6 Types of Tax in Croatia 2021

In Croatia, there are different types of tax governing certain areas. Some common taxes include income tax and VAT (Value Added Tax). These two accounts are for the vast majority of revenue collected by the Croatian government. However, there are many other forms of taxation in Croatia that may apply to your situation. By knowing these different types of taxation, you can be sure that you meet all of your tax obligations. Without further ado, below are the 6 Different types of tax.

Income Tax

This is charged annually on income generated during the year. Income can include salaries, wages, royalties, dividends, pensions, and rental income, to name a few examples. This income tax helps to cover the costs of public services in Croatia.

Aside from that, it also goes towards paying for public infrastructure, education, and medical costs. And that’s why many people in Croatia are charged this tax. In fact, it is divided into three categories, depending on income levels. These categories include; up to 15,000 Kuna, between 15,001 and 50,000 Kuna, and over 50,000 Kuna.

Value Added Tax (VAT)

This tax is charged on the value of goods and services at each stage of production and distribution. The standard VAT rate in Croatia is 25%. However, there are several exemptions from this tax.

These include medication, books and newspapers, as well as exports outside of the European Union (EU). Also, the reduced VAT rate of 13% is applied to a range of goods and services, such as food, hotel accommodation, cultural and sports events.

Corporation Tax

This tax is levied on the profits of companies registered in Croatia. The rate of corporation tax is 20%. This tax is used to finance public services and infrastructure projects. Not only is that, but this tax also has benefits for companies in Croatia. This includes that making a loss can be carried forward against any profits during the next five years.

Personal Income Tax

This is similar to income tax but applies to individuals (not corporations). It is levied on certain incomes of Croatian residents.  The standard rate of personal income tax in Croatia is 25%. There are also higher rates for high levels of income. These include a 35% tax rate on incomes over 150,000 Kuna and a 40% tax rate applied to incomes over 250,000 kunas.

Inheritance Tax

The heirs pay this when an individual who has passed away leaves the property (or money) to them. The inheritance tax rate in Croatia is between 4% and 12%. As an expat, you are allowed to inherit certain possessions without paying this tax.

These items include personal items (clothing, furniture, etc.), some tools of the trade (e.g., a carpenter’s saw), one plot of land used for private purposes, and 2 hectares elsewhere

Real Estate Tax

This is charged on both individuals and corporations with respect to their ownership of the real estate in Croatia. The tax rates vary but are typically between 0.5% and 2%. Property used for business purposes is taxed at a higher rate than property used for residential purposes. Therefore, it is important to check the flow of tax reliefs, especially for property owners, not residents in Croatia.

7 Interesting Things to Know About Expat Tax in Croatia

In Croatia, there are no double taxation treaties, but with a tax residence certificate, Croatian citizens living in foreign countries don’t pay income tax on their income from abroad. Taxation rates in Croatia depend on your location and financial status.

A non-resident receives an income from a source outside Croatia for either a limited or unlimited period. Income earned as a non-resident is only taxed on income generated in Croatia. There are several tax rates that expats may be subject to in Croatia, and these vary depending on the income bracket you fall into. The following are the interesting things to know about expat tax.

1.    National Insurance number (OIB)

Everyone who is employed in Croatia must have a national insurance number. Employers will usually apply for the Croatian national insurance number, but the individual should contact the Croatian tax office. You will need your national insurance number to file a tax return in Croatia. Also, you may need it to open a bank account or to get a residence permit.

2.    Tax Residency

If you are resident in Croatia for tax purposes, you are taxed on your worldwide income. If you are not resident in Croatia for tax purposes, you are only taxed on Croatian-source income and Croatian property. Besides, you are only taxed on Croatian-source income if you have a permanent establishment or fixed base in Croatia. You can check your tax residency status with an online calculator here.

3.    Personal Allowance and Tax Rates

There is no personal allowance in Croatia; everyone starts with an income of HRK 0 (HRK 1 for those born before 1949). After earning more than HRK 87,626 per year, your salary will be taxed at 16% until you reach HRK 106,356. At HRK 106,356, your salary will be taxed at 25%, and then at 35% for income between HRK 587,878 and HRK 1,076,356. Finally, any amount above that is taxed at 40%.

4.    Tax Filing Deadline

The deadline to file the Croatian tax return is by 30 April each year, but if you do not have any tax payable in Croatia, you can file a return any time before the deadline. If you don’t file your Croatian income tax return by 30 April and you work for an employer who withholds taxes from your salary (like most people), then the term of limitation is three years after the end of the calendar year in which the taxes should have been paid.

