Non-taxable occasional rewards during holiday season

In Croatia, during the holiday season, employees and their children are likely to be given occasional or special rewards as a non-taxable bonus by their employers. Such measure is, of course, optional to the employers, however, it consists of a nice gesture towards the employees during the most wonderful time of the year. 

Occasional rewards for holidays are excluded from the HRK 5.000,00 non-taxable amount that can be paid to employees as a reward for work performance. The yearly payable amount is HRK 3.000,00. Another non-taxable reward can also be through gifts for children in the amount of HRK 600,00 or as a gift in kind in the same amount.  

The base for the payment of the occasional reward during the holidays should always be related to the employment relationship and stands as an opportunity to cover the expenses an employee might have during certain holidays. There is no obstacle to the appropriate reward paid on holidays for people who do not celebrate Christmas. If any of the special rewards was already paid during the year, the employer should then only pay the difference up to the defined amount of HRK 3.000,00. 

For the non-taxable payment of a gift for a child, the only condition is the age of the child, proven by the child’s birth certificate. Both parents are entitled to receiving a gift for a child up to 15 years. If both parents have an established employment relationship with the same employer, from a tax point of view, they will both receive a tax-free payment of the gift for their child.  

During the Christmas holidays, employers often choose to give gifts in kind to their employees as well. This type of non-taxable payment to employees is not strictly tied to Christmas period or other occasions. A gift in kind of worth up to HRK 600.00 can be given to the employee during the year for any purpose. The employer may gift to employees: 75% of own company products or services, 75% merchandise from business premises, 75% value or gift coupons or 75% certificates of paid advances in a particular company on the base of which the workers will select the gift of their choice. 

Both special rewards, either to employee or in form of a gift to a child need to be reported to Tax office through JOPPD file upon payment, while the gifts in kind do not need to be reported. 

For further information, please contact Petra Dzankic, Accountant and Payroll Assistant in our Eurofast office in Zagreb, at zagreb@eurofast.eu