TAXATION SYSTEM

Croatia has conducted a taxation reform on the basis of the systems used in Western European countries with developed market economies. The current tax system includes the following taxes: profit tax, income tax, value-added tax, special tax (excise duty), real estate sales tax, games of chance tax and certain forms of tax levied by local authorities.

PROFIT TAX

Persons liable to pay profit tax are companies or other legal entities engaged in an economic activity for the purpose of making profits. The tax base is the profit calculated as the difference between income and expenditure. The law clearly defines the types of income and expenditure on the basis of which the profit is calculated. Amortization expenditure includes additional, partial or complete write-offs of equipment and business facilities acquired within the tax period. The profit tax rate is 20%.

Tax benefits:

a lower tax rate (0%, 3% and 7%, dependent on the invested amount and the number of employees) on profit resulting from new investments. Benefits may be given only to newly established companies for a period of 10 years from the beginning of the investment.

a lower profit tax rate (10%) for users of free zones;

EUR 2.000 per employee for covering the cost of job creation and re-training on a one-time basis. The incentives can be used only for new job creation, provided that the number of new employees is not reduced during a period of at last three years.

an additional one-year reduction of the tax assessment base for the amount of salaries for new employees; this benefit is granted for a three-year period if disabled persons are employed.

VALUE ADDED TAX (VAT)

A Value-Added Tax (VAT) payee is any entrepreneur that delivers any goods or services that have been listed in the VAT regulations. An entrepreneur is any legal or natural person that independently carries out an activity with an intention of earning income. Value-added Tax is paid on the delivery of all types of goods and services performed in Croatia by an entrepreneur in return for a fee, personal consumption and the import of goods into Croatia. The tax base for applying the VAT is calculated as the amount paid for the goods delivered or for the service performed. VAT is payable at the rate of 22 %.

VAT exemptions for exports:

Export delivery of goods and processed goods, including transport and all delivery services;

Delivery of goods to tax-free sales outlets and specialised warehouses for foreign and domestically produced goods.

INCOME TAX

The taxpayer is the domestic or foreign physical person who earns taxable income. Domestic tax payers pay income tax on all income earned in the country and abroad, which is reduced by transferred loss and personal allowances, whereas foreign tax payers pay income tax on all income earned in the country, which is also reduced by transferred loss and personal allowances (EUR 160).

Personal Income tax rates are 15%, 25% and 35%.