The tax year is the calendar year.
The Croatian PIT system does not allow for joint annual tax return filing.
The annual tax return filing deadline is the end of February of the current year for the previous year’s annual tax return.
Obligation to file an annual tax return exists if:
- a taxpayer realises income from self-employment activities
- international shipping crew members, Croatian residents, realise employment income, and
- the tax administration requested the taxpayer to pay PIT subsequently.
The tax return shows the difference between the annual tax liability and the amount of tax prepayments made during the tax year. Depending on this difference, the taxpayer will be either entitled to a tax refund or will be required to make tax due payment.
The tax burden on income types that are included in the annual tax return can be higher compared to the tax burden indicated at each income category (e.g. other income that falls into the category of annual income).
A special procedure for annual assessment of PIT and municipal tax liability arising in connection with employment income and other income that falls into the category of annual income is applicable. The taxpayers are generally not obligated to file their annual tax return. Instead, the tax administration will carry out a special procedure for annual assessment of PIT and municipal tax liability.
Taxpayers can realise certain rights that are prescribed by the PIT Act (e.g. the right to increase basic personal allowance based on dependent family members, the right to avoid double taxation) by filing a request for a specific right to be recognised as part of the special procedure for annual assessment of PIT and municipal tax liability. The request filing deadline is the end of February of the current year for the previous year’s annual tax return.
Income that falls into the category of final income is not included in the annual tax return nor does it enter the process of annual assessment of tax liability. Consequently, tax paid on the final income is deemed finally paid tax (i.e. it cannot be subject to additional taxation regardless of the amount of other types of income taxable at the annual level).
Payment of tax
Depending on the income type and taxpayer’s circumstances, income tax prepayments can be made:
- on the basis of the tax administration’s assessment
- on the basis of the filed annual tax return, or
- at the time income is paid.
Such tax prepayments may constitute final tax (i.e. in case of final income) or a taxpayer may be obligated to file an annual tax return in order for the final annual tax liability to be determined (i.e. in case of annual income) or income enters the process of annual assessment of tax liability (i.e. in case of employment income and other income that falls into the category of annual income). In some cases, a taxpayer can voluntarily initiate the process of annual assessment of tax liability in order to realise certain rights.
Per the filed annual tax return, the tax administration issues a tax assessment. If per such assessment tax due is assessed, the taxpayer has 15 days from the day of tax assessment receipt to cover the tax due. Otherwise, late payment penalty interest is calculated.
Some of the exceptions to the above process are the following:
- In case of taxpayers who are realising income from self-employment activity and are paying PIT based on the so-called lump-sum taxation ('paušalno oporezivanje'), the tax administration issues a tax assessment determining annual and monthly lump-sum tax liability. Annual tax refund or tax due is determined based on a special annual reporting form that the taxpayer needs to file within 15 days as of the end of the tax year for which the report is filed. In case of assessed annual tax due, the taxpayer needs to pay the tax due at the time of filing of the annual reporting form.
- In case of taxpayers who are realising income from self-employment activity and are liable to file an annual tax return, they are liable to pay PIT arising in relation to the filed annual tax return at the time the annual tax return is filed.
- In case of taxpayers who have been issued a tax assessment as a result of the special procedure for annual assessment of tax and municipal tax liability carried out by the tax administration:
- If the taxpayer receives a tax assessment for the previous tax year by 30 June of the current year, one is liable to pay assessed tax due by 15 August of that year unless one files an appeal against the assessment.
- If the taxpayer receives a tax assessment after 30 June of the current year, one is liable to pay assessed tax due within 45 days as of receipt of the assessment unless one files an appeal against the assessment.
Tax audit process
The tax audit process is usually performed as follows:
- Notification of a tax audit is sent to the taxpayer eight days prior to the tax audit, at the latest.
- Tax audit is conducted with an interview with the taxpayer or an authorised person on behalf of the taxpayer.
- Minutes of the tax audit are issued.
- The taxpayer can object to the minutes within a prescribed filing deadline. If objection shows new facts and evidence, the tax administration will prepare supplementary minutes.
- Resolution of the tax audit is issued within 60 days as of the day deadline for objection to the minutes has expired or as of the day supplementary minutes have been provided to the taxpayer.
- Appeal against the resolution can be filed within 30 days as of the day the taxpayer received the resolution.
- After a rejected appeal, the taxpayer can initiate court litigation procedures.
Statute of limitations
The tax administration’s right to assess tax liabilities and interest; the tax authorities right to collect taxes, interest, and execution costs; and the taxpayer’s right to a refund of tax, interest, and execution costs is subject to a statute of limitations that becomes effective in six years, counted from the day statute of limitation commences. However, the tax administration may initiate the tax audit within three years counted from the day statute of limitation commences.