The amendment to the Ordinance on the Implementation of the General Tax Act extended the period in which non-taxable donations can be made to help areas affected by the earthquake in the Zagreb, Karlovac and Sisak-Moslavina counties, until 31 December 2022. In addition to donations for the aforementioned areas, income taxpayers and income tax payers may also donate in regular circumstances for general utility purposes. It is important to emphasize that a donation is a unilateral act for which the recipient is not expected to counteract and that for each donation the taxpayer must have proof of the donation.
When it comes to regular circumstances, donated goods and services are taxable with VAT, while the exceptions are cash donations (unless the donor has received a good or service in return), and food donation, which is regulated by a special regulation and is not taxable in the amount of up to 2% of income or receipts from the previous year, but provided that food donation is made for the purpose of preventing its destruction, environmental protection and assistance to final recipients, exclusively to non-profit legal entities that have been approved by the competent administrative body for continuous collection and provision of humanitarian aid, and are registered as intermediaries in food donation.
For food donations, the taxpayer is obliged to submit data on completed deliveries to the Tax Office by the 20th day of the month following taxation.
From the point of view of profit tax, donations in kind or in cash may be tax deductible if they do not exceed 2% of income generated in the previous year, and if they are made in the Republic of Croatia for non-profit purposes to associations and other institutions performing activities in accordance with special regulations. In exceptional cases, if ministry makes a decision on the implementation of the financing of special programs and actions, the amount that is tax deductible may be higher than 2%.
Donations for non-profit purposes also include the payment of expenses for the medical needs of natural persons, which are not paid, but only in codition that the payment of expenses is made to the account of the recipient of the donation or health institution on the basis of authentic documents, and donations from food producers and retailers who donate food in order to prevent food destruction and protect the environment.
When it comes to income tax, donations in Croatia in kind, and donations in cash paid to the account increase personal deduction, while donations for public benefit and donations to institutions that perform activities in accordance with special regulations increase personal deduction to 2% of receipts for which in the current year filed a tax return and determined income tax. As with income tax, donations to natural persons for health purposes may also be included, of course in condition that the donation is paid on account of the recipient or health institution on the basis of authentic documents.
Below is an abbreviated overview of tax-deductible expenses for donations from profit taxpayers and income taxpayers in regular circumstances.
|Type of donation||Purpose and conditions of the donation||Where||Whom||How much||How||Taxable VAT||Method of payment|
|Profit taxpayers||Income taxpayers|
|Donation for public purposes||General purpose|
Condition:– on the basis of authentic documents
|In Croatia||Associations and other institutions that perform non-profit activities in accordance with special regulations.||up to 2% of revenue generated in the previous year||up to 2% of current year receipts- personal deduction increases||In kind||yes||–|
|Exceptionally, it may be more if it is given according to the decisions of the competent ministries on the implementation of funding for special programs and actions.||money||no||On bank account|
|Payment of expenses for the health needs of natural persons||surgical procedures, treatment, purchase of medicines and orthopedic aids, costs of transport and accommodation in health institutionsCondition:– has not been paid for by any type of health insurance or at the expense of a natural person- on the basis of authentic documents||In Croatia||Natural persons||up to 2% of revenue generated in the previous year||up to 2% of current year receipts||In kind||yes||–|
|money||no||On bank account of the recipientof the donation orhealthinstitutes|
As previously mentioned, for the areas affected by the earthquake in the Zagreb, Karlovac and Sisak-Moslavina counties, the period in which non-taxable donations can be given has been extended. With these changes, value added taxpayers are exempt from VAT on donations of goods and services in these areas for donations that will be made by the end of 2022, and are tax deductible expenses from the point of view of profit taxation as well as from the point of view of income taxation.
Article written by: Ines Herman, bacc. oec.