Effective Tax Rate on Rental Income
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Nonresident individuals are taxed on their Croatian-sourced income. Married couples are taxed separately.
Personal allowances extended to both domestic and foreign taxpayers are not applicable to property income.
Rental income from property is taxed at 12%, with allowed deductions fixed at 30% of the incurred expenses.
Surtax is levied on top of the tax due from taxpayers by local authorities at the following rates:
Capital gains from the sale of immovable property are subject to a flat withholding tax rate of 25%. Allowable deductions are the acquisition cost of the property as adjusted by inflation and the fees incurred in the transfer.
The sale of real estate is exempt from capital gains tax if (1) the sale took place more than three years from the date of purchase, or (2) if the property was used as the residence of the taxpayer and/or dependent members of the taxpayer’s family, (3) or the sale was directly connected with a divorce or an inheritance.
VAT is waived on the leasing of housing premises.
The proposed real estate tax would be levied at a flat rate of 1.5%. The tax base is around 70% of the estimated market value of the property.
Tax on holiday homes are payable by owners of holiday homes in Croatia. The tax is levied on the useful area of the property. The tax is HRK5 (€0.65) to HRK15 (€2) per square meter, depending on the municipality or town where the property is located.
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