Croatia - Other taxes and levies

Croatia - Other taxes and levies

Taxation of international executives

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Social security tax

Are there social security/social insurance taxes in Croatia? If so, what are the rates for employers and employees?

If an expatriate has a contractual arrangement with a Croatian legal entity and performs services in Croatia, the Croatian entity needs to withhold and pay compulsory social security contributions (pension fund, health insurance, unemployment fund contributions - and contributions against injuries at work). A Croatian entity refers to all legal entities incorporated in Croatia, branch offices, and representative offices.

Croatian social security rates (applicable for the year 2015) are as follows.

Employer and employee

Type of insurance Paid by Total 
  Employer Percent Employee Percent Percent
Pension 0.0 N/A N/A
Split between (depending on the age of the employee) Generation solidarity (Pillar 1) N/A 15.0 15.0
Individual capital savings (Pillar 2) N/A 5.0 5.0
Health 15.0 0.0 15.0
Unemployment 1.7 * 0.0 1.7
-   0.0  
Contributions against injury at work 0.5 0.0 0.5
Total 17.2 20.0 37.2%

It should be noted that for the year 2015, the compulsory employee social security contribution base is capped at the maximum monthly amount of HRK 47,658 (for both Pillars only on portions of income which qualify as a salary for that month) or HRK 571,896 on an annual basis (for Pillar 1 only; there is no annual cap for Pillar 2 contributions). The minimum monthly base for employee and employer social security contributions is HRK2,780.05.

Employer social security contributions are not capped.

Inbound expatriates

An employee of a non-resident company from an ther EU Member State seconded to work in Croatia remains subject to the home-country social security system if the anticipated duration of the work performed in Croatia does not exceed 24 months and they are not replacing another person.

An employee of a non-resident company from a non-EU countri seconded to work in Croatia (inbound expatriate) is not subject to the social security system in Croatia, provided there is an effective social security treaty (totalization agreement) between Croatia and the country where the individual is resident. Additionally, the employee must be able to evidence that he is insured in his country of residence and the form prescribed by the totalization agreement must be obtained.

Croatia has signed totalization agreements with a number of non-EU countries, which override Croatian legislation. If there is no contractual agreement between the foreign national and the Croatian company to which the foreign national has been assigned - a totalization agreement may exempt the foreign national from paying Croatian social security obligations for a certain period (provided certain conditions are met). If a totalization agreement cannot be applied or if its application has expired or if there is no agreement in place, the foreign national would at least need to pay compulsory health insurance contributions based on an assessment issued to the foreign national by the Croatian tax authorities.

Outbound expatriates

An employee of a resident company seconded to work abroad - remains subject to the social security system in Croatia. Monthly receipts of the employee are subject to Croatian social security contributions at the standard rates, but the base for calculating the contributions is the salary the assignee would receive for the same or similar work in Croatia (in accordance with the working contract, book of regulations or collective agreement) increased by 20%. Furthermore, the company is liable to pay an additional health insurance contribution at the rate of 10% applied to the same increased base. The additional health insurance contribution does not apply to an employee of a resident company seconded to another EU Member State.

Other receipts which do not relate to remuneration for work in a specific month (e.g. annual bonus, 13th salary, daily allowances above non-taxable amounts) are subject to Croatian social security contributions at the standard rates and the basis for calculation of Croatia social security contributions is the actual amount of remuneration. Other receipts are not subject to –additional health insurance contributions.

Income received by an outbound expatriate from the foreign entity to which the expatriate is seconded to, is subject to pension insurance contributions in Croatia are computed in the same manner as for “other income”.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Croatia?

Inheritance tax and gift tax at the rate of 5 percent applies to transfers by individuals or legal entities of real estate, cash, securities, or movables, if their individual market value exceeds HRK50,000 (approximately EUR6,700), where that property is inherited, received as a gift or otherwise received (or transferred), without consideration.

Inheritance and gift tax does not apply to movable property inherited/received as a gift if the transfer is subject to VAT.

Inheritance and gift tax provisions are not applicable under certain other circumstances, amongst others, the transfer between immediate relatives (that is spouses, siblings, and children).

Croatia does not levy a wealth tax.

Real estate tax

Are there real estate taxes in Croatia?

If the seller of real estate is not VAT registered, the transfer of real estate is subject to RETT. If the seller of real estate is VAT registered, the transfer of real estate(business / residentialpremises and accompanying land) and construction land is subject to VAT except for transfer of real estate that has been occupied for more than 2 years, in which case generally RETT applies.

Sales/VAT tax

Are there sales and/or value-added taxes in Croatia?

The stanard VAT rate is 25 percent (and applies to most products and services).

A reduced VAT rate of 13 percent - applies to:

  • Tourist accommodation services;
  • Full or half board services and the rent of campsites;
  • Certain newspapers and magazines, with the exception of newspapers and magazines that consist mainly or entirely of advertisements or whose main purpose is advertising;
  • Edible oils and fats, baby food, supply of water (except bottled or otherwise packaged drinking water) and refined (white) sugar;
  • Services of preparation and serving of food, non-alcoholic drinks, wine and beer in registered hospitality facilities;and
  • Tickets for concerts.

A reduced VAT rate of 5 percent - applies to:

  • All kinds of bread and milk;
  • Educational literature (specified);
  • Scientific magazines and film projection services;
  • Certain medicines;
  • Certain medical implants and orthopedic devices;
  • Books of professional, scientific, artistic, cultural and educational contents;
  • Certain daily newspapers.

VAT exemption (with no input VAT recovery) applies to: health and welfare services, education services, supplies by charitable organizations, supplies by museums, libraries, theaters, orchestras and other cultural services, financial and insurance services, betting and gambling, - rental of residential property, postal services supplied by the Croatian National Post, public radio and television broadcasting etc.

The registration threshold is taxable supplies of HRK 230,000 (approximately EUR 30,667) or more in the previous year.

Based on the general B2B (business to business) rule for taxation of services, provision of services by a Croatian taxpayer to a foreign taxpayer is subject to VAT according to the legal seat of the of service recipient. If a Croatian entrepreneur renders a service to a foreign recipient who is not registered for VAT purposes (e.g. a foreign individual), then those services are subject to VAT in Croatia.

Entities in Croatia using financial support from certain pre-accession EU funds are entitled to obtain goods/services without being subject to VAT, if certain conditions are met.

Foreign legal entities may be able to recover VAT, provided relevant conditions are met.

Different conditions apply for foreign legal entities from EU member states and third countries.

Unemployment tax

Are there additional taxes in Croatia that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Local taxes

Municipalities and cities may levy a city surtax, which is calculated on the amount of personal income tax payable, as follows:

  • municipalities, up to 10 percent
  • cities with less than 30,000 inhabitants, up to 12 percent
  • cities with more than 30,000 inhabitants, up to 15 percent
  • 18 %  for the city of  Zagreb.

Resident taxpayers are subject to city surtax, while taxpayers who under Croatian domestic tax legislation are non-residents (not taking into account the impact of double tax treaties, if applicable) are not subject to city surtax.

© 2016 KPMG Croatia d.o.o. za reviziju, a Croatia limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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