Croatia

A taxpayer for personal income tax (PIT) purposes is every physical person deriving income.

Resident taxpayers are subject to worldwide taxation in Croatia. Non-resident taxpayers are liable to pay tax in Croatia on Croatian-source income. Non-resident performers (artists, entertainers, athletes) are not required to pay PIT if the fee for their performance is paid to a foreign legal entity and subject to withholding tax (WHT) in line with corporate income tax (CIT) legislation.

Under certain circumstances, an individual can, either voluntarily or obligatorily, become a CIT (i.e. profit tax) payer instead of a PIT payer.

Personal income tax (PIT) rates

Croatia has progressive tax rates that are applicable to the taxable base in the process of annual tax liability assessment. Progressive tax rates depend on an individual's place of residence or habitual abode in Croatia.

The local self-government units can choose on an annual level two progressive tax rates from a range where 15% represents the lowest possible rate and 35.4% represents the highest possible tax rate. However, the actual ranges from which a municipality/city can choose the lower and the higher of the two progressive tax rates depends on the size of the municipality/city:

• A municipality can choose a lower rate in the range of 15% to 22% and a higher rate in the range of 25% to 33%.
• A town with less than 30,000 inhabitants can choose a lower rate in the range of 15% to 22.40% and a higher rate in the range of 25% to 33.60%.
• A town with more than 30,000 inhabitants can choose a lower rate in the range of 15% to 23% and a higher rate in the range of 25% to 34.50%.
• The City of Zagreb can choose a lower rate in the range of 15% to 23.60% and a higher rate in the range of 25% to 35.40%.

The local self-government units have until 30 November of the current year at the latest to choose the rates applicable as of 1 January of the following year. The decision in made each year. Those locations for which a local self-government unit does not make a choice by the set deadline are subject to progressive tax rates of 20% and 30%.

The following types of income form part of the so-called 'annual income' that is subject to the process of annual tax liability assessment:

• Employment income.
• Self-employment income.
• Other income that is not deemed 'final other income'.

Taxable base is calculated by applying prescribed tax deductions and tax allowances (i.e. non-taxable parts of income) to the total amount of annual income.

Tax deductions and tax allowances may, depending on the income type, also be applied when calculating monthly tax prepayments. The following tax rates and tax brackets are used on an annual basis, i.e. in the process of annual tax liability assessment:

The following types of income form part of the so-called 'final income' that is not subject to the process of annual tax liability assessment:

• Income from property and proprietary rights.
• Income from capital.
• Other income relating to the refund of social contributions.
• Other income relating to the difference between taxpayer’s assets and reported sources for financing acquisition of assets.
• Other income in relation to temporary and occasional seasonal work in agriculture.
• Other income in relation to gratuity (tip), above the tax-free amount.
• Income for which tax liability is determined on a lump-sum basis in line with PIT legislation.

Consequently, the difference between annual and final income is that the final income does not fall under the process of annual tax liability assessment and the tax paid on the final income is deemed finally paid tax (i.e. final income cannot be subject to additional taxation regardless of the amount of other types of income taxable at the annual level). On the other hand, the annual income is included into the annual tax liability assessment process; consequently, the tax prepayments are not necessarily the final tax payable on that income in the tax year in question.