Profit tax (corporate tax or corporation income tax – CIT) is a relatively young form of tax that achieved its full momentum only in the 20th century, and today it is present in almost all developed capitalist countries of the world. It is a tax form that taxes the result of performing an economic activity.

Who is a TAX PAYER?

In accordance with the Law on Income Tax (Official Gazette 177/04 to 114/23), the persons liable for income tax are:

TAXPAYER

1. Trading company and other legal and natural person – (resident of the Republic of Croatia)which performs economic activity independently and permanently for the purpose of achieving profit, income, revenue or other economic benefits

2. Domestic business unit of a foreign entrepreneur (non-resident)

3. Companies in bankruptcy/liquidation

4. Institutions, associations, etc. – if they perform economic activity (only for that part)

5. A natural person who earns taxable income (from trades and trades of equivalent activities):

a) AT OWN REQUEST – upon declaration that he will pay profit tax instead of income tax

b) BY LAW – if in the previous tax period, he receives more than 1.000.000,00 euro (without VAT)

AS A RULE, THEY ARE NOT TAXABLE

Open investment funds

State administration bodies

State institutions, religious communities, political parties, trade unions, chambers, associations, DVD36, tourist boards, sports associations, foundations, etc. and associations,

THEY ARE TAXABLE ONLY IF THEY PERFORM AN ECONOMIC ACTIVITY and only fot that part.

Mandatory registration in the register of taxpayers to the competent TA

Deadline: 8 days before the start of the activity

TAX PERIOD

Calendar year (01.01.-31.12.)

Shorter – newly established companies (date of establishment – 31.12.)

Different from the calendar year – at the request / with the approval of TA- usually foreign entrepreneurs

TAX LIABILITY REPORT

By submitting the CIT form

To the competent TA according to the residence

No later than four months after the end of the tax period for which the tax is determined

TAX BASE

The tax base of profit tax is profit, which is determined ina accordance with accounting regulations as the difference between income and expense,s before the calculation of profit tax, increased and decreased according to the provisions of the Law on Profit Tax.

FOR RESIDENT -profit realised in country and abrod

NON-RESIDENT – Domestic profit

TAX RATE

For entrepreneurs who generated income during the tax period:

do 1.000.000,00 € – 10 %
revenues greater than EUR 1,000,000.01 – 18%
Taking into account central and local taxes, Malta has the highest statutory corporate tax rate, which is 35 percent. They are followed by Portugal with a rate of 31.5 percent, Germany with 29.9 percent and Italy with 27.8 percent. On the other hand, Hungary (9 percent), Ireland (12.5 percent) and Lithuania (15 percent) have the lowest corporate tax rates.

The average rate of profit tax in the analyzed European countries was about 21.3 percent, which is slightly lower than the world average, which in 2023, measured in 181 world jurisdictions, was 23.45 percent.

According to the OECD report, expectations from the adoption of the Global Initiative for the introduction of the minimum corporate tax, agreed to by more than 140 members of the inclusive framework for suppression o Tax Base erosion and profit diversion (BEPS), will certainly contribute to the stabilization of national tax policies.

More than 35 jurisdictions currently implement or plan to implement a minimum effective corporate tax rate of 15%, effective from 2024.

This will certainly contribute to reducing the pressure on national legislation, considering that the rate of profit tax is a factor that affects the ability of individual countries to attract investments and stimulate economic activities.

Author, Admin – FINACRO doo

Sources:

Profit tax (Official Gazette No. 177/04 – 114/23)

Rulebook on profit tax (Official Gazette No. 95/05 – 153/23)

https://www.porezna-uprava.hr/obrtnici/Stranice/Porez-na-dobit.aspx

https://www.oecd.org/en/publications/corporate-tax-statistics-2024_9c27d6e8-en.html

RRIF