A new round of tax reform with nine amended tax laws and regulations taking effect on 1 January aims to further ease the burden on households and businesses.

The amended law on income tax raises the non-taxable disposable income from €530 to €560. Furthermore, the eligibility criteria for higher non-taxable disposable income concerning dependents is changed.

The amended legislation raises the threshold for the application of a higher income tax rate from €47,780 to €54,400 annually.

The amendments abolish local surtax, and authorities in cities and towns can offset that by increasing tax rates on income. According to the response from the cities and municipalities, some of them will opt for higher income tax rates, while some will not change the existing rates.

The changes reduce the pension insurance base in the first pension pillar for gross wages up to €1,300.

The amendments also include increased tax rates for income from capital, property and property rights, which would leave slightly less than €6 million in disposable income.

As for local taxes, ranges were increased within which local and regional government units can determine the amount of tax on holiday homes from 60 cents to 5 euros per square metre.

Another novelty is that it will be possible to pay tips by card. The non-taxable amount was fixed at €3,360 per annum, while the amount of the tip above the non-taxable amount will be taxed at 20%.

The new tax package includes amendments to the laws on income tax, local taxes, funding of local and regional government units, contributions, fiscalisation in cash transactions, profit tax, value added tax, tax consultancy, and administrative cooperation in taxation.

Non-taxable rewards growing as of 1 January

Income tax rules, amended and published in the Official Gazette at the beginning of December, with most of them entering into force at the start of next year, increase the amounts of tax-free rewards and benefits that employers can pay to employees in numerous categories.

Thus, according to the amended income tax regulations, the maximum annual amount that employers will be able to pay to all workers as special rewards, which include, for example, Christmas bonus and vacation pay, will increase to €700 as of 1 January, which is €36 more than the current 663.62 euros.

Furthermore, the reward for work results, which refers to additional salary or salary supplements, increases from €995.43 to €1,120 from next year, which is a jump of €124.57. The lump-sum monetary award for the costs of food for workers currently amounts to a maximum of €796.44, and as of next year it will increase to €1,200, up by €403.56.

Presenting the proposed amendment to the income tax regulations when it was submitted for public consultation, the Minister of Finance Marko Primorac told a press conference in early November that the amount of tax-free income that the employer can pay to each employee in one year, and when it comes to occasional awards, rewards for work results and food costs, will increase by €564.5 as of 1 January 2024.

In these three categories of tax-free income, currently and until the last day of 2023, the maximum annual tax-free amount that can be paid to workers is €2,455.49, and as of January 1 it will increase by €564.51, to €3,020.