Croatia is set for a transformative fiscal year with sweeping amendments to its tax and social security systems taking effect on January 1, 2024. These changes bring a nuanced blend of challenges and opportunities for taxpayers across the nation, touching upon personal income tax and social security adjustments.
In the realm of personal income tax, several pivotal changes will redefine the landscape. The basic individual tax allowance sees a significant boost to EUR 560, providing relief for individual taxpayers. Furthermore, the tax allowance for dependent family members and individuals with disabilities is enhanced, recognizing, and addressing diverse family needs.
A notable development is the cancellation of the municipality tax/city surtax, simplifying the tax structure for all types of income. Furthermore, the threshold for the higher tax rate has moved to EUR 50,400, from what the majority of the taxpayers will certainly benefit. Additionally, a groundbreaking municipality-based income tax rate system is established, granting municipalities the authority to set rates. This system aims to accommodate the tax losses of municipalities by incorporating the cancelled municipality tax or city surtax directly into the income tax rate.
On the revenue side, the tax on rental income and capital income has increased to 12% from the previous 10%. Moreover, income derived from incentive shares sees an uptick, and is now taxed at 24%, up from the previous 20%.Shifting focus to social security, changes effective from December 1, 2023, introduce a significant relief measure. The base for the first pillar of mandatory pension insurance is reduced for gross salaries up to EUR 1,300. Individuals earning up to EUR 700 are entitled to a base reduction of EUR 300, while those earning between EUR 700 and EUR 1,300 are eligible for a partial reduction based on their gross salary range.
As Croatia embarks on this new era of taxation, individuals and businesses must carefully navigate these changes.
Strategic planning and a comprehensive understanding of the amended regulations will be crucial to ensuring compliance and optimizing financial outcomes in this evolving fiscal landscape.
Stay informed as Croatia takes bold steps toward shaping its financial future in 2024.
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