If you develop applications or design interiors, manufacture, or are planning an investment in a logistics center or new production and business space, did you know that you can make savings on your income tax?
There are a number of activities that are eligible for profit tax savings through tax incentives based on the Investment Promotion Act – architecture, design, production, IT, etc.
This option has been available to entrepreneurs in Croatia for many years, with minor changes over the years.
What are the prerequisites for these corporate tax savings?
The maximum amount of support depends on your planned investments in tangible and intangible assets over a three-year period. To be eligible for the profit tax relief, you must submit an application before you start hiring new employees or ordering new equipment and software.
The minimum required investment in fixed assets is EUR 50,000 in the case where the corporate tax savings can be used over a period of 5 years or EUR 150,000 in the case where the tax savings can be used over a period of 10 years.
A key eligibility requirement is that you plan to employ people, and to benefit from this option, you must be operating at a profit. The expected number of new jobs is 3 to 5 in the next three years, depending on the size of the entrepreneur.
How is the support used?
Several forms of support are possible.
For example, lower paid corporate income tax, grants for new jobs and education, etc.
The amount of corporate income tax you pay less in a year depends on your regular tax liability, and ranges from 50% to complete tax exemption, depending on the amount of investment and new jobs. The longest period of using this relief is 5 to 10 years.
How much support can be obtained?
You can’t reduce the corporate tax rate for the next 10 years without limits :).
The maximum amount of support depends on the size of your company and your activity.
The aid granted under this Act is regional aid, which is why the amount you can receive depends on the regional aid map (below).
Entrepreneurs who invest and create new jobs in the City of Zagreb area can count on slightly lower co-financing rates compared to other parts of Croatia.
For example, a small entrepreneur investing in Zagreb can receive tax relief of 55% of the investment value over three years. On the other hand, if the same entrepreneur decides to invest in Zagreb County, they can receive relief of up to 70% of the investment value over the same period.
Tax breaks vs grants
When considering the contractual obligations, the way planned investments are realized and the implementation procedures, this option represents a simpler path compared to applying for EU tenders. For those who realize high profits and plan to hire new employees, the tax breaks provided for by the Investment Promotion Act are often more profitable than grants from EU funds.
The process of applying for tax breaks is administratively less demanding, and the investment can include all work equipment that is recorded as a company’s long-term tangible or intangible asset.
For support in creating documentation for application to the Investment Promotion Act, contact us.
To date, Happtory has successfully supported client investments worth over EUR 100 million. Over the past 12 years, the project experience of the team members is significantly greater than the aforementioned amount.
Author: Tatjana Štefanac Zjalić
