Comparison of Croatia’s taxes with taxes of the 10 largest EU/EEA Member States

We are very often asked what the tax system is like in Croatia, which makes sense. Taxes are a big concern for most people, and most of us want to pay as little as possible. Croatia is not a tax haven or shelter. We will state that upfront.

However, when looking at the tax rates, it helps to put them into context. To set that context, we’ve prepared a tax comparison between Croatia and 10 other EU/EEA Member States including:

• Austria
• Czech Republic
• Denmark
• France
• Germany
• Hungary
• Netherlands
• Poland
• Portugal
• Slovenia

In this post, we cover:

• VAT comparison and rates
• Contributions on salaries
• Working income tax
• Profit tax on companies
• Passive income tax
• Property transfer tax
• Property tax

The facts are these…

Comparison between Croatia tax rates and other EU member state tax rates

VAT comparison and rates

VAT stands for Value Added Tax, which is added to most products and services. In Croatia, VAT is referred to as PDV.

[Read: PDV (Value Added Tax) in Croatia]

EU Member States have a responsibility to define their own VAT rates. There are several types of VAT rates, but not all countries apply all of them.

Below is a table that shows a comparison of VAT rates.

Here are explanations of the different types of VAT rates mentioned in this table.

Standard rate

The standard VAT rate applies to the supply of most goods and services. Each country defines its own rate, but it cannot be lower than 15%.

Reduced rate

Reduced VAT rates apply to the supply of specific goods and services. In most cases, they don’t apply to electronically supplied services. Reduced rates cannot be lower than 5%.

Super-reduced rate (special rate)

Some of these countries apply special VAT rates on certain supplies including:

• Super-reduced rate
• Zero rate
• Parking rate

Parking rate

Some countries apply parking VAT rates to certain supplies of goods and services, instead of the standard rate. They are also called intermediary rates. Parking rates cannot be lower than 12%.

Contributions on salaries

Generally speaking, employers in the EU pay contributions to the state on behalf of their employees. This usually includes pension, health insurance, and income tax – but can vary.

Below are tables that show the rates for employer and employee contributions.

Employer Payroll Contributions

Employer payroll contributions or contributions paid on top of salary are paid by the employer. In Croatia, they are called doprinosi na plaću.

Employee Payroll Contributions

Employee payroll contributions or contributions collected from the salary are paid at the expense of the employee. In Croatia, they are called doprinosi iz plaće.

Personal income (working) tax

Personal income is calculated on salaries and wages a person earns. Tax rates for Croatia plus 10 EU/EEA countries are listed in the table below.

Croatia does have a municipality surtax on income, which varies. You can view those rates for each municipality and city here.

The surtax is charged according to the following rules:

• Municipality – Up to 10%
• Town under 30.000 inhabitants – Up to 12%
• City over 30.000 inhabitants – Up to 15%
• City of Zagreb – Up to 18%

Profit tax on companies

A corporate income tax called porez na dobit is a tax that companies pay to the state budget for the profits they earn. This tax is paid on the company’s taxable income which implies the company’s revenue reduced by operating costs including the ones for sold goods, administration, selling and marketing, research and development, and depreciation.

The combined corporate income tax for the countries we observe are the following.

Passive income tax

The passive income tax called porez na pasivni prihod is calculated on incomes that are not gained as a regular salary. It is an income that is subsequently earned for certain actions that you made in the past.

This includes passive income earnings from:

• Sold or rented properties
• Stock and investment fund dividends
• Copyright to written and sold books
• Written articles
• Online courses
• Social networks
• Capital gains
• Partnership in business
• Certain types of cryptocurrency gains
• Sale of certain rights or concessions

Tax rates for the countries we observe are the following.

Real estate (property) transfer tax

The real estate transfer tax is paid once you acquire (purchase or inherit) a real estate (land or building) for which the VAT is not paid. Tax rates for the countries we observe are the following.

Real estate (property) tax

A property tax is a tax that is paid on the real estate property of the individual or a company. It is calculated according to the value of the property or land.

In Croatia, there is no property tax, so owners of real estate properties are not obliged to pay this type of tax. However, holiday homeowners are obliged to pay a tax in the amount of 5-15 kuna per square meter.

The real estate property tax for the countries we observe are the following.

View our other tax articles

• All the taxes you might pay in Croatia: Guide for 2022
• Changes to Croatia’s tax laws (Effective starting 2021)
• PDV (Value Added Tax) in Croatia
• Shopping online: What are the taxes and customs fees
• What is a tax stamp and why do you need them
• What is fiscalization and why does it matter to business owners

Sources:
Pravila o PDV-u i stope PDV-a: standardne, posebne i snižene stope
taxsummaries.pwc.com
papayaglobal.com