Benefits in kindWhat is the benefit in kind? The benefit in kind is the non-monetary benefit that employees and other persons receiving from the employer. Such benefits are taxable. The Income Tax Act (and Ordinance on Income Tax) treats them equalized with the salary and other income, and the Law on VAT (and Ordinance on VAT) are considered taxable deliveries. So, generosity is beautiful but expensive. What is considered a benefit in kind? Benefit in kind is considered: 1. Using business buildings and their parts, and residential buildings, apartments and a garage. Example: an employer gives his employee apartment to use, free of charge. In this case, it is considered that the employer pays its employees an additional net-salary amounting market rental rate (depending on the area of the flat and the place where the property is located) and it is required to calculate contributions, income tax and surtax on net salary. In addition, the employer (if he is taxpayer of VAT) will have to charge VAT from the rent (not to rent - considered to be the market rental price in itself already includes VAT) and pay to the State.
- Using a vacation house or a resort, free of charge. Example: the employer owns resort at sea and their employees sent on a free stay in it. Then it will be necessary to determine a market price of accomodation and it is treat as a net salary in the previous example. The calculation of VAT is based on the principle of the previous example.
- Monthly income of 1% of the purchase value of the vehicle (including VAT) or in the amount of 20% of the rate of operative leasing.
Determining the benefit based on the actual use of the vehicle ie. based on kilometers traveled. Then you have to keep records of kilometers traveled, a benefit is calculated by multiplying the number of kilometers and the charge per kilometer of 2,00 HRK (including VAT).
In both cases, at the benefit in kind shall be calculated contributions, income tax and surtax. Since in the purchasing of cars for personal use is not recognized prepayment, in calculating the benefit in kind is not calculated VAT. In the case of the air and sea traffic, units for the calculation of the hours of use, and the accounting value is the market price of assets hour rental. Another note with the calculation of benefits in kind on the basis of the use of personal vehicle: commonly expenses of using the personal vehicle is tax recognized in the amount of 70% of the total cost (with VAT included). In the event that the agreed use of vehicle in private use, when calculating benefit in kind, the cost of using this vehicle are fully tax deductible (with VAT included). The method of calculation of taxes If the recipient of the benefit in kind is employee, as it is evident from the above examples, the benefit in kind is treated as net income. If the recipient is a person outside of employment, benefit in kind is considered other income. This means that you should calculate contributions for retirement from 20% (I and II pillar), health insurance contribution of 15% and income tax of 25% and a surtax (depending on the place where the recipient is logged in). In both cases, VAT is calculated on the amount of net benefit only in the case if during purchasing or expense, which is given to a person without compensation, is used prepayment. Tibor Jankač