As of March 1, the Value Added Tax (VAT) rate, up from 23 to 25 percent, will be in force in Croatia, and a lower rate of 10 percent will be introduced for edible cooking oil and fat, baby food, white sugar and water delivery. Croatia retains a zero VAT on bread, milk, books, scientific journals an on some medicines and medical aids.
The changes in the VAT system are expected to pour an additional HRK 2.5 billion in the state budget in 2012, according to the Finance Ministry's estimates.
The higher VAT is likely to increase prices by 1.4 percent, according to the government's projections.
The government introduced a 10-percent VAT on edible cooking oil and fat, baby food, white sugar and water delivery to offset the effects of the higher VAT on the rest of products and services.
The new rate puts Croatia among European countries with the highest VAT. Only Hungary has a higher VAT rate - 27 percent.
As of 1 March, the new legislation on taxation of income and taxation of profit will also go into force.
Thus, the nontaxable part of income rises from HRK 1,800 to HRK 2,200 and the nontaxable part of pensions from 3,200 to HRK 3,400.
The salary brackets will be changed but tax rates on salaries of 12%, 25% and 40% stay in force.
This will help some 800,000 workers to receive higher monthly wages and some 200,000 pensioners to get higher pensions.
Recipients of gross salaries up to HRK 7,500 (the net salary up to HRK 5,300) can expect a slight rise in their salaries, while those with higher salaries can expect reductions in their monthly wage.
