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Croatia Individual - Income determination

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Employment income (annual income)

Employment income includes all receipts such as salaries and other payments in cash or in kind (except non-taxable payments up to the prescribed amounts) and pensions paid on the basis of the employment relationship.

Employers may give employees certain benefits that qualify as non-taxable. The following are the most common:

  • Reimbursement of travel expenses for coming to work (the actual cost incurred by public transportation, i.e. monthly ticket for public transportation).
  • Daily allowance for business trips in Croatia (up to HRK 170 per diem), plus travel and accommodation expenses.
  • Daily allowance for business trips abroad (the allowed sums are defined by a special decision and depend on the country of the trip), plus travel and accommodation expenses.
  • Reimbursement for use of the employee’s personal car for business purposes (up to HRK 2 per kilometre).
  • Cash granted to employees upon retirement (up to HRK 8,000).
  • Disability grant (up to HRK 2,500 per annum), death benefit upon the death of an employee (up to HRK 7,500), and death benefit upon the death of the employee’s close family members (up to HRK 3,000).
  • Occasional awards paid at Christmas, Easter, for vacation, etc. (up to HRK 2,500 per annum).
  • Awards to children until the age of 15 (up to HRK 600 per annum).
  • Awards to employees for 10, 15, 20, 25, 30, 35, 40, etc. years of service (up to prescribed amounts).
  • Severance payments paid under certain conditions (up to prescribed amounts).
  • Premiums for voluntary pension paid and borne by the Croatian employer into a Croatian voluntary pension fund for its employees are tax free up to HRK 500 per month (i.e. a total of HRK 6,000 per year).
  • Presents in kind up to the value of HRK 400.

If any of these benefits exceed the prescribed limits, the difference is considered to be salary and is subject to PIT, surtax, and employer’s and employee’s social security contributions.

The taxable base for employment income is equal to receipts less expenditures (i.e. employee’s social security contributions) and applicable personal allowances (see the Deductions section).

Tax rates applicable to the annual taxable base for employment income are provided in the Taxes on personal income section. Monthly tax bands are provided in the table below.

Monthly tax bands (HRK) Tax rate (%)
Over Not over
0 17,500 24
17,500 36

Tax liability is further increased for surtax.

Generally, tax calculation, withholding, and prepayments’ obligations, as well as all reporting obligations arising in respect to the realised income, lie with the income payer. However, there are cases (e.g. when income is realised directly from abroad) when this general rule is not applicable.

Self-employment income (annual income)

Taxable self-employment income includes income from:

  • small business (craft) and activities equivalent thereto
  • independent professions (doctors, lawyers, consultants, artists, and similar) under certain circumstances, and
  • agriculture and forestry activities as defined by the PIT regulations.

Individuals realising self-employment activity are obligated to keep business books and evidences.

The taxable base for self-employment income is equal to business receipts less business expenditures and applicable personal allowances (see the Deductions section). Note that the relevant regulation specifically prescribes what is to be regarded as business receipts and business expenditures.

Taxpayers who earn self-employment income make monthly tax prepayments in accordance with annual tax returns that they are required to file at the year-end.

Tax rates applicable to the taxable base for self-employment income are provided in the Taxes on personal income section. Tax liability is further increased for surtax.

A tax loss may be determined in respect of self-employment activities as well as other activities for which income is determined on the basis of business books. It can only be deducted from the income on the basis of which it has been determined. Tax loss can be carried forward for up to five successive years.

Derogations from the described tax compliance process are possible in case of a taxpayer realising self-employment activity who is not subject to VAT pursuant to the VAT Act and whose annual receipts from this activity do not exceed the amount prescribed by the VAT Act for the mandatory registration in the VAT system (HRK 300,000). The tax will be paid as a lump sum on the basis of the tax administration's assessment. Such taxpayer is not obligated to file an annual tax return in respect of this income.

Self-employed individuals are subject to social security contributions in accordance with special rules.

