SALARY FOR EXECUTIVE DIRECTOR/MEMBER OF THE BOARD FROM 01.01.2019.

With draft bill of amendments concerning Act on Contributions, it is proposed that two base-added contributions, contributions to compulsory insurance in case of unemployment – calculated at a rate of 1.7% and contribution to occupational health care – calculated at a rate of 0.5%, be abolished from January 1st, 2019.

At the same time, the contribution for health insurance will increase from 15% to 16.5%, which aims to contribute to dealing with financial difficulties in the health system. It is proposed to stipulate the minimum annual basis for calculating contributions in the product of average salary, coefficient 0.65 and figure 12 in proportion to the period during which the duties of a member of the board and/or the executive director and/or director of a cooperative has been performed.

In case you have been a member of the board, executive director or director of a cooperative in a way that you are:

  1. part-time employee with the calculation of income proportionate to the minimum base for directors/members of the board
  2. full-time employee in another company with the calculation of income below the minimum base for directors/members of the board
  3. part-time employee in another company with the calculation of income below the minimum base for the directors/members of the board
  4. full-time employee with the calculation of income to the minimum base for directors/members of the board
  5. part-time employee with the calculation of income to the minimum base for directors/members of the board
  6. full-time employee in another company with the calculation of income to the minimum base for directors/members of the board
  7. full-time employee in another company with the calculation of income above the minimum base for directors/members of the board
  8. part-time employee in another company with the calculation of income above the minimum base for directors/members of the board

make sure you find out what your obligations are from January 1, 2019.

For the option listed as number 1, it is necessary to begin with the calculation of contributions to the minimum base for directors/members of the board from January 1st 2019, while the amount of salary is not prescribed.

For the options listed as number 2 and 3, the annual calculations will determine possible differences in contributions according to a decision made by the Tax Administration. The person liable to pay the difference of contributions determined by the decision of the Tax Administration is a member of the board or executive director of the company.

The proposed change will not affect those members of the board who are currently calculating contributions on the base, calculated by applying the coefficient of 0.65 to the average gross salary registered for full-time employment or earning gross salary above the mentioned base, which refers to options listed from number 4 to number 8.

An example of the situation for the option listed as number 1.

The director of the company is employed for one hour per week with the calculation of income proportionate to the minimum base for the directors/members of the board.

Calculation of employment income:

year 2018 year 2019 in HRK
Direktor – one hour per week Director – one hour per week with the obligation to calculate contributions DIFFERENCE
1. Gross I salary 130,33 137,26 6,94
2. Contrubutions from salary 20% 26,07 1.098,11 1.072,04
a) I pillar 15% 19,55 823,58 804,03
b) II pilar 5% 6,52 274,53 268,01
3. Gross less retirement benefits (1-2) 104,26    
4. Untaxable part 104,26 137,26 33,01
5. Taxable part – tax base (3-4) 0,00 0,00 0,00
a) 24% 0,00 0,00 0,00
b) 36% 0,00 0,00 0,00
6. Total tax (a+b) 0,00 0,00 0,00
7. Local income tax 0,00 0,00 0,00
8. Net salary to be paid 104,26 137,26 33,00
a) Health insurance contribution 19,55 905,94 886,39
b) Employment contribution 2,22 0,00 -2,22
c) Health insurance in case of workplace accident and professional illness 0,65 0,00 -0,65
11. Total contribuitons on salary (a+b+c) 22,42 905,94 883,52
  TOTAL COMPANY COST FOR EMPLOYEE 152,75 2.141,31 1.988,56

Note:

  • In 2018, the minimum base for the directors/members of the board is HRK 5,213.00 per month and this amount is the product of the average gross salary for the period from January 2017 to August 2017 (HRK 8,020.00) and prescribed coefficients (0,65).
  • In 2019, the minimum base for directors/members of the board will be HRK 5,490.55 per month (data on gross wages are taken from the Central Bureau of Statistics according to the first results and the prescribed coefficients (0.65)).

We expect the final confirmation of these changes, after which we will inform our clients about all the latest news.

 

With confidence, contact us at: ponuda@sapientia.hr or call us at +385 1 619 42 00. Please inform us about your problem or dilemma about salary and contribution calculation. We will consider your case and give you feedback with our opinion or call for a meeting for further elaboration.