Taxation revamp still in the works by Croatia’s government

Taxation revamp still in the works by Croatia’s government

Municipal budgets might be severely impacted by a reduction of local taxes

Earlier this week, the Croatian government reaffirmed its goal of scrapping the country’s property sales tax during its term in office. The abolishment of the tax was one of the objectives set out by officials and the implementation of the promise is slowly taking shape.

Fears for local budgets

The Croatian property sales tax amounts to 3% of the total value of the property being sold. It is also one of the main revenue streams for towns and municipalities across the country and its scrapping could lead to serious problems for local governments as they would suddenly find themselves without vital funds needed to implement their projects and initiatives.

During a press conference held earlier this week Finance Minister Zdravko Maric stated that it was never the goal for the government to abolish the tax on 1 January 2021. The statement was made in response to media reports that local authorities across Croatia had raised their concerns to the country’s central government, thus causing a delay to the implementation of the tax cut.

Maric instead stated that starting 1 January 2021, the government will implement two other tax changes – namely two cuts to income tax rates from 24% to 20% and from 36% to 30% and a slashing of the profits tax from 12% to 10% for businesses with an annual turnover over HRK 7.5 million.

Meanwhile, the abolition of the property sales tax, which could adversely affect municipalities is expected to happen as part of another round of tax changes further down the line during the government’s mandate.



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