The tax system in Croatia

To run a business in Croatia, each entrepreneur should know exactly what system of taxation is valid in the country and how it works. Thus, this article helps you understand the types of taxes that operate in Croatia and how it works in the frameworks of commercial activity.

So it ought to be noted that both natives and non-natives receive the same tax treatment. While taxing non-residents, Croatia also considers its agreements to prevent double taxation with more than 60 other nations.

Types of taxes in Croatia

• Corporate Income Tax

10% for revenues up to HRK 7,500,000.00 or 18% for gains equal to or more than HRK 7,500,000.01 were earned during the tax period.

•  Rate of income tax on withholdings

15% generally

10% for dividends, profit-sharing, and overseas artists’ performances

20% on all fees and services that are taxable when paid to individuals who have their registered office, corporate headquarters, or supervisory authority in one of the nations that the EU lists as non-cooperative jurisdictions for tax purposes and to which the Republic of Croatia does not apply the double taxation avoidance agreement.

• Income tax on capital

Both capital income tax based on capital gains and capital income tax based on interest is levied at a rate of 10%.

• Surtaxes and Income Tax

20% up to an annual income of 360,000 HRK

30% of income over 360,000 HRK

Surtaxes

• Cities and towns up to 10%
• cities with less than 30,000 residents, up to 12%
• cities with more than 30,000 residents: up to 15%
• Zagreb is up to 18%

The taxpayer must pay a surtax on income tax as well, as required by towns and cities, in addition to their regular income tax. The amount of income tax serves as the foundation for calculating the surtax. The surtax rates range from 0% to 18%, with Zagreb being the sole city to apply the highest rate (18%).

• Value Added Tax

25% is the average rate of VAT in Croatia.

There is a 5% reduced VAT rate for the following services and products:

1. all varieties of bread;
2. all milk products from cows, sheep, and goats that are sold in liquid form, are fresh, pasteurized, homogenized, and condensed under the same name, except for sour milk, yoghurt, kefir, chocolate milk, and other milk products, and are alternatives for breast milk;
3. except for textbooks for educational instruction in elementary, secondary, and higher education that is wholly or mostly made up of videos or musical; compositions, or that serve as advertising in whole or in part, books of professional, scientific, artistic, cultural, and academic content;
4. pharmaceuticals approved by the appropriate regulatory body for pharmaceuticals and medical devices;
5. spital supplies, aids, and other devices used to ease the treatment of disability only for the individual use of the disabled that is prescribed in the general act on orthopaedic and other help of the Croatian Health Insurance Institute;
6. tickets to movies, concerts, sporting events, and other cultural events—as opposed to those for cultural services and closely connected supply of products provided by organizations, governmental authorities, or other legal entities engaged in the art are free from sales taxes;
7. daily newspapers that do not serve or include any advertising in full or in part or that feature full or partial audio or video material issued by a newspaper publisher with a media statute;
8. scholarly journals;
9. baby food and prepared meals made from cereal for newborns and young children;
10. edible fats and oils, including butter and margarine, both of plant and animal origin;
11. seeds and plants;
12. insecticides, fertilizers, and other agrochemicals;
13. excluding pet food, goods mostly used as animal feed;
14. delivery of live animals, including cattle, pigs, sheep, goats, horses, donkeys, domestic chicken, hares, and rabbits; fresh or chilled meat and edible byproducts from these animals; fresh or chilled sausages and other meat products; meat byproducts or blood; live or chilled fish; molluscs and other aquatic invertebrates; fresh or chilled crabs: lobster, shrimp; fresh or chilled vegetables.

There is a 13% reduced VAT rate for the following services and products:

1. lodging services and lodging with breakfast, half-board, or full-board in hotels or other similar facilities, including vacation lodging, lodging rental in vacation camps or locations intended for camping, and lodging on marine tourist vessels;
2. magazines and newspapers published by newspaper publishers with a media statute and by publishers who are not required to adopt a media statute due to a special regulation, excluding the publications mentioned above that publish regularly, contain or serve to advertise entirely or in part, or are entirely or partially composed of video or musical content;
3. baby diapers and infant car seats;
4. menstrual products;
5. water supply, excluding water sold in bottles or other packaging when referring to public drainage and water supply under special control;
6. power delivery to another provider or ultimate user, together with any associated fees;
7. the provision of natural gas and heat from heating stations, as well as the costs associated with such supplies,
8. wood chips, pellets, briquettes, and firewood;
9. public service for the collection of separate garbage, biodegradable municipal waste, and mixed waste following a particular rule;
10. caskets and urns;
11. services and related copyrights provided by authors, composers, performers, and phonogram rights holders who are members of appropriate collective management organizations and who carry out this activity by special laws governing copyright and related rights and with the prior consent of the state administration body in charge of intellectual property;
12. following a particular rule, preparing and serving meals and sweets both inside and outside the catering facility.

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