Updated: July 2010

Republic of Croatia, Ministry of Finance, Tax Administration
The Tax Administration is an administrative unit within the Ministry of Finance whose basic task is to implement tax regulations and regulations concerning the payment of obligatory contributions. All residents are obliged to participate in the settlement of public expenses in accordance with their economic abilities. The tax system is based on the principles of equality and equity.

Taxation
The Croatian tax system is very much compatible to EU member countries' tax systems, and is based around a set of direct and indirect taxes. Croatia has taken over the obligations of executing international contracts and agreements signed by ex-Yugoslavia, and has also signed many bilateral double taxation conversions.

Foreigners enjoy tax privileges to the same extent as Croatian nationals. The tax privileges are not linked to the place of permanent residence.

The Croatian tax system includes:
- Corporate income tax (profit tax)
- Personal income tax
- Value added tax
- Special taxes – excise duties (on mineral oil and mineral oil products, tobacco products, alcohol, soft drinks, beer, coffee, passenger cars and other motor vehicles, vessels and aircrafts, luxury goods), tax on liability and comprehensive road vehicle insurance premiums
- Real estate transfer tax
- Games of chance tax
- County and municipal/city surtaxes as local self-governing units’ revenues.

Personal income tax
A tax payer is the domestic or foreign natural person who generates income.
Income tax is paid on the following types of income:
- Income from employment
- Income from self-employment
- Income from property and property rights
- Income from capital
- Income from insurance
- Other income

The income tax base for a resident is the total amount of income from employment, income from self-employment, income from property and property rights, income from capital, income from insurance and other income, acquired by the resident in Croatia and abroad (the world income principle) reduced by the resident’s personal allowances.

The income tax base for a non-resident is the total amount of income from employment, income from self-employment, income from property and property rights, income from capital, income from insurance and other income, acquired by a  non-resident in Croatia (the domestic income principle) reduced by the non-resident’s personal allowances.

According to Croatian laws, a resident is a natural person with a legal residence or a customary habitat in the Republic of Croatia. A non-resident is a person who has neither a legal residence nor a customary habitat in Croatia, but earns a taxable income in Croatia. A legal residence, according to tax laws, is the ownership or use (note: a lease contract applies) of a housing unit for at least 183 days continuously – actual occupation of the unit is not necessary. A customary habitat is implied when the circumstances lead to the conclusion that the tax payer’s residence is not temporary. In the sphere of tax laws, this is concluded after a continuous residence of at least 183 days (short interruptions of residence, not longer than one year, are not regarded).

All tax payers are entitled to a personal allowance in the amount of 1,800.00 kn 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. Personal allowances for supported family members are expressed as factors in relation to the basic personal allowances.

Income tax rates:
- 15% (for income of: up to 3,600.00 kuna per month or 43,200.00 kuna per year)
- 25% (from 3,600.00 to 9,000.00 kuna per month or from 43,200.00 to 108,000.00 per year)
- 35% (from 9,000.00 to 25,200.00 kuna per month or above the total amount of 302,400.00 kuna per year)
- 45% (over the total amount of 25,200.00 kuna per month or over the total amount of 302,400.00 kuna per year)

Municipalities and cities have the possibility to impose additional local income tax (local surtax) calculated by the domicile or usual residence of the taxpayer.
Local surtax rates can be:
- For municipalities up to 10%
- For cities with less than 30,000 inhabitants up to 12%
- For cities with over 30,000 inhabitants up to 15% and
- For the City of Zagreb up to 30%.

The Croatian Tax System - useful information

Agreements on avoidance of double taxation
When foreigners are employed only in Croatia then they are obliged to pay taxes in Croatia. However, 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.

Among the Agreements concluded and assumed by the Republic of Croatia, the following are being applied:
- The Agreements for both income and capital tax have been concluded with: Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, the Czech Republic, Denmark, Finland, Germany, Greece, Hungary, Iran, Ireland, Israel, Italia, Korea, Macedonia, Moldova, Netherland, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Swiss, Ukraine, United Kingdom, Yugoslavia*.
(* a legal inheritance is assumed for the successor states Serbia and Montenegro)
- The Agreements only for income tax have been concluded with: Chile, China, Estonia, France, Jordan, Latvia, Lithuania, Malaysia, Malta, Mauritius, San Marino, South Africa and Turkey.