recent tax developments 11/2022

On 17 November 2022, the draft of the final proposal of the Act on additional profit tax was published and is currently under public discussion.

The draft law proposes the introduction of an additional profit tax as a form of solidarity contribution to the energy crisis.

According to the draft law, additional profit taxpayers are defined as taxpayers who meet the following conditions in the tax period of 2022:

1. revenue of more than HRK 300,000,000.00 and
2. taxable profit in an amount which is by 20 % higher as the average taxable profit from four previous tax periods. The comparability starts with the period 2018 and includes the periods until 2021. Taxable profit is defined as the difference between income and expenses, increased and decreased according to the provisions of the Profit Tax Act, i.e., the profit as stated under numbers 36 or 39 of the Profit Tax Form (PD). If the taxpayer reported a tax loss in one of the previous tax periods, for the purposes of the additional tax, the taxable profit for this tax period is assumed zero.

The tax base is defined as the positive difference between the profit from the tax period 2022 and the average from the previous four tax periods increased by 20 %. The rate of additional tax on profit is 33 %.

The taxpayer must pay the profit tax determined at the standard rate of 18 %. In the following, he bears the obligation to pay the additional profit tax at the rate of 33 %.

The additional profit tax is paid regardless of the activity or business of the taxpayer and is a one-time tax for 2022. The calculation and the payment of the additional profit tax are within the deadlines prescribed for reporting the profit tax.

Additional profit tax is calculated for the tax period that began on 1 January 2022. Adjustments are prescribed for taxpayers whose tax period is not a calendar year, and this period is equal to the current regulation on income tax. Thus, profit taxpayers whose tax period began, for example, on 1 October 2022, will determine and pay the first additional profit tax liability only after 1 October 2023, and so on.

Those taxpayers who are liable to pay solidarity contribution according to Council Regulation (EU) 2022/1854, are not obliged to pay additional profit tax.

It is expected that the Act will be soon approved. It is further likely that an Ordinance will be adopted within 90 days from the date of entry into force of the amending act and will provide for more details and the method of the legal implementation.

Please feel free to contact us for any further questions.