Tax Structure In Croatia

Croatia’s tax regime affects both residents and non-residents. A resident is a natural person with a legal residence or a customary habitat in the Republic of Croatia, whilst a non-resident is a person who has neither a legal residence nor a customary habitat in Croatia, but earns a taxable income in the country. You become a tax resident in Croatia if you remain in the country for at least 183 days and your stay is not temporary, or if you own a residence there for at least the same amount of time and it is shown that you plan to keep using that accommodation. It is important to stress that it doesn’t matter whether the accommodation is owned or rented.

The Croatian tax system includes corporate and personal income taxes, value added tax, special taxes, tax on liability and comprehensive road vehicle insurance premiums, real estate transfer tax, games of chance tax and county and municipal/city surtaxes.

When it comes to personal income tax rates, they are progressive:

Monthly income from 2,200 kuna – 12%

Monthly income from 2,200 til 8,800 kuna – 25%

And monthly income over 8,800 kuna – 40%

 

Income tax is paid on income from employment, self-employment, from property and property rights, capital, insurance and other incomes. All tax payers are entitled to a personal allowance in the amount of 2,200 kuna per month, while taxpayers who support a spouse, children and other family members can, in addition to the basic personal allowance, also deduct from their taxable income the personal allowances for supported family members.

Corporate tax rate amounts to 20%, although certain small companies pay a lower tax rate. Company capital gains are taxable at 20%, whereas individuals pay between 25% og 40% for their capital gains.

Croatia has no wealth tax, which means that pensions received from abroad, as well as capital gains from trading securities and other financial assets are exempt from taxes. The same goes for interest payments on loans, investments, securities, deposits with financial institutions, capital gains from real estate and inheritance and gifts in the first line of succession.

Municipalities in Croatia charge income surtax. the amount payable is taken on income tax thresholds and is levied at varying rates throughout the country- A commune can charge at a rate of up to 10%, cities with a population of below 30,000 can charge at rates of up to 12%, cities with a population over 30,000 can charge at rates of up to 15%, whilst the city of Zagreb, the capital, can charge as much as 30%, although at the moment it charges 18%.

 

Foreigners are subject to tax on income from employment received in Croatia or from work, a business or real estate in Croatia, as well as income from one’s own or chartered marine ships/aircraft used for dispatching goods or people from Croatian ports/airports, income from independent personal activities (deliveries of goods or rendering of services) that are carried out in Croatia or abroad, and are used for the performance of an activity in Croatia and income from capital or insurance that originates from within Croatia.

When foreigners are employed only in Croatia then they are obliged to pay taxes in Croatia. Imidlertid, when they are employed abroad and are only in Croatia to do a specific, identifiable work/service (as a non-resident) and are paid under a contract for work/services or with an author’s fee, then they should check whether an agreement on avoidance of double taxation between the two countries exists. If it does, the necessary forms need to be filled out before the completion of the work. The details should be arranged with the Croatian employer.