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Croatia is a parliamentary republic in which the head of government, the prime minister, and the head of state, the president, represent the executive power and the state in the country and abroad. The governance structure is based on the separation of legislative, executive and judicial powers. Parliament holds legislative and executive power. Its members are elected for 4 years.




CIT = Corporate Income Tax 

SSC = Social Security Contribution  (Employee + Employer)


The most important sectors of the Croatian economy in 2018 were wholesale and retail trade, transport and hotel and restaurant services (23.1%), industry (20.4%) and public administration, defense, education, health and social assistance (15.5%).

68% of Croatia exported to the EU: Italy 14%, Germany 13% and Slovenia 11%; in non-EU countries it exported 9% to Bosnia-Herzegovina and 4% to Serbia.

78% of Croatia imported from EU Member States: Germany 15%, Italy 13% and Slovenia 11%; from non-EU countries it imported 3% from both Bosnia-Herzegovina and China.

Image by Kristijan Arsov


The state has a modern tax system, with a structure similar to that of the European countries.

Croatia has been a member of the European Union since 2013, but is not part of the euro area.

Taxation of individuals
The personal income tax was profoundly reformed in 2017 with subsequent amendments in the following years. For resident subjects the principle of world taxation applies, for which the income tax of individuals affects income wherever produced.
For non-residents, on the other hand, only income from national sources is taxable.
A natural person is resident for tax purposes if he has a permanent residence or habitual presence in Croatia. Employees of the public administration of the Republic of Croatia are also considered fiscally resident. 
Income from employment (or retirement), self-employment and other income are subject to tax. The latter category is divided into other annual income, which includes the remuneration of company directors, artists, sportsmen and scholarships, and other final income, which includes income deriving from the exploitation of properties (such as rents ) and investment income.
Individuals who carry out individual business activities or self-employment can opt for the payment of the corporate income tax instead of that on the income of individuals.
There are some deductions from income:

  • personal deduction of HRK 4,000 per month. This deduction is not available to those who only receive other income.

  • deduction for dependent family members of HRK 1,750 per month;

  • deduction for dependent children starting from 1.750 HRK  depending on their number;

  • contributions for compulsory health insurance and pension.


On the taxable basis of the annual income (made up of income from work and other annual income) the rate of 24% is applied for the first 360 thousand HRK and 36% for the excess amount. Municipalities can decide whether to apply a surcharge with maximum rates that depend on their size and can reach up to 18% of the tax due . 
For some types of "other income", single rates of 12%, 24% or 36% are envisaged, depending on the case.
The tax return must be presented by those who carry out self-employment by February of the year following the reference year. For other types of income, the administration sends a pre-filled declaration which must be corrected if necessary within 15 days of receipt. Foreign subjects who perform performances in the national territory (artists, athletes, etc.) are not required to submit a tax return if the relative withholding taxes are applied.

Legal entities: income tax and other direct taxes
Similarly to what has been seen for natural persons, also for resident legal persons the principle of worldwide taxation applies whereby residents are taxed on the income produced wherever they are. For non-resident subjects, only income from national sources is taxable. You are considered to be resident if you are established according to Croatian laws or if the place of effective management of the business is in Croatia.
The tax base is calculated starting from the balance sheet result by applying the changes provided for by law. Taxpayers with revenues of less than 7.5 million HRK can adopt the cash principle for determining the temporal accrual of revenues and costs.
The rate in general is 18%. For individuals with revenues of less than 7.5 million HRK, a rate of 12% is applied.
Depreciation is made according to the percentages established by law for the various types of assets.
Interest relating to loans between related parties are deductible only if they do not exceed the rates indicated annually by the Ministry of Finance and in any case do not exceed the ratio of 4 to 1 between these payables and capital.
Losses can be carried forward for up to five years and must be used in the same order in which they were formed.
Capital gains and losses are part of the taxable income, as well as interest and royalties.
​​The law for the promotion of investments provides for investment incentives for manufacturing activities, innovative activities, business support activities and high value-added services. You can access the incentives if you exceed an amount of investments and new employees that varies by type and size of the companies. Tax incentives that can last from 5 to 10 years increase as investment increases and range from 50% to 100% of income tax, while those on new employees depend on the unemployment rate of the province in which one operates. It is foreseen a deduction of up to 200% of expenses in research and development and other incentives such as that for the training of workers, for innovative projects and those for labor-intensive projects.
The tax return must be filed within the fourth month after the end of the tax period. It is not possible to submit a consolidated declaration so each company must submit its own. Taxpayers must pay monthly payments on the basis of the previous year's return and then settle any excess with the tax return.

Value Added Tax
The tax follows the scheme adopted by the Member States of the European Union and applies to all transactions of goods  and services within the country, to intra-EU purchases and imports. Financial and insurance, health, cultural, sport-related services and the transfer of land and buildings are exempt from VAT, with the exception of those sold by the manufacturer.
The ordinary rate is 25% but there is a reduced rate of 13% and an even lower rate of 5%.
Registration and application for VAT are mandatory for taxpayers who have revenues exceeding 300 thousand HRK while for others it is optional. Taxpayers must declare and pay VAT on a monthly basis by the 20th of the following month with the exception of smaller taxpayers whose due dates are quarterly.

Real estate transfer tax
There is no tax relating to the ownership of properties while for their transfer a tax equal to 3% of the market value of the property is applied.

Inheritance and gift tax
The tax applies to inheritances and donations of more than 50,000 HRK. For movable property it has a rate of 4% regardless of the relationship between the parties while for real estate the rate is 3% with the exemption for the closest relatives (spouse, brothers and sisters, children).

Social security contributions
The Croatian social security system covers pension and health insurance.

Social security contributions are payable in relation to income earned on an assumed basis, depending on the status the individual has in the social security system and other relevant circumstances.

In the case of employees, the social security charges are borne by the employee and the employer.

The social security contributions payable by the worker are pension contributions drawn at a rate of 20% (15% for the First Pillar, 5% for the Second Pillar). The basis for their payment is the gross salary, which is limited to the following values for 2021:

  • HRK 55.086 monthly cap (applicable for both I. and II. Pillar payments in case of salary).

  • HRK 661.032 annual cap (applicable for payments of the I. pillar regardless of whether it is salary or other types of remuneration).

In addition, employers pay social security contributions for health insurance-related social security benefits at a rate of 16.5%.
The basis for the payment of employer social security contributions is the gross salary, which is not limited.

Employers have some additional obligations towards disabled people.

With some exceptions, employers employing 20 or more employees are required to hire a predetermined number of disabled people. The number is equal to 3% of the total number of employees.

Employers who do not meet the prescribed requirements are required to pay a monthly fee equal to 20% of the gross minimum wage (the minimum gross wage for 2021 is HRK 4,250) for each disabled person that the employer was required to hire.


Our Zagreb office can count on the support of a firm of Accountants and Auditors made up of 2 Partners as well as a staff of 8 people who work daily in the areas of auditing, payroll processing, accounting, tax assistance and compliance. 

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