Corporate taxes in Croatia

Corporate taxes in Croatia

Croatia is one of the best nations for the establishment of business because of its economic stability, excellent geographical position, simple process of company registration and, of course, favourable taxation regime. Before starting a business in Croatia every entrepreneur ought to know all subtleties of taxation in commerce activity.

Corporate Income Tax in Croatia is 18%

Tax Rate for Foreign Businesses

Taxation for nonnatives companies is spread only on the income with a Croatian source. According to the size of the business, the amount of the investment, and the number of new jobs generated, companies that qualify for the Investment Promotion Act may be available for a 50% or 100% discount on the income tax rate for a 5 to 10-year period. The required investment in fixed assets is € 50,000 with the creation of three new jobs for microenterprises and € 150,000 with the creation of five new employees for small, medium-sized businesses, and large companies.

If a company is formed and registered in Croatia, or if it is controlled and managed there, it is considered to be a resident.

Taxation capital gains

Taxes on capital gains are at the ordinary corporate income tax rate of 18%, which is included in income tax (or 10% for businesses with yearly incomes under HRK 7.5 million).

Principal Tax Credits and Deductions

Tax deductions range from 5% to 50% for amortizing both physical and intangible assets. This devaluation has no impact on real estate, financial assets, cultural landmarks, or works of art.

Interest payments are deducted up to 30% of the taxpayer’s profits before interest, tax, depreciation, and amortization, or up to EUR 3 million, whichever is larger. Interest costs that aren’t able to be written off in the year they occur can be carried forward for a total of three years.

In general, bad debts are deductible. Deductions for write-offs of receivables made by the bankruptcy rules that apply to special interest organizations are also permitted.

Up to 2% of your taxable income from the prior year may be deducted as a donation to charitable organizations. If donations are made under ministerial regulations on the support of unique activities or programs, this rate may be higher.

Taxes and fines are not deducted from income.

Up to five years’ worth of tax losses can be carried forward.

Value added tax

VAT, or value-added tax, is 25%. If you’re beginning a business in Croatia, you should be aware of this. The decreased VAT rate for lodging, food, and newspapers is 13%. 5% VAT is charged on several commodities, publications, and medical supplies.

Foreign businesses often have to register as non-resident traders for Croatian VAT in the following circumstances:

  • purchasing and reselling products nearby (domestic supplies);
  • importing stuff, selling them to consumers in Croatia via catalogues or the Internet (distance selling);
  • arranging live events for which entry is charged;
  • intra-community goods beyond the local reporting level that are given directly to Croatian consumers;
  • providing consumer services concerning Croatian real estate;
  • providing lodging and offering consumers meals and beverages.

Additional Corporate Taxes

A real estate tax of 3% of the subject property’s selling price is imposed on the acquisition of real estate. Property transfer tax is not applied to the purchase of property that is subject to VAT. Regular property taxes are not due.

The employer is required to pay 16.5% of the employee’s wage in social security payments. Firms with 20 or more workers that don’t follow the rules for handicapped employees are required to pay a monthly fee equal to 30% of the minimum wage (HRK 4,687.50 in 2022).

Payroll tax is not the responsibility of employers, however, they must withhold 20% to 30% of employees’ gross compensation.

Depending on the kind of firm, the necessary yearly membership price to the Croatian Chamber of Commerce ranges from HRK 42 to HRK 3,973.

In Croatia, there are no stamp taxes. Companies may be required to pay payments for cultural monuments, tourism, and forests.

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