5.    Double Taxation Relief

If you are a Croatian tax resident, then you will qualify for double tax relief on foreign income if it is taxed in your home country too. You can claim this relief by completing the relevant section of the Croatian income tax return.

For example, if you work as an English teacher in Croatia on a Croatian work permit, you will pay tax to Croatia on your earnings. You may also have to pay income tax in your home country on your Croatian-source income. If so, you can claim relief against the foreign taxes paid, which effectively means that you do not have to pay more tax than necessary for these two taxes to be paid.

6.    Currency Exchange Rate

The Croatian tax year runs from 1 January until 31 December, so you must use the average annual mid-market currency conversion rate for the whole of 2015 to convert foreign income and gains into kunas. This means that if you receive your salary in another currency, it will first need to be converted into euros. Then the euros will be converted into kunas at the average annual mid-market currency conversion rate for 2021.

7. Tax-Free Shopping

If you live in Croatia and have a valid residency card, you can shop tax-free in Croatia. This means that you do not have to pay Croatian value-added tax (VAT) on items you buy. You will need to show your residency card at the time of purchase.

Frequently Asked Questions about Expat Taxes in Croatia

What Types Of Income Are Taxable In Croatia?

Income tax in Croatia is levied on the income earned from employment, pensions, and individual capital gains. In addition, Croatian tax laws stipulate that all individuals who are residents of Croatia for tax purposes must pay taxes on their worldwide income to the Croatian Tax Administration.

Also, any income earned in Croatia by a non-resident is subject to Croatian taxation. Therefore, it is important to report all income earned in Croatia, regardless of residency.

How Is My Taxable Income In Croatia Calculated?

The taxable amount of your income in Croatia is determined by applying the progressive Croatian Personal Income Tax Law rates to your ‘Base for calculation of personal income tax,’ which is calculated according to the provisions of Section 6 of Croatian Personal Income Tax Law.

Meanwhile, your capital gains are taxed at a flat rate of 25%. But, if capital gains from your sales of shares are realized within six months from the date of purchase, 50% of that gain will be taxed as income.

Do I Have To Pay Croatian Taxes During My Stay?

All individuals who are residents of Croatia must file a tax return and pay personal income tax on their worldwide income to the Croatian Tax Administration. In fact, it is a legal obligation. In addition, expats who stay in Croatia for more than 183 days in a tax year must file a tax return and report their Croatian-sourced income.

How Are Expat Taxes In Croatia Calculated?

Many different factors affect the calculation of Croatian Expat Tax. These include your residency status, length of stay, and type of work you do. The best way to calculate this is to contact a local tax adviser who will help you understand what payments need to be made. Meanwhile, you can get more information on the Revenue Agency website.

What Is The Tax Rate In Croatia?

The tax rate in Croatia varies depending on your income level and individual circumstances. However, it is around 25 percent for most people, though some exemptions for lower-income earners.

Also, keep in mind that you may need to pay additional taxes on income earned from certain investments or activities. But, once again, it is best to speak with a tax specialist to find out more.

What Happens If I Don’t Pay?

If you do not file and/or pay your Croatian tax bill, the authorities may take legal action to collect what you owe. If that doesn’t work, they will likely start a criminal investigation against you – and we’re talking about serious prison time here.

So, be sensible and file your taxes on time every year. Also, make sure you keep your contact information updated with the tax office in case they need to get in touch with you.

Conclusion

Do you live in Croatia as an expat? If so, have you considered your tax situation here? Many people move to this part of Europe, but very few realize that their home country may still expect them to pay taxes. Nonetheless, this article explained the main aspects of filing and paying taxes as an expat in Croatia.

Before introducing this article, if you are interested in our core services which are expat financial, insurance and mortgages, you can contact me here. 

The best time to consider your financial situation is when you are moving to a new country.

Introduction

Expat tax in Croatia can be a bit of a headache to figure out. The main thing to remember is that you are taxed on your Croatian income, no matter where you are resident in the world. This means that if you earn money in Croatia, even if you’re living elsewhere, you’ll have to declare and pay taxes on it.

There are a few exceptions, though. If you’re earning less than €7,000 per year, you don’t have to pay taxes on it. And if you’re only in Croatia for a short period – less than 183 days in a calendar year – you also don’t have to pay taxes on your income.

But for the most part, if you’re living in Croatia and earning money here, you’ll have to pay taxes on it. The good news is that Croatian taxes are relatively low compared to other countries. And as an expat, you may be able to take advantage of some tax breaks and deductions available only to foreigners.

However, you’ve come to the right place if you’re looking to know more about expat taxes in Croatia. And remember, it’s always better to be safe than sorry – so make sure you take care of your taxes, even if it seems like a hassle. After all, it’s what we have to do to keep the government happy!

