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Croatia Corporate - Taxes on corporate income

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CIT is generally paid at a rate of 18%. For taxpayers with revenues in the tax period lower than 3 million Croatian kuna (HRK), the rate of 12% is applied. This is applicable for the tax years starting from 1 January 2017 (previously, the CIT rate was a flat 20%). The CIT payers are enterprises engaged in independent activities on a long-term basis for the purpose of deriving profit, branches of foreign enterprises, enterprises that control shares in capital (unless the object of investment itself pays CIT), and natural persons who choose to pay CIT instead of personal income tax (PIT).

The CIT base is the accounting profit adjusted for deductions and disallowed items. Croatian residents pay CIT on profit derived in Croatia and abroad, and non-residents (e.g. branches) pay CIT only on profits derived in Croatia. The tax base also includes gains arising from liquidation, sale, change of legal form, and division of the taxpayer where it is determined at the market rates.

Payments into voluntarily pension funds paid by an employer for an employee under certain conditions prescribed by the CIT Act are also considered as deductible expenditures.

Expenditures are not considered to be deductible expenditures if they are not related to the taxpayer's business activity.

Taxpayers who realise less than HRK 3 million in revenues can determine the tax base according to the cash principle.

The CIT base is reduced by the following items:

  • Income from dividends and profit sharing (i.e. dividends and shares in capital that are paid by the company that pays CIT that is identical to Croatian CIT, which has a prescribed legal form, and dividends and shares in capital that the payer didn’t use as recognised cost [i.e. deduction] in one’s CIT return).
  • Unrealised gains from value adjustments of shares (increase of financial asset value) if they were included as income in the profit and loss (P&L) account and offset previously recognised tax non-deductible unrealised losses from the same financial year.
  • Income from collected written-off claims that were included in the tax base in the previous tax periods but not excluded from the tax base as recognised expenditure.
  • The amount of depreciation not recognised in previous tax periods, up to the amount prescribed by the CIT Act.
  • The amount of tax relief or tax exemption in line with special regulations (i.e. costs of education, costs of research and development (R&D), and costs of a new employee’s salary).

The CIT base is increased by the following items:

  • Unrealised losses from value adjustments of shares (decrease of financial asset value) if they were included as expenses in the P&L account and do not offset previously recognised gains from value adjustments from the same financial asset.
  • The amount of depreciation in excess of the amounts prescribed by the CIT Act.
  • 50% of entertainment costs (food and drink, gifts with or without the printed firm logo or product brand, and expenses for vacation, sport, recreation, renting cars, vessels, airplanes, and holiday cottages). Entertainment costs do not include the costs of goods and merchandise adapted by a taxpayer for business entertainment purposes, labelled ‘not for sale’, and other promotional objects with the name of the firm or merchandise or other advertising objects (e.g. glasses, ashtrays, table cloths, mats, pencils, business diaries, cigarette lighters, tags) put to use in the selling area of the purchaser and given to consumers, provided that their value does not exceed HRK 160 per item.
  • 50% of the costs, except insurance and interest costs, incurred in connection with owned or rented motor vehicles or other means of personal transportation (e.g. personal car, vessel, helicopter, airplane) used by managerial, supervisory, and other employees, provided that the use of means of personal transportation is not defined as salary. Please note that the percentage of 50% non-deductible expenses incurred in relation to personal cars will be applicable as of 1 January 2018. Until then, 30% of these expenses will be non-deductible.
  • Asset shortages exceeding the amount prescribed by the Croatian Chamber of Economy or Croatian Chamber of Trades and Crafts, in accordance with the Value-added Tax (VAT) Act and on the basis of which no PIT was paid.
  • The costs of forced collection of taxes and other levies.
  • Fines imposed by competent bodies.
  • Late payment interest charged between associated persons.
  • Privileges and other economic benefits granted to natural or legal persons for the purpose of causing or preventing a certain event in favour of the company (generally related to commissions paid to parties acting on behalf of the taxpayer).
  • Donations in excess of the amounts prescribed by the CIT Act.
  • Expenditures identified during tax authority's audit, including VAT and contributions related to hidden profit payments and withdrawals from shareholders, company members, and physical persons performing independent activities taxable by CIT.
  • Any other expenditure not directly related to profit earning, as well as other increases in the tax base, which were not included in the tax base.

Local income taxes

According to the newly enforced Local Taxes Act and amended Act concerning the financing of units of local government and regional self-government, which came into force as of 1 January 2017, tax on trade name as one of the revenues of local governments was revoked. This decision exempted all entrepreneurs, including crafts, from paying the aforementioned tax.


Last Reviewed - 06 June 2017

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