In the Official Gazette no. 2/21, the Bylaw on Amendments to the Bylaw on the Implementation of the General Tax Act was published, which prescribes the payment of taxes on donations to eliminate the catastrophe caused by the earthquake.
According to the mentioned Bylaw, Article 71.ta , taxpayers that are VAT registered are exempt from payment of VAT on supplies of goods and services made free of charge or for donations of goods and services to help areas for which by the “Decision on declaring a catastrophe in the area affected by the earthquake”, a catastrophe was declared.
Taxpayers who apply those exemption have the right to deduct the input tax for donated goods, ie services provided free of charge. The exemption applies to all donations of goods and services made starting in December 2020 until the end of 2021.
This means that taxpayers are also entitled to exemption for already made donations in December 2020 that they will declare in the VAT return for the month of December 2020, or for the IV. quarter of 2020.
Also, exceptionally from the special regulations on taxation of profit and income, donations from the taxpayers will be considered as tax deductible expenses regardless of the amount of income in the previous tax period and regardless of whether they are given directly to a specific natural or legal person.
This will apply when filing the annual corporate profit and personal income tax returns for 2020 and 2021 for donations given until the end of 2021.
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Photo: Croatian Red Cross