Other income (annual income)

With the new PIT Act that entered into force on 1 January 2017, two categories of other income are introduced: (i) annual other income and (ii) final other income.

Annual other income is considered to be realised on the basis of the following:

  • Receipts received by the members of the supervisory, management, or other similar bodies of legal entities.
  • Royalties paid pursuant to a special act governing copyright and related rights.
  • Receipts arising from the activities of athletes.
  • Receipts received by travelling salesman, agents, referees and sports delegates, interpreters, translators, tourist workers, consultants, expert witnesses, and similar activities.
  • Receipts in kind, the use of buildings, means of transportation, favourable interest rates on credits, and other similar privileges granted by the payers of these receipts to natural persons other than their employees.
  • Rewards to pupils during practical work and apprenticeship above tax-free amount.
  • Receipts of pupils and students in full-time education for the work via pupil and student associations, pursuant to special regulations above tax-free amount.
  • Scholarships to pupils and students for full-time education at secondary, two-year post-secondary, and higher schools and universities above tax-free amount.
  • Scholarships paid to athletes pursuant to special regulations for the improvement of their sport skills above tax-free amount.
  • Cash rewards for sport achievements and compensations to athletes pursuant to special regulations above tax-free amount.
  • Other unspecified receipts paid or given to natural persons by legal entities and natural persons (liable to profit tax or income tax based on self-employment activity) and other payers.

The taxable base for other income is equal to receipts less expenditures. Expenditures shall be recognised in the amount of 30% of the receipts acquired on the basis of:

  • Royalties paid pursuant to a special act governing copyright and related rights, including considerations for delivered works of art paid to the persons engaged in artistic or cultural activities.
  • The work of professional journalists, artists, and athletes who are insured on that basis and pay compulsory insurance contributions pursuant to a ruling.
  • The receipts of non-residents arising from artistic, entertainment, sport, literary and visual art-related activities, and the activities connected with the press, radio, and television shows.

Tax levied on other income is withheld by a payer of income at the rate of 24%, increased for surtax, without provision for taxpayers to claim personal allowances. In case the amount of other income does not exceed HRK 12,500 in the fiscal year, it will not be subject to annual tax rates (i.e. it will not be taxed at a rate of 36% on an annual level).

Normally, other income is subject to social security contributions from receipt, levied at 10%, and on top of receipt, levied at 7.5%.

Note that a taxpayer realising other income may, upon request, determine one’s income in the manner prescribed for self-employment activities.

Income from property and property rights (final income)

Taxable income from property and property rights includes income from the following:

  • Rentals and leases.
  • Property rights.
  • Disposal of property and property rights.
  • Disposal of specific property categories (i.e. of waste) as in accordance with specific regulations.

In specific circumstances, individuals realising income from property and property rights may be subject to social security contributions in accordance with special rules.

Income from property and property rights is not subject to social security contributions.

Rentals and leases

The taxable base for income from property on the basis of rental or lease of movables and immovables can be decreased by 30% for expenditures. Tax payments are made according to the assessment issued by the tax administration. The tax rate is 12%, and no personal allowance is allowed. Tax liability is further increased for surtax.

Property rights

The taxable base for income from property rights can be decreased by the amount of expenditures actually incurred, for which the taxpayer has proper and credible documentation. The expenditures are recognised based on a report that the taxpayer needs to file with the tax administration within 15 days as of year-end of the year for which the report is filed. The taxpayer needs to pay tax liability within 15 as of receipt of assessment. The tax rate is 24%, and no personal allowance is allowed. Tax liability is further increased for surtax.

Disposal of property and property rights

The taxable base for income from disposal of property and property rights can be decreased by the procurement value (increased by a rise in producer prices of industrial products) and disposal costs. Tax payments are made according to the assessment issued by the tax administration. The tax rate is 24%, and no personal allowance is allowed. Tax liability is further increased for surtax.

Disposal of waste

The taxable base for income from disposal of waste can be decreased in accordance with specific regulations. Tax payments are withheld by the income payer. The tax rate is 12%, and no personal allowance is allowed. Tax liability is further increased for surtax.

