The most important provisions among the latest changes to the Income Tax Act, in the part related to capital gains tax, are as follows:
- capital gains tax is applicable to holding periods under 2 years (compared to 3 years previously);
- all associated costs charged to the expense of a taxpayer are included into the capital loss;
- 28 February of the current year is introduced as a new deadline for calculation, withholding, remittance and reporting of the capital gains tax (compared to 31 January previously);
- a taxpayer can keep records of prices and financial instruments in the currency of acquisition (compared to counter-value in local currency requested previously);
- a taxpayer can employ an investment company, a credit institution authorised to provide investment and ancillary services, a collective investment undertaking, a financial organisation, an institutional investor or the Central Depository & Clearing Company Inc. (SKDD) to calculate and report its capital gains tax to the Croatian Tax Administration (compared to a management company or a person managing financial assets on behalf of the taxpayer previously);
- if SKDD is employed, the taxpayer is obliged to deliver all data necessary for the calculation of the capital gains tax, including the statement of holdings at the beginning and at the end of the tax period as well as data on the capital gains not in scope of the tax, by 15 January of the current year for the previous year. SKDD is obliged to calculate the capital gains tax, to advise the taxpayer accordingly by 31 January at the latest and to provide the prescribed report to the Croatian Tax Administration for all financial assets by 28 February. SKDD will be engaged in the development and the implementation of an integrated comprehensive solution for the calculation of capital gains tax in the forthcoming period and will be able to support the capital gains procedure starting from 2018 (for capital gains realised in 2017).
The new Income Tax Act and its bylaw have come into effect as of 1 January 2017 and refer to the disposal of financial instruments acquired as of 1 January 2016.
The fines prescribed by the Income Tax Act for not remitting capital gains tax, remitting insufficient amount of capital gains tax, not reporting or reporting capital gains with delay to the Croatian Tax Administration are as follows:
- from HRK 2,000 to HRK 20,000 for individuals;
- from HRK 10,000 to HRK 50,000 for legal entities (taking over the whole procedure on behalf of individuals);
- from HRK 2,000 to HRK 10,000 for authorised representatives of legal entities.
Impact on investors: With effect from 1 January 2017, capital gains tax must be calculated, withheld, remitted and reported by 28 February of the current year, and refers to the positive difference between the capital gains and the capital losses realised in the previous year. Capital gains tax is applicable to holding periods under 2 years.
Related Newsflashes: Capital Gains Tax Changes