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Taxation

Updated: August 2011

1. Croatian Tax System

The Croatian tax system is very much compatible with those
of EU member countries, 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.

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.

Republic of Croatia, Ministry of Finance, Tax Administration

 

2. 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 and other incomes.

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 nonresident 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 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).

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

Income tax rates:
- 12% (for income of: up to 3,600.00 HRK per month or 43,200.00 HRK per year)
- 25% (from 3,600.00 to 10,800.00 HRK per month or from 43,200.00 to 129,600.00 per year)
- 40% (over the total amount of 10,800.00 HRK per month or over the total amount of 129,600.00 HRK 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.

The Croatian Tax System - useful information (in English)

 

3. Fellowship taxation

Fellowships are a form of financial aid awarded to individuals for the purposes of their education, training, professional development or research. Fellowships programs can include degree-programs (bachelor’s, masters and doctoral study programs), shortterm study programs, professional development programs (seminars, conferences, workshops, internships etc.), scientifi c research, language-learning, etc. Fellowships are awarded by a wide range of institutions, organizations and individuals from all sectors of society – public, civil, corporate and private.

On 1 July 2010, the New Income Tax Bylaw entered into force and regulates in detail the enactment of the Income Tax Act which changes the previous practice whereby fellowships exceeding the tax-exempt amount of 1,600.00 HRK - or „exceptionally“ 4,000.00 HRK for excellent achievement - were treated as a second income.

The key change in the Income Tax Bylaw is that fellowships are free of income tax. Instead of the previous limit of the tax-exempt amount of scholarships which could only cover a part of the total study expenses, tax-exempt scholarships can now cover the costs of tuition, transportation, accommodation, basic health insurance abroad, food, books and other expenses. It is important to note that scholarships regulated under the Bylaw may be granted only by foundations, agencies and other institutions founded with the intention of granting scholarships, registered in the Republic of Croatia for the purpose of education or scientifi c research and acting pursuant to specific regulations. However, this tax-exempt is only valid if the fellow is enrolled in a regular study programme and is residing in Croatia for the purpose of studies.

In case of scientific research, the fellowship is not taxable only if the financial source is the national budget (for example, if they are financed by the Croatian Science Foundation). If the financial source is different than the national budget, the taxation is made by a rule of other income, which means that the fellowship should cover the tax contribution in fi xed amount of 25% of income, pension contribution of 20% as well as 15% of health insurance contribution.

 

4. 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 for income tax only have been concluded with: Chile, China, Estonia, France, Jordan, Latvia, Lithuania, Malaysia, Malta, Mauritius, San Marino, South Africa and Turkey.

Agreements on avoidance of double taxation (in English)

It is necessary to fill out a form of double taxation (a form can be bought in the Official Gazette) if there is an agreement on avoidance of double taxation between Croatia and the country of which the foreigner to whom fees are paid is. The form consists of 4 copies:
Copy 1 - for the claimant,
Copy 2 – for the payer of the income,
Copy 3 – for the Tax Administration of the Republic of Croatia,
Copy 4 - for the Tax foreign tax authority.

All 4 pieces should be sent to the foreigner’s country for certification. 2 pieces are sent back to Croatia, one copy for the payer of the income and one for the Tax administration of the Republic of Croatia.

 

Disclaimer: The descriptions of administrative procedures in the Republic of Croatia given on this website are to be used for informational purposes only. Recommendations on this website do not substitute official information sources and information given by the official administration should be taken into account in all cases. The information provided on this website gives no right for claims of legal expectations of any kind. EURAXESS Croatia takes no responsibility for the content of external pages.