Karanovic & Nikolic

Croatia highlights — income tax law and compulsory health insurance: July 2014

This briefing deals with a repeal of the provisions of the Income Tax Law (Official Gazette no. 125/12) regarding the retroactive taxation of receipt from dividends and profit sharing.

By the decision of the Constitutional Court of the Republic of Croatia as of 18 June 2014, retroactive taxation of receipts from dividends and profit sharing are repealed. The repealed provisions of the Income Tax Law stipulated that dividends and profit sharing disbursed during the period of applicability of such law from the profit generated from business activities of the company during the period when there was no legal obligation to pay taxes shall be subject to taxation at the rate in force at the moment of profit disbursement.

The Constitutional Court has determined that such statutory solution, which intervenes in legal relationships between the company and the taxpayer that arose before the disputed law came into force, leads to retroactive effect that is constitutionally unacceptable. Since the disputed provisions were repealed rather than cancelled, the Croatian Ministry of Finance will not refund the already paid income tax and surtax…

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