Income from property rights and the disposal of property is taxed at a rate of 24%. However, capital gains derived from the sale of real estate are not taxable if the real estate meets either of the following conditions:
• It was held more than two years.
• It was used by the owner or dependent family members for lodging.
If a person sells more than three real estate or property rights in a five-year period, income from sale of real estate or property rights is taxed at a rate of 24%. The expenses incurred are deductible for tax purposes.
Other income. Other income includes all types of income that cannot be included in one of the above categories, such as directors’ fees. Other income is taxed at a lower prepayment tax rate determined by the city/municipality of residence (for example, in Zagreb, the lower tax rate amounts to 23.6%), without the right to deduct personal allowances. Exceptionally, other income tax will be increased by a rate of 100% in the event of tax audit findings of unreported income and 36% in the event of the claiming back of pension contributions paid in excess of the annual limit.
Capital gains and losses. Capital gains derived from the sale of financial property acquired in or after 2016 are subject to tax at a rate of 12%. Realized capital losses may offset realized capital gains in the same year. Certain exceptions apply (for example, capital gains are not subject to tax if the financial property is held for at least two years).
Deductions
Deductible expenses. Compulsory social security contributions payable by an individual on a specified type of income are deductible in determining taxable income. Personal expenses incurred to produce income from employment are not deductible.
Personal allowances. Resident and nonresident taxpayers may claim a basic personal allowance of EUR560 per month. Resident taxpayers may also increase personal allowances by the following:
• EUR280 for a dependent spouse and ascendants
• EUR280 for the first dependent child, EUR392 for the second, EUR560 for the third, EUR784 for the fourth, EUR1,064 for the fifth, EUR1,400 for the sixth, EUR1,792 for the seventh, EUR2,240 for the eighth and EUR2,744 for the ninth
• EUR168 or EUR560 (depending on circumstances) for a dependent invalid child or other family member or for an invalid taxpayer
Nonresident taxpayers who are residents of the European Union (EU) can claim increased personal allowances in the same manner as residents if their total Croatian-sourced income accounts for at least 90% of their total annual income.
To be considered a dependent family member, the individual’s annual earnings may not exceed EUR3,360. A dependent family member is not required to live in the same household as the taxpayer.
IT tool during the year. This simplified procedure may not apply to individuals in a complex tax position or in cross-border arrangements.
Individuals who earn self-employment income from ongoing business activities must pay advance tax monthly in an amount determined by the tax authorities. The balance of tax due is payable or refundable after the official assessment of annual personal income tax. The payer of self-employment income must withhold and pay personal income tax and contributions with respect to such income.
Nonresidents receiving Croatian-source income may need to register with the tax office. For nonresidents employed by resident employers, the employer is responsible for tax withholding and reporting requirements. Residents and nonresidents who work in Croatia for a nonresident employer and are being paid from abroad must file monthly tax returns and pay advances of personal income tax within 30 days after the income is received. The same rule applies to any other income received directly from abroad (dividends, foreign pensions and other income).
E. Tax treaties
Croatia has entered into double tax treaties with the following jurisdictions.
Albania India Oman
Andora Indonesia Poland
Armenia Iran Portugal
Austria Ireland Qatar
Azerbaijan Israel Romania
Belarus Italy Russian
Belgium Japan Federation
Bosnia and Jordan San Marino
Herzegovina Kazakhstan Serbia
Bulgaria Korea (South) Slovak Republic
Canada Kosovo Slovenia
Chile Kuwait South Africa
China Mainland Latvia Spain
Cyprus Lithuania Sweden
Czech Republic Luxembourg Switzerland
Denmark Malaysia Syria
Estonia Malta Türkiye
Finland Mauritius Turkmenistan
France Moldova Ukraine
Georgia Montenegro United Arab
Germany Morocco Emirates
Greece Netherlands United Kingdom
Hungary
North Macedonia Vietnam
Iceland Norway
F. Travel visas
Whether a foreign national must have a travel visa to enter Croatia depends on the individual’s country of nationality. Travel visas are issued for tourist, business, personal or other purposes. The period of the stay of a foreign national with a travel visa varies according to the type of visa.
