Mazars in CROATIA

Corporate taxes and other direct taxes

From 2017 onwards, CIT rates are 18% or 12% for enterprises with annual revenues below HRK 3 million for taxable periods which ends after 1.1.2017. The tax base is accounting profit modified by several increasing and decreasing items. Enterprises with annual revenues below HRK 3 million have the option of determining the profit tax base by cash flow principle. Losses can be carried forward within 5 years but special limitations are applicable in case of M&A transactions. Capital gains are included in the annual corporate profits tax return.

Croatia uses thin capitalization (4:1), but thin capitalization does not apply if shareholders are financial institutions, CIT payers in Croatia or PIT payers in Croatia. There is a range of tax allowances for new investments and R&D (up to 150% of qualified costs), the education of employees, etc.

Transfer pricing in Croatia
Arm’s lenght principle since 2004
Documentation liability Deliver to Tax Administration upon request. Along with submission of tax return, taxpayers have to deliver Report on business transactions with related parties ( PD-IPO form) (deadline is 30 April)
APA APA is available as from January 1, 2017. The application fee will be charged.
Country-by-Country liability from FY 2017
Master file-local file (OECD BEPS 13) applicable The tax authorities have not yet issued any guidance on the implementation of the Master File, but is expected and recognised in practice
Lack of documentation Not specifically stated, general rules apply (up to HRK 200,000 for a company and HRK 20,000 for the responsible individual
Tax shortage Additional tax charged and 100% of that tax is not deductible
Related parties 50% (25%) < direct or indirect control (25% is commonly used by tax authority and advisors) or joint control functions
Safe harbours Interest on IC loans is determined by the Minister of Finance and for 2019 interest rate amounts to 3,96% (for FY18 4,55%)

Level of attention paid by Tax Authority:


A withholding tax of 15% is applied on interest, royalty and business consultancy services paid by a Croatian company to a foreign company. Exceptionally, WHT on dividends and profit shares are taxed at the rate of 12%. However, Croatia has more than 60 active DTT treaties used to avoid withholding tax. A withholding tax of 20% is applied on all payments to offshore companies for the services not mentioned in Law. The EU Directives on withholding tax apply.

Real estate transfer tax (RETT) is applied on the transfer of immovable property at the rate 3%. The taxable base is the market value of a real estate at the moment when the tax liability is incurred and the taxable person is the buyer. The acquisition of newly built real estate that is taxed according to the VAT Law is not considered the transfer of real estate.

Other taxes include contribution to the Croatian Commercial Chamber (fixed monthly fee), forestry tax (annual percentage) and tourist tax (for certain activities).

VAT and other indirect taxes

The tax rate is 25%; a reduced rate of 13% applies to tourist accommodation services, newspapers, specific input for agricultural production, delivery of electrical energy, etc., while a reduced rate of 5% applies on milk, books, etc. VAT-exempt services are mainly banking services, insurance, investment-related services, educational services (under certain conditions), games of luck, certain services provided by medical doctors and dentists, and certain other activities which are tax exempt with regard to their public interest or their special character. Tax is deductible on food donation to non-profit humanitarian legal entities up to 2 percent of total revenues of previous year. From 2019 the HRK 400,000 threshold for the deduction upon purchase or lease of passenger cars is abolished so the taxpayers can deduct 50% of VAT charged on purchase or lease of passenger cars and related goods or services, irrespective of the car’s purchase value.

Small enterprises that exceed the threshold of HRK 300,000 have to register for VAT immediately and not from 1 January of next year as it had been prescribed earlier.

From 1 January 2020, the standard rate will be reduced from 25% to 24%.

VAT Options in Croatia Applicable / limits
Distance selling EUR 36,000/year
Call-off stock
VAT group registration
Cash accounting EUR 400,000/year
Import VAT deferment Only in specific cases
Local reverse charge construction work, the supply of used material, the transfer of allowances to emit greenhouse gase, the supply of immovable property in certain conditions
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold* EUR 40,000/year

Exchange rate HRK/ EUR : 7,5

Other indirect tax types in Croatia are excise duty and insurance tax.

Personal income tax / Social security system

Personal income tax rates are 24% (monthly tax base up to HRK 30,000) and 36% (above HRK30,000), while 12% rate is withheld from certain types of income, e.g. dividends, capital gains, lease of the real estate etc.. Active incomes fall under the scope of the SSC system: individual pension social contributions equal 20% (employee contribution) and health and unemployment contributions of 16,5%% represent employer contribution. For the person under 30 on undetermined period, there is no contributions on salary (16.5) for the period of 5 years. Passive incomes are generally subject only to taxes.

Based on the amendments to the Personal Income Tax Regulations, a performance award (e.g. bonuses) can be paid up to HRK 5,000 per employee per annum as a non-taxable receipt. The provision regulating the payment of annual non-taxable payments in the amount up to HRK 2,500 such as Christmas bonus, Easter bonus, holiday allowance, etc. has remained unchanged

The examples below show the cost of the employer and the employee in case of minimum and average wage level in the private sector. Basic personal allowance amounts to HRK 3,800 and surtax is determined by municipality/city and amounts from 0% to 18%.

Wage related taxes in Croatia Minimum wage Average wage in private sector
Exchange rate HRK/EUR 7,43 in EUR in HRK in EUR in HRK
  505 3750 1136 8444
TOTAL WAGE COST 588 116,50% 1324 116,50%
Employer's contribution 83 16,50% 188 16,50%
GROSS SALARY 505 100,00% 1136 100,00%
Employees' contribution 101 20,00% 227 20,00%
Tax and surtax* - 0,00% 113 9,91%
NET SALARY 404 80,00% 797 70,09%

*Tax base differs from the gross salary, deductions apply.

Mazars Cinotti Consulting d.o.o.
Strojarska cesta 20, XVI. Floor, 10 000 – Zagreb, Croatia
Kristijan CINOTTI
Partner – Advisory services