Croatia currently levies an Insurance Premium Tax (IPT) on insurances written under the Freedom of Services (FoS) duty. The IPT in Croatia applies only for specific classes of business, such as Motor and Fire coverage. Both taxes, Motor IPT (MIPT) and Fire Brigade Contribution (FBC), are calculated on the insurance policy premium charged to the policyholder. The insurer is liable for all taxes.
Motor Insurance Premium Tax
There are currently two different IPT tax rates in force for motor insurance in Croatia:
- “Motor Vehicle Liability” (third-party insurance) is subject to an IPT rate of 15%
- “Motor” (Hull Insurance) is a subject to an IPT rate of 10%. This class of business covers expenses arising from an involuntary collision or crash in any motor vehicle (CASCO insurance)
Motor vehicle IPT is an insured borne tax that is required to be reported monthly and payable within 15 days following the end of the month. The tax point for this type of IPT is set as the date the policy is signed, and businesses should make payment in local currency: Croatian Kuna (HRK). The exchange rate for those payments should be set to the rate published on the last working day by the Croatian National Bank.
It’s important to remember that two different sets of returns should be filed for each risk of motor insurance covered. Also, companies should make the payment under the correct corresponding reference number according to the associated insurance risk.
Croatian Motor IPT requirements:
Currently, there is no obligation to submit a Motor IPT return when no taxes have been paid for the reporting period (NIL).
The penalty for a late payment is generally 12% communicated by the Zagreb Regional Tax Office (Porezna Uprava).
The annual Motor IPT Report must be submitted on 31 January following the end of the reporting year.
Croatian IPT: Fire Coverage
The Fire Brigade Contribution (FBC) tax is levied on the payment of premiums for insurance contracts concluded in Croatia. The local law on Fire Prevention and Firefighting requires insurance companies covering a fire risk to contribute 5% of the fire insurance premium. The 5% contribution should be apportioned to the fire risk element of the insurance policy.
The FBC is an insurer borne tax that is required to be reported quarterly and payable within 30 days following the end of the quarter. The tax point for this type of IPT is the date payment is made, and businesses should make the payment in Croatian Kuna to the Croatian Firefighting Association (Hrvatska Vatrogasna Zajednica). There is no requirement for businesses to submit NIL returns.
The FBC breakdown is as follows:
- 30% for the Croatian Firefighting Association
- 30% for the County Fire Brigades and of the Fire Brigade of the City of Zagreb
- 40% for the regional fire brigade where the insured property is situated
The insurer is liable for all taxes. If the insurer doesn’t declare and remit taxes, the relevant authority may impose a fine and undertake an assessment of the tax.