In a period of increased instability in the global energy market, the issue of regulating energy prices has once again become a focal point of fiscal and economic policy. It is precisely in this context that amendments to the Value Added Tax Act have been proposed, which would allow the introduction of a variable, or so-called “floating”, VAT rate on certain energy products.

This is a model that would enable the Government of the Republic of Croatia to respond more flexibly in extraordinary market circumstances, particularly in situations involving sudden disruptions in fuel and energy prices.

Such a change represents a significant shift from the previous approach to VAT taxation, which has traditionally been regarded as one of the more stable and predictable forms of taxation.

What does a “floating” VAT rate imply?

The proposed amendments to the VAT Act envisage the possibility for the Government of the Republic of Croatia, under special circumstances and for a limited period, to prescribe a different VAT rate for energy products subject to excise duties by way of a regulation.

The recent amendments to the Corporate Income Tax Ordinance are already affecting tax reporting and how taxpayers operate for periods starting 1 January 2026.

The new provisions introduce more detailed rules for investment funds, asset transfers, and tax reliefs. They also apply to the crediting of taxes paid abroad and amendments to the content of the PD, PD-NN, PD-IPO, PT, and PD-PO forms.

Below, we highlight the most important changes and their practical significance for entrepreneurs and companies.

A new approach to the taxation of investment funds without legal personality

One of the more significant amendments relates to investment and pension funds without legal personality, which, under certain conditions, are exempt from corporate income tax.

The amendments further emphasize the authority of the Tax Administration to assess the actual economic purpose and economic effect of an investment fund. In practice, this means that the following will be subject to more detailed analysis:

• the structure of investors,
• the relationship between fund members,
• the investment strategy,
• the asset structure,
• the autonomy of management,
• as well as the actual business purpose of individual transactions.

Management companies of such funds are additionally required to submit more extensive data and information to the Tax Administration no later than the deadline for filing the corporate income tax return.

If it is determined that the fund was established primarily for the purpose of obtaining tax benefits, it may lose its right to tax exemption.

More precisely regulated reporting of asset transfers

The amendments also apply to asset transfer procedures between companies, particularly in cases of reorganizations and status changes.

Under the new rules, the company transferring the assets is required to submit:

• all relevant documentation,
• calculations of tax effects,
• and transaction-related data

no later than the filing deadline for the first tax return following the completed transfer.

In addition, it is now possible to submit an opinion issued by an authorized tax advisor, which may include:

• a tax review of the transaction,
• an assessment of tax consequences,
• and a professional opinion on the tax treatment.

It is important to emphasize that the reporting obligation does not end with the asset transfer itself. Companies will also be required to report the tax effects of the transaction in future tax periods for as long as its tax consequences continue.

Amendments to the PD and PD-NN forms

The new Ordinance also introduces several technical, yet highly important amendments to the content of tax forms.

Particular emphasis is placed on the expanded possibility of reducing the tax base for certain taxes paid abroad that are not covered by double taxation avoidance agreements.

This enables taxpayers to benefit from a more favorable treatment of certain foreign tax burdens included in the domestic tax base.

New tax reduction for sponsorships

One of the more practically significant changes relates to the introduction of a special item for reporting sponsorships that enables an additional reduction of the tax base.

These sponsorships include activities aimed at:

• cultural,
• scientific,
• educational,
• healthcare,
• humanitarian,
• sports,
• environmental,
• and other public benefit purposes.

However, the tax benefit applies only under prescribed conditions and for entities that will be defined by decisions of the competent authorities.

For entrepreneurs, this means an additional need for careful monitoring of documentation and verification of whether specific sponsorships meet the legal requirements for tax recognition.

Changes related to investment incentives

The amendments further elaborate the provisions relating to:

• tax incentives for investments,
• state aid,
• and investments in the tourism sector.

At the same time, the method of reporting tax incentives and allocating tax benefits according to the applicable corporate income tax rates is prescribed in greater detail.

For beneficiaries of existing incentive measures, it is particularly important to properly record acquired rights and continuously report them in tax returns.

Crediting taxes paid abroad

Significant amendments also relate to the rules for the crediting of taxes paid abroad.

Taxpayers operating through permanent business units in other countries and paying corporate income tax there will be required to submit the following with their tax return:

• certified copies of foreign tax returns,
• certified translations,
• and proof of tax paid.

The Ordinance further clarifies the limitations and method of tax crediting, particularly in cases involving:

• the application of double taxation avoidance agreements,
• operations through controlled foreign companies,
• and operations in multiple countries simultaneously.

An obligation to timely notify the Tax Administration in the event of subsequent changes to foreign tax liabilities has also been introduced.

New rules regarding tax refunds

One of the more practically significant changes relates to the reporting of tax refunds through new annexes to the PD and PD-NN forms.

Taxpayers will now be able to specify more precisely whether they wish:

• a refund of overpaid tax,
• a carryforward of the overpayment to a future period,
• or a transfer to other tax liabilities.

Such amendments should contribute to greater transparency and more efficient management of tax overpayments.

Changes related to eInvoices and related parties

Amendments to the PD-IPO form are connected to the fiscalization of eInvoices.

Taxpayers operating within the eInvoice fiscalization system will no longer be required to report certain data regarding transactions with related domestic parties if such data has already been recorded through the eInvoice system.

The aim is to reduce the administrative burden and avoid duplicate reporting.

Conclusion

The amendments to the Corporate Income Tax Ordinance for 2026 introduce a number of administrative, technical, and substantive changes that will require additional attention from taxpayers, accounting departments, and company management.

Special emphasis has been placed on transparency, the documentation of tax positions, and the more detailed monitoring of certain transactions and tax incentives.

Given the scope of the amendments and the possible tax consequences of incorrect application of the regulations, timely analysis and business compliance are becoming more important than ever.

Brandom continuously monitors legislative changes and practice in order to provide clients with timely, professional, and reliable information for secure business decision-making. Contact us if you have any questions.