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Corporate Taxes In Croatia: Complete Guide

This article will describe the corporate taxes in Croatia. Every firm established in Croatia, be it a resident firm or a non-resident firm is liable to pay the numerous corporate taxes in Croatia.

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Corporate Taxes In Croatia

Every firm established in Croatia, be it a resident firm or a non-resident firm is liable to pay the numerous corporate taxes in Croatia. Both citizens and non-residents receive the same tax treatment, and while charging corporate taxes in Croatia for non-residents, Croatia also takes into consideration the accords it has made with more than 60 other nations to prevent double taxation.

corporate taxes in croatia

As such, the same Croatia corporate tax rate applies to non-resident businesses as they do to domestic businesses. However, non-residents solely pay business taxes in Croatia on their income derived from the sources within the country.

This article will describe the numerous corporate taxes in Croatia. Along with that, it will also describe the corporate tax rate in Croatia, that residents, as well as non-resident firms, have to pay.

Various Corporate Taxes in Croatia

various business taxes in croatia

If you register a corporation in Croatia, you must pay the various business taxes. This section of the article will talk about the various business taxes in Croatia that local as well as foreign firms are liable to pay.

Corporate Income Tax (CIT)

  • The standard rate of corporate income tax (CIT) payment is 18%. The 10% rate is given to taxpayers whose earnings during the taxable period were less than HRK 7.5 million. 
  • The companies that contribute to Corporate taxes in Croatia include, long-term profit-driven autonomous organizations, international company branches, companies with capital-share ownership, and natural individuals who prefer to contribute corporate income tax (CIT) rather than personal income tax (PIT). 
  • The accounting profit after adjustments for exclusions and prohibited items is known as the base for Croatia corporate tax rate. Croatia corporate taxes (CIT) is paid by the residents of the nation on income earned both domestically and overseas, while non-residents only pay the corporate tax rate in Croatia on the earnings earned locally.
  • If the profits are calculated using market prices, the tax base also comprises profits through liquidation, transfer, and shift in the legal structure of the business.

Capital Gains Taxation

Capital gains taxation is another one of the crucial corporate taxes in Croatia. Capital gains that are included in taxable income are taxed at the ordinary corporate income tax rate of 18% (or 10% for businesses with yearly incomes under HRK 7.5 million).

Real Estate Transfer Tax (RETT)

  • Real estate transfer tax (RETT) is another one of the crucial corporate taxes in Croatia. Taxes are levied during the purchase of the real estate. 
  • Real estate typically refers to property for use in agriculture, construction, and some other activities as well as for personal, industrial, and other purposes. 
  • Transactions of real estate involve the buying and selling of real estate for money, as well as any other methods of obtaining property. The purchase of a real estate for which the VAT has been paid is exempt from the RETT.
  • The purchaser is responsible for paying the tax, which is now imposed at 3% (instead of 4%) of the property’s market price as of the date of the agreement.

Payroll Taxes

  • Payroll tax is not the responsibility of employers, however, they must withhold 20% to 30% of employees’ gross compensation. Businesses must deduct a certain amount from workers’ salaries and bonuses as pay for their PIT. 
  • Based on the individual conditions and earnings of the worker, the amount of withholding taxes in Croatia ranges from 20% to 30%.

Social Security Contributions

  • Social security contributions are another one of the business taxes in Croatia. Pensions, medical, and unemployment compensation are all covered by the Croatian social security program. 
  • Social security costs for those who are working as dependents are shared by the worker and the company.
  • For medical insurance, employers contribute to social programs at a Croatia corporate tax rate of 16.5 percent. 
  • Gross salary, which has no limit, is the foundation for calculating employer social security contributions. Employers have responsibilities toward people with disabilities.
  • With a few exceptions, firms with 20 or more employees are required to hire a certain amount of people with disabilities. The percentage is dependent on the overall workforce and cannot be less than 3% of the workforce.
  • Employers who violate the rules must pay a monthly payment equal to 30% of the minimum wage. The minimum gross compensation for 2022 is HRK 4,687.50. This price is applied to every disabled person, the employer was required to hire.

Contribution from the Chamber of Commerce

  • Contribution from the Chamber of Commerce is another one of the business taxes in Croatia. For membership payments to the Croatian Chamber of Commerce, businesses are classified into 3 groups in accordance with the size, overall revenue, and asset worth of the corporation.
  • As of January 2022, businesses in category I are no more obligated to make these contributions, however, they may choose to do so voluntarily.
  • Organizations in categories II and III continue to be required to contribute, and their monthly membership price has not altered. Membership dues range in price from HRK 150 to HRK 3,973.

Corporate tax rate in Croatia for Foreign Companies

  • The same Croatia corporate tax rate is applicable to non-resident businesses as they do to domestic businesses, however, it is solely charged on their income derived within Croatia.
  • According to the nature of the organization, the quantity of the capital, and the volume of new employment opportunities generated, businesses that qualifies for the Investment Promotion Act could be entitled to a 50% or 100% discount in the income tax rate for a five- to ten-year duration. 
  • The required investments in fixed resources are EUR 50,000 with the creation of 3 available employment for microenterprises and EUR 150,000 with the creation of 5 new employment for small, medium-sized businesses, and big corporations. 
  • If a company is formed and listed in Croatia, or if it is governed and administered there, it is considered to be a resident company.

Most common tax credits and deductions

  • Tax deductions range between 5% to 50% for amortizing both physical and intangible assets. 
  • This depreciation doesn’t have any impact on real estate, monetary assets, cultural landmarks, or works of art.
  • Start-up costs may be written off during the year these were acquired.
  • Interest expenses are deducted up to 30% of the taxpayer’s revenue before interest, taxes, depreciation, and amortization (EBITDA), or up to EUR 3 million, whichever is larger.
  • Interest costs that aren’t able to be written off in the year they arise can be pushed ahead for a maximum of 3 years.
  • In general, bad debts are deductible. Deductions for write-offs of receivables done in accordance with the bankruptcies rules that are applicable to special interest organizations are also permitted.
  • Up to 2% of your Croatia corporate taxes earnings from the prior year may be deducted as a contribution to charity institutions. If contributions are given in accordance with governmental guidelines on the financing of unique initiatives or programs, this percentage may be unusually larger.
  • Tax deductions do not apply to penalties and taxes.
  • Tax losses are transferable for a maximum of 5 years. Losses cannot be carried forward.

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Conclusion

The above article briefly discusses corporate taxes in Croatia. Resident firms and non-resident firms in Croatia are liable to pay the same Croatia corporate taxes. However, in the case of non-resident firms, the corporate tax rate in Croatia is solely derived from the income generated within the nation.

For more queries regarding business taxes in Croatia, you can reach our experts at Odint Consulting. Our experts will help you solve your queries.

FAQ’s

The standard rate of corporate income tax (CIT) payment is 18%. The 10% rate is given to taxpayers whose earnings during the taxable period were less than HRK 7.5 million. 

Yes, international firms have to pay taxes in Croatia on the revenue generated from the sources within Croatia.

In Croatia, there are no stamp taxes.

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

The employer is required to pay 16.5% of the employee’s wage in social security contributions. Businesses with 20 or more workers who don’t follow the rules for disabled workers are required to pay a monthly payment equal to 30% of the minimum wage.

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