Tax Reforms Presented, VAT in Hospitality Sector Slashed

Lauren Simmonds

As Index writes on the 26th of July, 2019, Prime Minister Andrej Plenković and Finance Minister Zdravko Marić presented the fourth round of tax reforms for the mandate of the current government today, which in their words brings a total tax relief of 3.75 billion kuna.

At the beginning of the presentation of the contours of the fourth round of tax reforms, the PM recalled that “his government started with the policy of relief for the economy and citizens from the very beginning”, N1 reports.

“In the fourth round [of tax reforms], total relief in the next year will amount to 3.75 billion kuna” said Plenković.

No tax for under 25 year olds

“We’ve decided on another measure of tax relief, which means that persons under the age of 25 will be fully exempt from tax obligations, and those from 26 to 30 years of age will get 50 percent off,” said Plenković.

“Those who enter the labour market and have freedom of movement will gain a certain type of position in their early stages of active business life, enabling them to realise higher levels of income and stay in Croatia,” the prime minister added.

Taxes on sweet drinks, more excise on cigarettes and alcohol

“There will be a change in the taxation of non-alcoholic beverages by the share of sugars added. We will try to reduce their consumption, especially by children, in order to have a positive effect on their health,” said Plenković. Excise duties on harmful tobacco products, as well as alcohol, will also be increased.

VAT in the hospitality sector slashed to 13 percent

“VAT on food for hospitality facilities will be reduced to 13 percent. We’re taking this measure to maintain the level of income from tourism,” the PM stated.

“Croatia can go enter the fourth wave of tax reforms based on the achievements so far and the fact that we have a clear direction for strengthening the economy and the [tax] relieving of citizens and entrepreneurs. I’m expecting suggestions and criticisms through the process of public debate and consultation. Each of the measures can take effect before January the 1st, 2020, through by-law acts,” the prime minister said.

Marić: This is a stimulus for young people

Finance Minister Marić, speaking about tax relief for Croatia’s youth, says they have tried to push one measure through the tax system.

“The tax system can’t solve all our problems, but it has to and should give some incentives, and that’s the goal of this measure.

We want young people in the early stages of their working lives to have extra benefits and stimuli. This is one incentive, and over the years it does not have to mean that salaries will decrease. A young person can advance in a company,” he said.

He does not yet know whether this measure will be limited to contracts for an indefinite period or for all types of employment, and it is already known that the measure will not apply to authorship contracts and honorary jobs.

“We’re talking about 380,000 young people and not everyone is caught in the scissors of income tax, so, this is something that will reflect on 250,000 young people,” he said.

Will the salaries in the hospitality industry rise?

Asked if the reduction in VAT on food preparation in the hospitality industry will increase salaries, he said: ”the intention of all of these measures is to broaden the number of taxpayers. The biggest emphasis is placed on the hospitality industry because those operating in that field are primarily small and medium-sized companies. I don’t want to induce too many expectations with myself or with others. It’s on them,” said Marić.

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