Individual Income Tax

Croatias individual income tax rates for 2012 are progressive, from 12% to 40%.

Personal annual tax rates 2012 (HRK)

Income (HRK) %

1-26,400 12

26,400-105,600 25

over 105,600 40

Corporate Tax

Croatias corporate tax rate for 2012 is 20%. Certain small companies pay a lower corporate tax rate.

Croatia Capital Gains

Capital Gains: Capital gains of companies are added to the regular income and are taxable at 20% rate. Individuals: Pay 15%-40% for their capital gains.

Croatia Residence

A foreign company is resident if incorporated in Croatia or have its actual management in Croatia. An individual is resident when having a permanent residence in Croatia or when having a place of abode for more than 183 days in a tax year. Residents pay tax on their worldwide income. Non residents pay tax only on Croatia source income.

Croatia Tax Deductions

Losses are carried forward for 5 years. There is no carry back of losses. Depreciation is deducted using the straight line method for tangible and intangible assets. The depreciation rate for buildings is 5%,for machinery 25% and 50% for computers, software and cellolar phones.

There is no company consolidation for tax purpose, each company has to file separately. Thin capitalisation rules relate to interest expenses. Interest paid to a shareholder having 25% or more of the voting rights and his loan to equity ratio exceeds 4:1 is not deductible. Transfer pricing rules in Croatia are in accordance with the OECD guidelines.

Croatia Personal Credits and Deductions For Croatian residents there is a basic deduction of HRK 21,600 per year. The sum is increased for a dependent spouse and dependent children, ranging from HRK for the first child and HRK 21,600 for the third child. Deductions are also permitted for payments to Croatian pension plans, insurance and cost of purchase of the first residence up to HRK 12,000 per year. 2% of donations are deductible, subject to a ceiling. For companies, dividend income is tax exempt.

Deduction of Tax at Source In Croatia tax is deducted at source from the following payments to non residents: Dividend- 0%. Interest- 15%. Royalties- 15%. Branch remittance to head office- 0%.

Croatia Social Security The contributions by the employer and the employee are subject to ceiling defined by law.

Employer: 17.2% of the gross salary. Employee: 20% of the gross salary. (pension).