Income tax in Croatia
July 17, 2018
Residents are taxed on their worldwide income. Married couples are taxed separately.
There are several categories of income in Croatia: (1) employment income, (2) self-employment income, (3) income from property and property rights (i.e. leasing immovable property) and capital gains from immovable property and rights in such property, (4) income from capital, (5) income from insurance, and (6) other income. Income tax rates vary, depending on the source or category of income.
Income from employment is taxed at progressive rates.
INCOME TAX 2017
|TAXABLE INCOME, HRK (€)|
|Up to 210,000 (€27,273)||24%|
|Over 210,000 (€27,273)||36% on all income over €27,273|
|Source: Global Property Guide|
Municipalities are authorized to introduce a surcharge on the income tax at rates between 10% and 30%, depending on the number of inhabitants. The actual highest rate of the surcharge is currently 18% (e.g. in Zagreb).
Residents are entitled to the following annual deductions:
- Basic personal allowance of HRK45,600 (€5,922)
- Child allowance of HRK21,000 (€2,727) for first child
- Child allowance of HRK30,000 (€3,896) for second child
- Child allowance of HRK42,000 (€5,455) for third child
- Dependent relative allowance of HRH21,600 (€2,805)
Rental Income Tax
Rental income from property is taxed at 12%, with allowed deductions fixed at 30% of the gross rent.
CAPITAL GAINS TAX
Capital gains from the sale of immovable property are subject to a flat withholding tax rate of 24%. 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.
VALUE ADDED TAX (VAT)
VAT is waived on the leasing of housing premises.
Real Estate Tax
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
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.
Income and capital gains are taxed at subject to the general corporate income tax of 12% if total income realized for the tax period is up to HRK3 million (€389,610). A corporate income tax of 18% will apply if total income realized for the tax period exceed HRK3 million (€389,610). Income-generating expenses are deductible when calculating taxable income.
For rental income, allowable deductions include investment, maintenance of buildings, management services, leases and rentals, depreciation costs, and financing costs such as interest payments. A 15% withholding tax is also levied on interest payments.
Depreciation is allowable as a business expense for both income and profit tax. Straight line depreciation is allowed on most long-life assets. Buildings command an annual depreciation rate ranging from 2.5% (regular depreciation rate) to 10% (accelerated depreciation), and a depreciation period from 40 to 10 years, respectively.
For capital gains, allowable deductions include acquisition cost of the property as adjusted by inflation and the fees incurred in the transfer.