THE IMPACT OF PERMANENT DIFFERENCES ON THE EFFECTIVELY PAID CORPORATE INCOME TAX RATE.

The objective of this paper is to investigate how the permanent differences defined by the Corporate Income Tax Act affect the effectively paid rate of corporate income tax in Croatia. Considering the significance and high concentration of the Croatian market in the trade sector, the analysis was made on the example of one large company from this sector. The paper analyzed the five-year period of the company's operations and the period of the pandemic is included. The research is based on secondary data obtained from the company's financial statements. All permanent differences defined by Croatian legislation are included, and only those categories that appear during this five-year period at the observed large trading company are specifically highlighted. Interesting results were obtained from the analysis, which are graphically presented in the paper. It turned out that this company paid an effectively higher rate of corporate income tax in three of the observed five years, and in two years during the pandemic, an effectively lower rate of income tax. This rate changed from year to year, and reached its highest level in 2022, when it approached the rate of 20%. On the other hand, the lowest effectively paid income tax rate was calculated in 2021, when it was approximately three times lower than the statutory tax rate. The reasons for the large drop in the effectively paid income tax rate lie in the fact that the company was partially prevented from operating during the pandemic, which is why it was the beneficiary of state grants in 2020 and 2021. These data also show the fact how generous state grants were in Croatia during the pandemic Covid-19 because the existence of taxable permanent differences was completely annulled by the state grants paid to company in this sector. [ABSTRACT FROM AUTHOR]