English for Tax Administration 2 Lecturer: Miljen Matijašević G10, room 6/I, Wed 11:00-12:00 e-mail: miljen.matijasevic@gmail.com Session 8

Today’s Session Revision questions and exercises Personal Income Tax

Revision of the last session Value Added Tax

Explain the following terms input tax output tax deductible legal entity taxable activity non-resident customs clearance consideration

Answer the questions Who is subject to payment of VAT? What is the criterion for entering the VAT system? What do you know about the input and output taxes? What are the taxable transactions? What is the taxable base? What are the rates? What rules apply to non-residents?

Revision Do the exercises on p. 15

Personal income Tax Unit 5

Personal Income Tax Paid on worldwide income in case of tax residency in Croatia Paid by resident and non-resident natural persons

Resident / non-resident Registered residence in Croatia If he/she intends to stay more than 183 days over a period of two years in Croatia NON-RESIDENT Taxed on income earned in Croatia

Taxable base – sources of income Income earned by: employment (salary) self-employment freelance work, crafts, agriculture, forestry property and property rights renting real estate, intellectual property rights capital insurance other income management board fees, income earned by sportsmen, referees, translators, tourist workers, etc. interest on savings in hard currency and HRK dividends on shares

Taxable base Total income minus personal allowances Non-taxable income HRK 45,600 per year monthly allowance HRK 3,800 Dependents and children Disabled members of the family Etc.

Areas of Special Interest Residents of those areas have special tax breaks Higher personal allowances Income tax exemption of earnings from agriculture and forestry Etc.

Tax Rates Income tax brackets: Tax base (annual income total minus deductions) Tax rate HRK 0 – HRK 17.500 24 % HRK 17.501 – 36 %

Local surtax Charged in certain municipalities on the total amount of calculated tax E.g. Zagreb - 18 %

Non-taxable Benefits Employers may give employees benefits not subject to taxation If these exceed the prescribed limit, the excess is fully taxable (contributions, income tax, surtax) non-taxable bonuses: up to HRK 2.500 per annum Contributions – to health and pension insurance (obligatory and optional)

Benefits in Kind Subject to income tax Valued at the market value, including VAT Use of business buildings, cottages, dwellings and means of transportation provided by the employer, Low interest on loans granted by the employer (taxable base – the difference between a rate of 4 % and the rate applied) Gifts and entertainment provided by the employer, and Shares received from the employer.

Key vocabulary freelance work crafts hard currency personal allowance depreciation tax brackets contributions

Practice Do the exercises on p. 17-18 in your coursebook

Thank you for your attention!