Croatia
Corporate taxes and other direct taxes
Depending on annual revenues, CIT rates in Croatia are set at 18% (on revenues exceeding EUR 995,421.06) or 10% (annual revenues below the prescribed threshold of EUR 995.421,06). Enterprises with annual revenues below EUR 995,421.06 have the option of determining the corporate income tax base using the cash flow principle. Losses can be carried forward for up to 5 years, but special limitations are applicable in case of M&A transactions. Croatia uses thin capitalization (4:1), but thin capitalization does not apply if shareholders are financial institutions or CIT or PIT payers in Croatia. There is a range of tax allowances for new investments, R&D, the education of employees, etc.
A withholding tax of 15% is applied on interest and royalty paid by a Croatian company to a foreign company. Starting from October 12, 2023, there is no longer an obligation to pay withholding tax on market research services, tax and business consulting, and auditing services provided (except for EU non-cooperative jurisdictions). WHT on dividends, profit shares, and performance by foreign performers is set at a rate of 10%. Croatia has 68 active DTT treaties. A withholding tax of 25% is applied on all payments to offshore companies for services not mentioned in the Law. The EU Directives on withholding tax apply. The latest amendments to the Law extend the exemption from taxation of interest and royalty payments between affiliated companies from EU countries to companies from EEA countries (Norway, Iceland, and Liechtenstein)
A 3% real estate transfer tax (RETT) is applied to the transfer of immovable property. The taxable base is the market value of an item of real estate at the moment when the tax liability is incurred and the taxable person is the buyer.
Level of attention paid by Tax Authority:
VAT and other indirect taxes
In Croatia, the standard VAT rate is 25%. A reduced rate of 13% applies to services involving the preparation and serving of meals, tourist accommodation services, newspapers, the supply of electrical energy, etc., while a reduced rate of 5% applies to milk, books, etc. The VAT rate of 5% will be applicable to supplies of gas and heating from thermal units, firewood, pellets, briquettes, and wood chips until March 31, 2024.
The most important VAT-exempt services are banking services, insurance, educational services (under certain conditions), gambling, certain services provided by medical professionals and dentists, and certain other activities. The zero VAT rate (0%) also applies to the supply and installation of solar panels on private residential buildings and public buildings. Activities of public interest are exempt from VAT regardless of their institutional form. Entrepreneurs are obliged to register for VAT purposes during the calendar year in which the total value of supplies exceeds a threshold of EUR 40,000.
Excise duties, special tax on motor vehicles, special tax on coffee and non-alcoholic beverages.
| VAT options in Croatia |
Applicable / limits |
| Distance selling |
Threshold for exemption is EUR 10,000/year, similar to other EU member states. OSS applicable. |
| Call-off stock |
 |
| VAT group registration |
 |
| Cash accounting - yearly amount in EUR (approx.)* |
EUR 2,000.000/year |
| Import VAT deferment |
Yes, available to all Croatian VAT payers with the right to full input VAT deduction. |
| Local reverse charge |
Construction work, the supply of used materials, the transfer of allowances to emit greenhouse gasses, and, in certain conditions, the supply of immovable property. |
| Option for taxation |
| - letting of real estate |
|
| - supply of used real estate |
|
| VAT registration threshold* |
EUR 40,000/year
|
Personal income tax / Social security system
Instead of the current tax rates of 20% and 30% + possible surtax on income, units of local and regional self-government apply tax rates within the following range, depending on the given local and regional self-government unit: lower rate: 15% - 23.60% (monthly tax base up to EUR 4,200 /annual tax base up to EUR 50,400) and higher rate: 25% - 35.40% (monthly tax base above EUR 4,200 /annual tax base above EUR 50,400). The 12% rate is withheld from certain types of income, e.g. dividends, capital gains, lease of real estate, etc. The payment of occasional awards up to an amount not exceeding EUR 700 (e.g. Christmas and Easter bonus, etc.) and payment of a premium performance award (e.g. bonuses) up to EUR 1,120 per employee per annum is deemed as non-taxable. Also, it should be noted that there are many other non-taxable receipts (employee meal costs, reimbursement of rental costs, etc.). Tax regulations prescribe a non-taxable flat-rate compensation to cover the costs of employees working from home to an amount not exceeding EUR 4 per day working from home, or EUR 70 per month. The examples below show the cost to the employer and the employee in the cases of minimum and average wage levels in the private sector. Basic personal allowance amounts to EUR 560.
Active incomes fall under the scope of the SSC system: individual pension social contributions equal 20% (employee contribution) and health and unemployment contributions of 16.5% represent employer contributions. There are no contributions on salary (16.5%) for a period of 5 years for persons under 30 years of age employed for an indefinite period. Passive incomes are generally only subject to taxes. From January 1, 2024, the base for the calculation of contributions for the 1st pillar pension insurance is reduced. For gross salaries up to EUR 700, the fixed allowance amounts to EUR 300, while for salaries from EUR 700.01 to EUR 1300, the allowance is gradually decreased - 0.5 x (EUR 1,300 – gross salary).
Wage related taxes
in Croatia |
Minimum wage
|
Average wage
in private sector |
| |
in EUR |
in EUR |
in EUR |
in EUR |
| |
840 |
840 |
1,620 |
1,620 |
| Total wage cost |
979 |
117% |
1,887 |
117% |
| Employer's contribution |
139 |
17% |
267 |
17% |
| Gross salary |
840 |
100% |
1,620 |
100% |
| Employees' contributions |
134 |
16% |
324 |
20% |
| Tax and surtax* |
35 |
24% |
174 |
24% |
| Net salary |
672 |
80.0% |
1,122 |
69.3% |
*Tax base differs from the gross salary, deductions apply.