Changes to tax legislation in 2023

On 24 May 2023, the Croatian Government presented changes to tax legislation affecting various forms of taxation. The key changes pertain to the introduction of a relief for calculating contributions to Pillar I of pension insurance, the abolition of surtax and autonomy of local government units (cities and municipalities) to freely define the personal income tax (PIT) rate and the increase of personal allowances in the income tax system. This Note analyses the effects of the proposed measures to the tax burden of a hypothetical employee, discusses their advantages and potential threats to autonomous definition of tax rates and suggests potential alternatives to the proposed contribution relief