Income from capital (final income)

Income from capital includes the following:

  • Interest income (excluding: late payment interest; interest realised on the basis of court assessments and assessments issued by bodies of local and regional government; interest realised on the basis of positive balance on giro, current and foreign currency account realised from banks, savings institutions and other financial institutions up to the level of interest such payers pay for a vista deposits assuming such interest is lower than the lowest level of interest paid for fixed-term deposits and assuming it is not higher than 0.5% per year; interest from bonds; receipts realised on the basis of yield from life insurance with savings element and yield from voluntary pension insurance).
  • Withdrawal of assets and use of services by the members of legal entities for their private purposes at the expense of the current year's profit (note that this is also applicable in case of individuals who earn self-employment income that is subject to corporate income tax/profit tax).
  • As of 1 January 2016, capital gains income realised from disposal of financial assets acquired as of 1 January 2016 and alienated within two years as of the date of acquisition when such alienation is not done between spouses, immediate family members, divorced spouses who are disposing of the assets in connection with the divorce, or when disposal is not in connection with financial assets' inheritance.
  • Income realised by members of a Board from grant of own shares or stock options based on purchase of own shares at a favourable price under certain circumstances.
  • Dividends and shares of profit when paid out of profits realised in the period from 1 January 2001 through 31 December 2004 and as of 1 March 2012; there are certain exemptions (e.g. if dividends and shares of profit have been used for the purpose of increasing the company’s registered capital, if receipts are realised from investments into Croatian Homeland War Veterans’ Fund).

The taxable base depends on the type of income from capital. No personal allowance is allowed when calculating tax prepayments at the rates stated below.

Tax calculation, withholding, and prepayments’ obligations, as well as all reporting obligations arising in respect to the capital income, lie with the income payer (unless income is realised directly from abroad) except for capital gains income.

The tax rates applicable to the taxable base are the following:

  • Income from interest, dividends, capital gains: 12%.
  • Income from grant of own shares or stock option based on purchase of own stock at a favourable price: 24%.
  • Income from withdrawals of assets and use of services: 36%.

Capital losses can be deducted only from capital gains realised in the same tax year.

Tax liability is further increased for surtax.

When it comes to capital gains income, obligation of keeping records, determining income from capital gains, tax calculation, tax prepayments, and reporting obligations lie with the financial assets holder, who may arrange it with the company/individual/Central Depository & Clearing Company Inc. to take over all obligations except for tax payment obligation. In case of capital gains realised on the basis of disposal of participation in capital of limited liability companies, a taxpayer is obligated to report the disposal to the tax administration and shall be obligated to pay tax on the basis of the tax assessment issued by the tax administration.

Income from capital is not subject to social security contributions.

Income from insurance (final income)

Income from insurance is the amount of receipts received in respect of paid tax-free premiums for savings-type life insurance and voluntary pension insurance.

The taxable base equals the amount of realised income (i.e. no personal allowance is available when calculating tax prepayments for insurance income).

Tax is levied at the rate of 12%, increased for surtax.

Tax calculation, withholding, and prepayments’ obligations, as well as all reporting obligations arising in respect to other income, lie with the income payer.

Income from insurance is not subject to social security contributions.

Other income (final income)

With the new PIT Act that entered into force on 1 January 2017, two categories of other income are introduced: (i) annual other income and (ii) final other income.

Final other income is:

  • income received on the basis of the repayment of I. Pillar pension contributions paid over the annual cap, where tax is levied at the rate of 36%, or
  • income determined as a difference between taxpayer’s assets and reported sources of assets, where tax is levied at the rate of 36%; total tax liability is additionally increased by 50%.

No personal allowance is allowed.

Note that this type of other income has to be determined in a special procedure undertaken by the tax administration.

Tax liability is further increased for surtax.

Final other income is not subject to social security contributions from receipt.


Last Reviewed - 29 June 2017

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