Personal allowance represents a non-taxable part of the general personal income, decreasing thus the basis for the calculation of personal income tax. As of January 1, 2017 a new calculation method was introduced according to which the basic personal allowance rate increased to 3,800 HRK. This rate can be further increased by applying corresponding coefficients for supported members of immediate family and/or children, with additional increase applicable for disabilities. Categories eligible for tax deduction must be registered on the tax payer’s personal tax card and the taxpayer’s annual income should not exceed 15,000 HRK (previously 13,000 HRK), with certain exemptions such as social support, child allowance, support for a new-born baby, travel allowance and other specifically indicated exceptions.
Until now, the definition of “immediate family” included a spouse or non-marital partner or life partner and informal life partner of a taxpayer, parents of a taxpayer and parents of his spouse/non-marital partner/life partner/informal life partner, ancestors and descendants in direct line, step parents supported by the adult stepchild, former spouse/non-marital partner/life partner/informal life partner of a taxpayer for whom the taxpayer pays support and adult persons to whom the taxpayer is appointed as a legal guardian.
However, as of January 1, 2018, this list has shrunk substantially. Immediate family will now include: spouse*, parents of a taxpayer, children after their first employment and adult persons to whom the taxpayer is appointed as a legal guardian in accordance with the special laws. Therefore, the following categories can no longer be used for a tax deduction and they be deleted from the tax payers’ tax cards by January 31, 2018:
• parents of a taxpayer’s spouse*; • ancestors and descendants in direct line; • step parents supported by the adult stepchild; • former taxpayer’s spouse* for whom the taxpayer pays support.
* In accordance with the Croatian Family Act, the term “spouse” includes non-marital partners, life partners and informal life partners.
For the purposes of the Croatian Personal Income Tax Act, the term “children” includes all children supported by parents, adoptive parents, foster parents and legal guardians. Children who have completed their regular mandatory schooling are considered to belong to this category until their first employment.
Employers using the ePorezna system will have the possibility to use it for sending updated tax cards of their employees to the Tax Office, for which a written consent of the employee is required. The consent itself does not need to be sent to the Tax Office but should be retained in the official documentation of the employer. This solution eliminates the need for employees having to go personally to the Tax Office.