Donations by entrepreneurs in Croatia represent a significant part of socially responsible business and contribute to various sectors such as culture, education, health and sports. In 2024, the tax system additionally encourages such donations through several tax benefits defined by the Law on Profit Tax and accompanying regulations. These benefits allow entrepreneurs to recognize certain expenses for tax purposes, which can ultimately reduce their tax base.

1. Tax-deductible donation expenses up to 2% of income

The most important relief in connection with gifts refers to the possibility of tax recognition of gifts of up to 2% of the total income generated in the previous or current tax period. This provision applies to entrepreneurs who donate funds for various socially beneficial purposes, including cultural, scientific, educational, health, humanitarian, sports, environmental and other generally beneficial activities. Donations can be made in cash or in kind, but it is important that they are aimed at domestic users, such as associations, non-profit organizations or institutions registered to perform these activities.

Newly established entrepreneurs also have the possibility to tax-recognize gifts, which is a novelty introduced from January 1, 2024. Instead of using income from the previous tax period (which, of course, they don’t have yet), they can take into account the income generated in the current period, which allows greater flexibility in tax planning. Thus, entrepreneurs who did not generate income in the previous year can use the income from the current year as a basis for calculating tax-recognized donations.

2. Donations above 2% of income for strategic projects

In addition to the basic relief, from 2024 an additional tax benefit was introduced for donations above 2% of income. These donations can also be tax-deductible if they are intended to finance strategic projects of national importance. In order for donations above this threshold to be recognized as tax-deductible expenditure, the projects must be approved by the competent state authorities and defined by special regulations or strategies of certain ministries with the consent of the Government of the Republic of Croatia. In this way, entrepreneurs can significantly increase the amounts of their donations, while retaining a tax deduction, which encourages investment in projects of wider social benefit.

3. Gifts to natural persons

Although gifts to individuals are generally exempt from tax relief, there are a few specific exceptions. In 2024, donations aimed at covering healthcare costs may be tax-deductible. This includes, for example, the costs of surgical procedures or the purchase of orthopedic aids. It is crucial that these funds are paid directly to the giro account of the user or healthcare institution, thus ensuring transparency and compliance with tax regulations. This type of donation allows entrepreneurs to help individuals in critical moments, while at the same time obtaining tax benefits.

4. Tax forms and application

From 2024, new forms have been introduced for all entrepreneurs who receive tax benefits based on donations – Form PD and Form PD-NN. These forms allow more precise recording of donation expenses and their tax recognition. Income tax payers are required to submit these forms together with the annual tax return, where expenses related to donations will be indicated separately.

Conclusion

Tax credits for donations in 2024 in Croatia provide entrepreneurs with the opportunity not only to reduce their tax base, but also to actively contribute to socially beneficial projects. Donations of up to 2% of income can be tax-deductible, and donations aimed at strategic projects can exceed this limit with the approval of the competent authorities. Specific cases, such as gifts for health care of natural persons, also offer additional tax benefits. All these measures contribute to the development of the community and encourage socially responsible business in a way that is also financially beneficial for entrepreneurs.

Proper use of these benefits allows entrepreneurs to optimize their tax obligations, while making a significant contribution to the general social good.

Author, Admin – FINACRO doo

Sources:

Law on Profit Tax (Order Nov., No. 177/04.- 114/23.)

Law of the Profit Tax Ordinance (Order Nov., No. 95/05 – 156/23.)