Croatian Income Tax
Our tax guide for freelance contractors working in Croatia
An individual who has a permanent or temporary place of residence is deemed to be tax resident in Croatia. A non-resident taxpayer is an individual who does not have a permanent or temporary place of residence in Croatia, but derives Croatian-source income that is subject to tax in Croatia. An individual is deemed to have a place of permanent residency if he/she owns a place of abode, or has one at his/her disposal for an uninterrupted period of 183 days. It is not necessary for the individual to stay in the place of abode to meet the 183 day rule.
Resident individuals are subject to tax in respect of their worldwide income. Non–residents are subject to tax on their employment income if the income is paid for employment exercised in Croatia. Obligatory social security contributions are deductible in determining taxable income. Life insurance, voluntary pension contributions and insurance premiums for additional health insurance may be deducted from taxable income up to an amount of HRK 1’000 (approx GBP 110) on a monthly basis. Resident and non-resident taxpayers may claim a basic personal allowance of HRK 1’600 (approx GBP 175) per month.
Personal income tax rates are levied at progressive rates beginning at 15% on income above HRK 38’400 (approx GBP 4’175) and progressing gradually up to the top marginal rate of 45% on income above HRK 268’800 (approx GBP 29’215). Income tax is further increased by municipal surcharges ranging from 10% to 30% which are levied on personal income tax by towns with more than 40’000 inhabitants. Zagreb currently applies the highest tax rate of 18%. This means that the highest total tax rate is 53.1%.
Resident employers must file monthly personal income tax returns for their payroll for their employees. For non-residents employed by resident employers, the employer is responsible for tax withholding and reporting requirements. Non-residents working in Croatia for a non-resident employer are required to file monthly and annual tax returns and to pay advances of personal income tax within eight days after the income is received. The annual tax returns must be filed by 28 February following the year in which the income was earned.