In this article, we will walk you through the concept of expat taxes in Croatia. Not only that, but you’ll know whether the country is suitable for a digital nomad, retirees, and many others, to mention a few. Also, we have compiled the ultimate guide to living in Croatia as an expat. Now, read further to get the details.

Benefits of Tax in Croatia

Tax in Croatia, which is payable by every citizen over the age of 18 years, may seem like a chore to some people. Some may associate it with being in prison and paying their way out. However, in reality, there are many benefits to paying taxes. Here are the reasons why paying tax in Croatia can benefit you.

In our humble opinion, there are a number of benefits to the Croatian tax system. Some people don’t welcome these benefits with open arms, but you should read them anyway!

1.    You Have Access to Public Services

One might argue that, in theory, this is a benefit for all citizens, not just those who pay taxes in Croatia. Public services in Croatia are free, including higher education, health care, and financial aid. Yet, we think this benefit is worth mentioning because not just anyone can access these services. You have to prove that you’re a tax-paying citizen in order to get them.

2.    You Deserve Some Respect from Everyone

As a developing country, Croatia is full of hardworking people trying to make an honest living. People who pay their taxes are among this group of hardworking citizens. By paying your taxes, you’re telling the government and everyone else that you’re doing your part to contribute to the country. This respect is something that all taxpayers can feel proud of.

3.    You’re Eligible for Tax Breaks

In addition to public services, taxpayers in Croatia are also eligible for a number of tax breaks. This includes deductions on income tax, property tax, and even VAT. You can also apply for a number of special funds only available to taxpayers.

4.    You’re helping to build the country

Croatia has a few infrastructure projects in the works, including roads and railways. Better infrastructure means better opportunities for companies in Croatia to expand their market overseas. However, all of this work requires money, so taxpayers are doing their part by paying taxes used to fund these projects.

5.    You Have Access to Public Funds

At the end of the fiscal year, all taxpayers have access to public funds returned to the people. This includes a share of all taxes paid over a fiscal year. Depending on which fund you put your money in, you could be eligible for up to 50% return on your investment.

Overview of Expat Taxation in Croatia

Croatia is one of many European countries with relatively low tax rates. It has a flat tax rate for individual taxpayers at 15%, and corporate entities pay 18%. These are among the lowest rates in Europe. Croatia does not levy any taxes on worldwide income, which means that there is no requirement to file or submit Croatian tax returns if you are not living or earning income in Croatia.

This tax-free system makes it one of the few European countries where expatriates do not have to worry about filing Croatian taxes, provided that they are not employed by Croatian companies or based out of Croatia for any length of time. However, if you have assets in Cyprus, this might change your tax situation. Besides, if you are a Cyprus resident, your worldwide income is subject to taxes in Croatia.

This means that you will be required to file a Croatian tax return and submit it to the Croatian Tax Administration, regardless of whether you are living or earning income in Croatia. In addition, you will also be taxed on your worldwide assets, including those located in Croatia. This is a new rule introduced in 2013 and affects all Cyprus residents, expatriates, and locals.

The good news is that the tax rates are still very low, so the additional taxes you will pay on your worldwide income and assets will not be too burdensome. However, it is important to be aware of these tax rules and to file the required returns if you are a Cyprus resident with assets in Croatia.

Croatia Tax System In 2021

In Croatia, the tax system is based on a progressive tax scale. This means that the more money you earn, the higher your tax rate. In 2021, the highest tax rate is 40%, which is applied to income over HRK 500,000 (approx. EUR 67,000). There are also a number of allowances, which can be deducted from your total income before you have to pay tax.

In 2021, taxpayers are allowed to deduct as much as HRK 20,000 (approx. EUR 2,700) from their wage or pension if they have school-aged children. In the past few years, many Croatian citizens have reduced their tax haven thanks to a generous tax credit scheme. If you do not have much money and need help, it’s well worth checking if the scheme is still available.

In 2021, people with rents can deduct HRK 12,000 per year. Furthermore, they are also entitled to receive an additional tax deduction on the interest they pay on their mortgage. This deduction is capped at HRK 10,000 (approx. EUR 1,350). As you can see, the Croatian tax system is very generous when it comes to helping people with their finances.

Whether you are a parent with children in school or renting out a property, there are plenty of allowances and tax credits to help you reduce your total income. However, people need to remember that they can’t get a refund after paying their tax bills. Therefore, many people choose to pay themselves the money earned from being taxed before submitting their earnings to the government. This way, if you get a refund, you are actually getting money back from yourself!

The Croatian tax system is straightforward to understand. If you have any questions, be sure to speak to an accountant or tax specialist. They will help you get the most out of your taxes in 2021.