Effective tax rates are moderate in Croatia
Taxation Researcher | July 17, 2018
Effective Tax Rate on Rental Income
|Click here to see a worked example|
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 Tax
Rental income from property is taxed at 12%, with allowed deductions fixed at 30% of the gross rent.
Surtax is levied on top of the tax due from taxpayers by local authorities at the following rates:
- Maximum of 10% for communities
- Maximum of 12% for cities with the population of less than 30,000
- Maximum of 15% for cities with the population of more than 30,000
- Maximum of 30% for the capital city, Zagreb
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.