TAX SYSTEM IN CROATIA
Tax system in the Republic of Croatia is based on and divided into two major group: direct and indirect taxes. Direct taxes (personal income or corporate income tax) and indirect taxes (such as VAT and excise duties).The tax system in the Republic of Croatia consists of government, county, municipal or local, shared taxes as well as taxes and fees on games of chance and any winnings.
1. Tax: Value Added Tax (VAT)
Taxpayer: Legal and natural person delivering goods or performing services
Tax base: Fee for provided goods or services
Tax rate: 25%, 13%, 5%
2. Tax: Personal Income Tax
Taxpayer: Natural person realizing taxable income
Tax base: Total income realized in Croatia and abroad (for foreign taxpayers income realized in Croatia) reduced by personal deduction for residents/non-residents
Tax rate: 12%, 25%, 40%
3. Tax: Corporate Income Tax (Profit Tax).
According to the Act on Investment Promotion and Enhancement of the Investment Environment, corporate income tax can be reduced to 0% if the prescribed conditions are met.
Taxpayer: A company or some other legal entity pursuing independent and permanent business activities in order to generate profit, business unit of a foreign entrepreneur (non-resident)
Tax base: Profit (difference between revenue and expenditure)
Tax rate: 20%
4. Tax: Real Estate Transfer Tax
Taxpayer: Buyer of the real estate
Tax base: Market value of the real estate at the moment of acquisition
Tax rate: 5%
5. Tax: Surtax on Personal Income Tax
Taxpayer: Income tax taxpayers
Tax base: Income tax
Tax rate commune and city: 1-30% (now for example for Zagreb 18%)
Double Taxation Treaties:
The Republic of Croatia has signed over 50 treaties of avoidance of double taxation including all EU countries.
Main Tax exemptions:
Reinvested profit – when the profit is invested into the share capital of the company and the share capital increase is registered with the Commercial Court (profit reinvested with aim to increase the share capital, which is not realized in the banking e.g. financial non-banking sector), the tax base is reduced by the reinvested amount
Withholding tax is not paid if the paid fee is credited as income of the resident permanent unit of foreign entrepreneur
Withholding tax on dividends and shares in profit – foreign recipients of dividends from the EU are not paying withholding tax on dividends and shares in profit at the rate of 12% if they own at least 10% of the capital for a continuous period of 24 months
Real estate transfer tax – is not paid when a property is brought into a company as equity stake or to increase the share capital (in accordance with the provisions of the Companies Act). This tax is also not paid when a property is acquired in the procedure of acquisition, merger or demerger of the company (in accordance with the provisions of the Companies Act).
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