Taxation & Salaries
The Croatian tax system is very much compatible with those of EU Member States, and is based around a set of direct and indirect taxes. It includes national taxes (value added tax; corporate income tax – profit tax; special taxes and excise duties, etc.), county taxes (inheritance and gift tax, tax on road motor vehicles, tax on vessels and tax on coin operated machines for games for amusement), city or municipal taxes and joint taxes (income tax, real estate transfer tax).
In the case when income derives from sources within Croatia, researchers are obliged to pay income tax. For employees receiving a salary, the employer bears the responsibility for income and he is obliged to pay income tax for the researcher at the same time as the salary.
Regardless of their status of tax resident or not, foreign researchers will have to pay income tax on the following:
- Income from employment
- Income from independent personal activities (self-employment)
- Income from property and property rights
- Income from capital
- Income from insurance
- Other income.
The tax base is total income from employment, self-employment, property and proprietary rights, capital, insurance and other income minus personal allowance. Gross income is reduced by the employee’s pension contribution payments (20% of gross income).
Deductions and allowances – each individual is entitled to a personal allowance of 3,800.00 HRK per month. The deduction may be further increased for each dependent family member. Tax rates are 24% and 36%, depending on the tax base.
The taxable base of a resident is the total amount of income that the taxpayer obtains in Croatia and abroad (income from employment + income from independent personal activities (small business and professional activities) + income from property and property rights + income from capital + income from insurance + other income) reduced by the personal allowance.
Taxable base of a non-resident is the total amount of income that the taxpayer obtains in Republic of Croatia (income from employment + income from independent personal activities (small business and professional) + income from property and property rights + income from capital + income from insurance + other income) reduced by the personal allowance.
All tax payers are entitled to a personal allowance in the amount of 3,800.00 HRK (approximately 500.00 EUR) per month while taxpayers, residents of Croatia, 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 allowance for supported family members. Personal allowance for supported family members are expressed as factors in relation to the basic personal allowances.
Personal allowance of a non-resident may be deducted from his taxable income for a tax period in the amount of the basic personal allowance, but the income may be increased by the amount paid for compulsory health insurance in Croatia, up to the amount of prescribed compulsory health insurance, contributions and by gifts in kind and in cash given in Croatia for cultural, educational, scientific, health-care, humanitarian, sport-related or religious purposes.
Where a natural person who is resident of an EU Member State or of the EEA, generates taxable income in Croatia which represents the minimum of 90% of his/her worldwide income earned during the taxation period and that is either non-taxable or tax-exempt in the Member State of his/her residence, he/she may by submitting an annual income tax return, increase his/her basic personal allowance by the personal allowance for supported family members and by the personal allowance for disabled (if the tax payer or his/her supported family members are disabled).
Fellowships are a form of financial aid awarded to individuals for the purposes of their education, training, professional development or research. The Income Tax Bylaw foresees special regulations for fellowships.
Students and researchers on a fellowship (scholarship). Fellowship programmes can include degree-programmes (bachelor's, master’s and doctoral study programmes), short-term study programmes, professional development programmes (seminars, conferences, workshops, internships etc.), scientific 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.
According to the Income Tax regulations certain types of scholarships are exempt from income tax, usually scholarships awarded to pupils and students in full-time education at secondary, post-secondary and higher schools and universities, financed either from the State Budget or the EU budget.
Scholarships may also be granted by foundations, agencies and other institutions founded with the intention of granting scholarships, registered in Croatia for the purpose of education or scientific research and acting pursuant to specific regulations. However, this tax-exemption is only valid if the student is enrolled in a regular study programme.
In case of scientific research, the fellowship is not taxable if the financial source is the national budget (for example, if they are financed by the Croatian Science Foundation). Otherwise, tax shall be paid according to the rule of other income, which means that the fellowship should cover the tax contribution in the fixed amount of 24% of income. Under certain conditions fellowships and other types of costs for research projects financed from the EU budget may also be non-taxable.
Scholarships awarded to natural persons from the European Union funds and programmes are also nontaxable under certain conditions. The purpose of these funds is to finance mobility activities, intended for education and training, and to cover the costs of transport, food and accommodation, as well as implementation of different project activities via an accredited institution in Croatia (such as the Agency for Mobility and EU Programmes for the Erasmus+ programme).
Croatia implemented changes to its VAT legislation on 1 July 2013 in order to align further with EU VAT regulations. Croatian VAT law is within the competence of the Croatian Tax Administration (Porezna uprava) under the Ministry of Finance.
VAT rates in Croatia:
- 25% - standard rate
- 13% - reduced rate for accommodation services, daily and periodic newspapers and magazines printed on paper
- 5% - reduced rate for a range of goods, such as books of professional, scientific, artistic, cultural and educational content and scientific journals
Based on the data from the tax card, a non-taxable portion of income is established – the personal allowance of each employee.
The following documents need to be submitted to the tax authorities (regional tax offices) in order to obtain a tax card:
- Application form (available in Tax administration offices)
- Copy of the confirmation of registered address
- OIB number
- Valid travel document – original and copy (third-country nationals)
- European ID Card – original and copy (EEA nationals).