Croatia

Corporate income tax (CIT) is generally paid at a rate of 18%. For taxpayers with revenues in the tax period lower than 1 million euros (EUR), the rate of 10% is applied. The CIT payers are domestic enterprises engaged in independent activities on a long-term basis for the purpose of deriving profit, business units (permanent establishments or PEs) of foreign enterprises, and individuals (natural persons) performing a business activity who choose to pay CIT instead of personal income tax (PIT). Pension and investment funds without legal personality, which are established and operate in accordance with special regulations, are generally exempt from CIT. However, this exemption does not apply if an investment fund has been created specifically to exploit tax benefits.

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 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 if it is determined at the market values.

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 EUR 1 million in revenues can determine the tax base according to the cash principle. There are specific adjustments of the CIT base for taxpayers applying a cash principle.

Pillar Two

Pillar Two rules were introduced in Croatian legislation through the Global Minimum Tax Act (‘the Act‘ or ’Pillar Two’). The Act entered into force as of 31 December 2023 and applies to the fiscal years commencing after 31 December 2023.

Pillar Two prescribes a global minimum level of taxation of 15% for multinational enterprise groups and large-scale domestic groups with total revenues exceeding EUR 750 million generated in any two of the previous four years.

It is especially important to mention that the Act also introduced the qualified domestic minimum top-up tax (QDMTT). QDMTT requires Pillar Two assessment for any domestic entity that is part of a large group, regardless of whether the group simultaneously performs a calculation at the parent entity level.

By introducing the Act, the Republic of Croatia adopted the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), as well as all exemptions provided for by the Directive that refers to governmental, international, and non-profit organisations, pension and investment funds, and the system of international maritime transport.

The rules for the so-called de minimis exclusion and safe harbour rules should minimise the Pillar Two impact on administrative obligations, at least in the first years of application.

For more detailed information and the most recent updates, please visit PwC’s Pillar Two Country Tracker.

Local income taxes

There are no significant county or local taxes on income.