G. Permits for stay and work
Under the Act on Foreign Nationals, a foreign third-country national must obtain a permit for stay and work if he or she enters into an employment relationship with a Croatian employer or if he or she is assigned to a Croatian company that is related to the individual’s foreign employer.
In general, permits for stay and work for employment with Croatian employers are subject to a labor market test. Croatian employers must request a labor market test to confirm there is no available Croatian individual who can perform the required work. If the employer receives a positive test, it can then apply for the work permit for a foreign individual. Intercompany transfers, employment of “key personnel” or EU Blue Card work permits are not subject to a labor market test. Specific requirements are prescribed for employment of non-EU citizens under a “key personnel” function (share capital exceeding EUR26,544.56, employment of at least three Croatian citizens and gross salary at least 1.5 times the average Croatian gross salary). Specific requirements are also prescribed for the EU Blue Card (only for individuals with higher education [meaning they have a bachelor’s degree or a master’s diploma] and gross salary at least 1.5 times the average Croatian gross salary).
The Ministry of Internal Affairs issues permits for stay and work, which are usually granted for a period of one or two years. However, foreigners who have obtained permanent residence in Croatia do not need to obtain a permit for work. Employers are fined if their foreign employees do not possess valid permits for stay and work.
The new Foreigners Act introduced a novel concept in the Croatian immigration system, which is the approval of a temporary stay for digital nomads. Digital nomads are thirdcountry nationals who are employed or performing work through communication technology for a company (including their own company) that is not registered in Croatia and who do not perform work or provide services to employers in the Croatian territory. The application for the approval of a temporary stay is submitted to the diplomatic mission or consular office of Croatia. If a third-country national does not need a visa to enter Croatia, the respective application can be submitted to the competent police department in Croatia. The approval of a temporary stay is issued for one year.
Because Croatia joined the EU on 1 July 2013, EU nationals and individuals with permanent stay in EU countries are no longer required to obtain a work permit in Croatia. They are required only to register their stay in Croatia.
H. Residence permits
Under the Act on Foreign Nationals, foreign nationals must obtain residence permits for temporary residence or permanent residence.
Registration. Foreign nationals who stay in Croatia up to 90 days (with a travel visa, or without one if not required) must register at the local police station within 48 hours after their arrival in
Croatia. This period is increased to eight days for EU nationals. If the foreign national stays in a hotel, the hotel must complete the registration. Each change of residence must also be registered.
Foreign nationals with temporary residence in Croatia must register their place of residence or change of address at the local police station within three days after their arrival in Croatia or their change of address.
Foreign nationals with permanent residence in Croatia must register their place of residence or their change of address at the local police station within 15 days.
Temporary residence. The temporary residence permit is issued for purposes of work, education, joining the family or other purposes determined by law.
Temporary residence is limited to stays of up to one or two years, with the possibility of extension, depending on specific circumstances.
Foreign nationals can apply for temporary residence permits at the Croatian diplomatic missions or consulates or at the Croatian Ministry of Internal Affairs if they do not need a visa to enter Croatia.
Permanent residence. Permanent residence is granted to foreigners who held temporary residence permits for five years without interruption before filing the request for permanent residence. Knowledge of the Croatian language is one of the requirements for non-EU nationals.
The Ministry of Internal Affairs must approve permanent residence.
I. Family and personal considerations
Family members of foreign nationals working in Croatia must apply separately for permits for stay and work (if they intend to work in Croatia). If they are EU citizens, only a stay permit needs to be obtained. A temporary residence permit for the purpose of joining the family is approved for a foreign national who is a close family member with respect to the following individuals:
• A Croatian national
• A foreign national who has been granted permanent residency
• A foreign national who has a temporary residence permit