount of non-taxable bonuses and reward be increased from HRK 5,000 to HRK 12,000.
Non-taxable allowance for work from home
AmCham also took into consideration allowances for workers’ health as well as the need to introduce a non-taxable allowance for work from home.
Considering the additional costs that workers have working from home and where it is not possible to necessarily separate certain business costs from household costs such as electricity, central heating and the like, AmCham suggests the introduction of a non-taxable fixed amount to cover these costs.
AmCham notes the example of Slovenia where the non-taxable allowance for work from home is 5% of the wage but no more than 5% of the average wage (which now is more than €90 a month).
AmCham also gives a dozen general recommendations, including on the extension of deadlines for filing income and profit tax returns, stressing that current regulations allowing the transfer of tax losses for the next five years do not stimulate long-term investments, particularly for high technology, and that this period should be extended to 10 years.
