Did you know that tax breaks are available for IT companies?
IT companies can achieve significant tax savings if they plan to hire and equip new workplaces, such as purchasing computers, software or licenses, etc.
When do you have to register?
The application for the right to profit tax relief must be made before employment and before ordering new equipment or software. IT companies have the option of reporting the costs of development projects, i.e. the cost of developing their own solutions that are not ordered by the client.
The investment that will occur within a period of 3 years from the start of the project is being considered.
What are the co-financing rates?
Entrepreneurs who invest and employ in the City of Zagreb can achieve lower co-financing rates than in other cities in the Republic of Croatia. For example, a small entrepreneur in the City of Zagreb can achieve savings of 55% of the value of the investment in the next 3 years. While the same entrepreneur investing in, for example, Zagreb County can achieve up to 70% of the value of the investment in the next 3 years.
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.
Tax breaks vs. grants
Tax breaks for IT companies under the Investment Promotion Act are more attractive than grants from EU funds, if you are highly profitable and plan to create new jobs. Implementing a project to achieve tax breaks is less administratively demanding, and it is possible to declare investments in all work equipment that is recorded as long-term tangible and intangible assets of the company. It is also possible to receive grants for employee training or to cover the salaries of new employees as part of this option.
However, investments that do not contribute to business growth or modernization are not eligible, as such investments would be viewed as replacement investments that are not encouraged by this measure. Investments that relate to regular running costs or other short-term assets are not eligible.
The documentation submitted is a business plan, prescribed forms, a joint statement and the company’s annual financial statements.
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
