There are no EU-wide rules that say how EU nationals who live, work or spend time outside their home countries are to be taxed on their income. However, the country where you are resident for tax purposes can usually tax your total worldwide income, earned or unearned. his includes wages, pensions, benefits, income from property or from any other sources, or capital gains from sales of property, from all countries worldwide.
The tax system of the Republic of Croatia determines state taxes: income tax, value added tax, special taxes and excise duties (special tax on motor vehicles, coffee and non-alcoholic beverages, insurance premiums from motor vehicle liability insurance and premiums from motor-vehicle damage cover, system of excise duty taxation of alcohol and alcoholic beverages, manufactured tobacco, energy products and electricity). This includes various county, city or municipal taxes, joint tax (income tax), and taxes related to games of chance.
The VAT rate in Croatia is 25%, while lower rates of 13% and 5% are applied to certain products and services.
Income tax is paid according to the 24% or 36% rate of the base amount, depending on the amount of income. This includes pension insurance contributions (20%), health insurance (16.5%) and surtax ranging from 0 to 18% (depending on place of residence). Workers shall have obligatory unemployment insurance and insurance in case of injury at work provided for from the state budget.
Each country has its own definition of tax residence. However:
- individuals are considered to be tax-residents in the country where they spend more than six months a year
- individuals are usually tax-residents in their home country if they spend less than six months a year in another EU country.
Under EU rules, no matter in which EU country you are considered a tax-resident, you should be taxed in the same way as nationals of that country under the same conditions. For example, in the country where you are tax-resident or where you earn all or most of your income, you should be entitled to:
- any available family allowances and tax deductions for childcare costs, even if the costs are incurred in another EU country
- any available tax deductions for interest on mortgages, even for a house you own in another EU country
- joint tax assessment with your spouse, if this is possible in that country
In some cases, two countries can consider you a tax-resident and tax your total worldwide income. Luckily, there are agreements between many countries on avoiding double taxation that usually contain rules according to which you can determine which of the two countries you are a resident of.
If the taxation agreement does not provide a solution or if your situation is particularly complex, you can contact the competent tax authorities of both countries and ask them to clarify the situation. In some cases, such as for workers posted abroad for a limited time or jobseekers abroad, you may be considered tax–resident, and therefore taxable, in your home country even if you stay abroad for more than 6 months – if you keep your permanent home in your home country and your personal and economic ties with that country are stronger.
For business operations in Croatia, depending on the circumstances, certain taxes, contributions and other levies have to be paid. After the registration of the head office (establishment), and before the start of the company, or 8 days after the start of the crafts, you are obliged to register your business entity at the Tax Authority. You will need the Decision on registration in the crafts register or the register of companies and for the company the issued Notification on classification according to the NCEA. The request for the PIN/OIB, income tax returns and company tax returns and all forms for payment shall be submitted to the Tax Administration local office. It is possible to meet the tax obligations electronically through the Tax Administration e-services, using the advanced e-signature. Companies i.e. trading companies as legal persons are obliged to pay income tax and value added tax (VAT). The threshold for entry into the VAT system is HRK 300,000.00. Companies employing workers, or paying receipts to other natural persons, are obliged to calculate and pay for them the prescribed taxes and contributions for mandatory insurance. Craftsmen, free occupations and farmers as natural persons are obliged to pay income tax and local surtax. It is possible to switch to payment of company tax instead of income tax. Contributions for mandatory insurance, value added tax (VAT) and other taxes are also to be paid. If you are corporation tax payer or income tax payer from an individual activity and you operate with cash you are also liable to fiscalization. Trading companies may be county and local tax payers, capital transfer tax payers and special taxes and excise tax payers.
PIN (OIB) for foreign persons
Personal Identification Number (PIN/OIB) is a permanent and obligatory mark for all persons in the Croatian Legal System.
PIN/OIB is considered a tax number for taxation purposes.
PIN/OIB is determined and assigned, among other things, to foreign natural and legal persons that have some cause to be monitored.
A foreign person is considered a natural person not having Croatian citizenship and a legal entity that has its headquarters outside the Croatian territory.
It is believed that the cause for monitoring a foreign person has developed:
- if the foreign person is entered in the official records of residence permits to foreigners in the Ministry of the Interior – foreign natural person then goes to the Ministry of the Interior to register the residence and to be determined and assigned PIN/OIB.
- if the foreign person is entered in an official register of persons and property on the Croatian territory and if the foreign person has become a taxpayer under a special regulation. Foreign natural and legal person then comes to the relevant Tax Administration office to be determined and assigned PIN/OIB.
For example, reason for monitoring has developed:
- when a foreign person becomes a taxpayer under a special regulation (accounting for another income, withholding tax calculation, etc.)
- when a foreign person becomes a taxpayer because acquires assets on which tax shall be paid and shall be entered in the official record in which the ownership of that property is kept (real estate – transfer tax, registration in the land registry, entry in the records of taxpayers utility charges, taxes on vacation homes, cars – a tax on road motor vehicles, entry in the records of the owner of the vehicle at the MoI, etc.)
- when a foreign person enters the acquisition of rights and obligations in the official records, not becoming a taxpayer (the acquisition of securities, bank accounts opening, the establishment of the company, etc.)
- when required by a foreign person due to obligations prescribed by laws.
For the purpose of determining and assigning the PIN/OIB a foreign person shall submit to the local competent Tax Administration office in person or by proxy a form Request for Determining and Assigning PIN/OIB. Along with the application the person submits valid documents confirming the information specified in the application. In the course of 2017 electronic procedure will be introduced.
Locally competent Tax Administration office refers to the Tax Administration office according to the place where the cause for monitoring a foreign person developed, depending on where the purchase was made (real estate, car, security, etc.), where a bank account is opened, where the right to retirement from the Republic of Croatia will be enjoyed, etc. If it is not possible to determine locally competent Tax Administration office the foreign person may contact the Regional Office Zagreb, Dubrovnik Avenue 32, 10000 Zagreb.
Ministry of Finance – Tax Administration, Regional Office Zagreb
Office for Non-residents
Avenija Dubrovnik 32; Zagreb 10000
Tel: +385 1 6501 111
Working hours: 8 till 15h (Monday-Friday)
The Ministry of Finance is responsible for developing and implementing the government’s fiscal policy. Its goals are to contribute to the stable growth of the economy, the increase of prosperity, quality of life and employment for all Croatian citizens.
One of the key tasks of the Ministry is to prepare the state budget, manage budget revenues and expenditures, i.e. the taxpayers’ funds. The Ministry of Finance is branched into several organizations that participate in various aspects of activities, one of which is the Tax Administration.
The Tax Administration is a unique and independent administrative organization within the Ministry whose goal is to implement and monitor the implementation of tax regulations and contributions collection regulations.
The Tax Administration operates under the name: Ministry of Finance, Tax Administration.
Info: Tax Administration