recent tax developments 10/2022

Dear Sir or Madam,

end of September 2022, amendments to the tax regulations were adopted. Please find in the following an overview of the most important amendments that will come into force in October 2022.

Amendments to the VAT Act

The supply and installation of photovoltaic panels (used for producing electricity) as well as solar panels for systems that produce thermal energy (for water heating or living space heating) will be subject to a VAT rate of 0 % in the case such installation is made on private dwellings, housing and public and other buildings used for activities of the public interest as well as adjacent to such dwellings, spaces and buildings.

The mere supply of solar panels without installation services and other equipment that accompanies the installation of solar panels, as well as the supply and installation of solar panels that does not qualify as a simple construction project in line with the special legislation, would continue to be taxable at the general VAT rate of 25 %.

A retroactive application of the 0 % VAT rate to supplies made before the entry into force of these changes is not possible.

The supply of heat from heating stations, including related fees, and the supply of firewood, pellets, briquettes and wood chips supplied up to 31 March 2023 will be subject to a reduced VAT rate of 5 %.

Amendments to the Income Tax Ordinance

With the adoption of the amendments to the Income Tax Ordinance, the following non-taxable receipts were increased:

• Occasional awards from HRK 3.000,00 to HRK 5.000,00 per year
• Benefit in kind from HRK 600,00 to HRK 1.000,00 per year
• Monetary lump-sum allowances for the costs of food for workers from HRK 5.000,00 to HRK 6.000,00 per year, i.e. up to a maximum of HRK 500,00 per month
• Reimbursement for the use of private cars for business purposes from HRK 2,00/km to HRK 3,00/km travelled
• Severance payment upon retirement from HRK 8.000,00 to HRK 10.000,00
• Work performance awards and other forms of additional rewards for workers from HRK 5.000,00 to HRK 7.500,00 per year
• Awards to children until the age of 15 from HRK 600,00 to HRK 1.000,00 per year

In the case that during the year 2022 the previous non-taxable amounts have been partially or fully paid out to employees it is possible to pay the difference up to the newly prescribed non-taxable amounts tax-free (except for the reimbursement for the use of private cars for business purposes).

As of 1 January 2023, employers will have the right to choose which type of tax-free allowance for the cost of food they will provide to their employees on a monthly basis (this was previously decided upon on an annual basis and could not be changed, therefore denying the possibility to combine different types of payments on an annual basis). Employers will now be able to pay the workers lump-sum allowances of up to HRK 500,00 per month or cover food costs based on credible documentation of up to HRK 1.000,00 per month.

Please feel free to contact us for any further questions.
Your LeitnerLeitner Team