Croatia has a high tax regime, but this shouldn’t affect you unless much of your income derives from sources within the country–or you become a tax resident. Tax residents are generally taxed on their worldwide income.
Based on physical presence, you are a tax resident in Croatia if you stay for at least 183 days under circumstances that indicate your visit is not temporary. The 183-day visit may overlap calendar years.
Based on maintaining a home in Croatia, you are a tax resident if you have a residence there at your exclusive and continuous disposal for at least 183 days under circumstances that indicate you intend to keep and use that accommodation. Again, this period may overlap calendar years. Your length of stay is not relevant, nor does it matter if the accommodation is owned or rented.
This may seem surprising, but if you do not receive a salary, consultancy fees, or a similar income in Croatia, then the tax situation is much more favorable, particularly for retirees.
Croatia has no wealth tax, and the following income is tax free:
• Pensions received from abroad
• Interest payments on loans, investments, securities, deposits with financial
institutions, and similar incomes
• Capital gains from trading securities and other financial assets
• Capital gains from real estate if you occupied the property, held it more than three years, or sold it to your spouse or an immediate family member
• Inheritance and gifts are exempt from taxation in the first line of succession. (In other cases, there is a flat rate of 5%.)
Foreigners are subject to tax on the following forms of Croatian income:
• Income from employment that is received in Croatia or from work in Croatia
• Income from a business in Croatia
• Income from real estate
• Income from one’s own or chartered marine ships/aircraft used for dispatching goods or people from Croatian ports/airports
• Income from independent personal activities (deliveries of goods or rendering of services) that are carried out in Croatia or abroad, and are used for the performance of an activity in Croatia
• Income from capital or insurance that originates from within Croatia.
Current income tax rates are as follows:
• Up to 36,000 kuna ($6,120): 15%
• Over 36,000 kuna ($6,120) and up to 81,000 kuna ($13,770): 25%
• Over 81,000 kuna ($13,770) and up to 252,000 kuna ($42,840): 35%
• Over 252,000 kuna ($42,840): 45%.
Corporate income tax is typically 20%. Croatia’s financial regulations also allow for municipalities to charge an income surtax. However, this will not affect you if you are not tax domiciled in Croatia. Equivalent to a poll tax, the amount payable is taken on income tax thresholds and is levied at varying rates throughout the country:
• A commune can charge at a rate of up to 10%
• Cities with a population of below 30,000 can charge at rates of up to 12%
• Cities with a population over 30,000 can charge at rates of up to 15%
• The city of Zagreb, the capital, can charge as much as 30%.
That’s what municipalities can charge, and it needs pointing out that Dubrovnik already goes for the full whack of 15%. In other places, though, the surtax is often way under those figures. Some examples: Split, 10%; Rijeka, 6.25%; Zagreb, 18%.