Under the Income Tax Act, the untaxed amount of the monthly salary has gone up from 1,500 to 1,600 kuna.
Pensions given to families whose members were killed or went missing in the 1990s war will no longer be taxed, nor will monetary awards given to winners of medals at the Olympics and at world and European championships.
Tax relief on, for example, health and life insurance or housing loans, totals 12,000 kuna annually.
The new law introduced a new income category, that earned by athletes, singers and artists. Seventy percent of their income will be subject to a 25 percent tax.
Under the amended Income Tax Rule Book, the untaxed amount of annual bonuses has gone up from 1,600 to 2,000 kuna.
Some of the Government's measures to combat the grey economy include the swift processing of criminal charges, preventing illegal labour, increasing inspectors' powers, the constant electronic data exchange, and stepping up the forcible tax collection regime.
About 100,000 people in Croatia are employed illegally, which costs the Government an estimated seven billion kuna annually.
The Financial Police, abolished in 2001, has been re-established with an aim to reduce tax evasion. It is expected to employ 260 workers and cost 38 million kuna this year.
(EUR1 = 7.6 kuna)