Whether you are an individual taxpayer, a business owner, or a foreign investor, how much tax you pay under the Croatia Tax System depends not only on statutory tax rates, but also on residency status, income source, and local municipal rules.
As an EU member state, the Croatia Tax System follows standard European tax principles, including residency-based taxation and harmonised VAT rules. At the same time, the Croatia Tax System maintains a distinctive local tax element, giving cities and municipalities discretion over certain income tax rates, property taxes, and local charges.
This guide provides a high-level overview of the Croatia Tax System in 2026. We will explain how the Croatia Tax System is divided between national and local authorities, outlines key tax rates, and highlights the main rules affecting residents, non-residents, companies, and foreign taxpayers. While this article does not replace professional tax advice, it is designed to give a clear structural understanding of how the Croatia Tax System operates before moving into more detailed planning or compliance considerations.
Croatia Tax System Overview
The Croatia tax system is a modern, EU-aligned framework combining national and local taxation. It covers personal income tax, corporate income tax, VAT, capital gains tax, property-related taxes, and mandatory social security contributions. Taxation rules depend on residency status, the source of income, and, in some cases, the municipality of residence.
Croatia applies standard EU principles, including worldwide taxation for residents, source-based taxation for non-residents, and extensive double taxation treaty coverage.
How the Croatian Tax System Works (National vs Local)
The Croatian tax system operates on three levels:
- National level
- Personal income tax framework
- Corporate income tax
- VAT and excise duties
- Capital gains taxation
- County level
- Limited administrative and regulatory fees
- City / municipal level
- Determination of income tax rates within legal ranges
- Annual property tax rates
- Local surtaxes and utility-related charges
Croatia Tax System for Foreigners
Foreign individuals and companies are fully integrated into the Croatian tax system.
- Non-residents are taxed only on Croatian-source income
- An OIB (personal identification number) is mandatory
- Croatia has an extensive double taxation treaty network
- Withholding taxes may apply to dividends, interest, and royalties
Foreign individuals and companies are fully integrated into the Croatia tax system, subject to residency and source-based taxation rules.
Croatia Taxes for US Expats (2026 Update)
The taxation of US expats in Croatia is governed by the interaction of two fundamentally different tax systems. Croatia taxes individuals primarily based on tax residency, while the United States applies citizenship-based taxation. As a result, US citizens living in Croatia generally remain required to file US tax returns regardless of where they reside.
For US expats, taxation typically involves dual compliance, requiring careful coordination between Croatian and US tax rules.
Key points for US expats in Croatia include:
- If classified as a Croatian tax resident, Croatia may tax worldwide income
- The United States requires annual filing of Form 1040, even when living abroad
- Croatia and the US are linked by a Double Taxation Treaty, which helps mitigate double taxation on certain income types
- Foreign-earned income may qualify for foreign tax credits or exemptions, depending on individual circumstances
US Expats: The Treaty Status
The US – Croatia Double Taxation Treaty, signed in 2022, is fully effective in 2026 and represents a significant development for US expats.
The treaty provides several important benefits:
- Reduced withholding tax rates on dividends, interest, and royalties
- A formal tax residency tie-breaker rule for individuals with connections to both countries
- Improved coordination of foreign tax credits, reducing the risk of double taxation
Despite treaty protection, US expats must still comply with US filing obligations, including Form 1040 and FBAR reporting, where applicable. The treaty does not eliminate filing requirements but allows for more effective tax relief mechanisms under US law.
Tax Advice for US Expats
US expats in Croatia should approach taxation with a dual-country compliance strategy, focusing on accurate reporting, proper classification of income, and effective use of treaty benefits.
Key considerations include:
- Determining Croatian tax residency status, based on residence, center of life, and length of stay
- Understanding how Croatian income tax and social security contributions interact with US tax reporting
- Evaluating eligibility for foreign tax credits or income exclusions
- Ensuring proper disclosure of foreign bank accounts and financial assets, where required
Because tax outcomes vary significantly depending on income structure, family status, and duration of residence, professional cross-border tax advice is strongly recommended for US expats to reduce compliance risks and avoid unnecessary taxation. With the upcoming introduction of the Digital Euro, financial transparency, cross-border traceability, and AML enforcement mechanisms within the EU are expected to evolve significantly.
Croatia Tax Rate Overview (2026)
| Tax Category | Key Rates |
|---|---|
| Personal Income Tax | ~15–23% (lower) / ~25–33% (higher) |
| Corporate Income Tax | 10% or 18% |
| VAT | 25% standard / 13% & 5% reduced |
| Capital Gains Tax | Generally 12% |
| Social Security Contributions | Employee 20% / Employer 16.5% |
| Annual Property Tax | ~€0.60 – €8.00 per m² |
| Real Estate Transfer Tax | 3% |
Croatia Income Tax
Personal Income Tax (PIT) applies to income earned by individuals from:
- Employment
- Self-employment
- Property and property rights
- Capital income
- Other taxable income categories
Tax residents are generally taxed on worldwide income, while non-residents are taxed only on Croatian-source income. Personal allowances and deductions reduce the taxable base before tax rates are applied.
Croatia Income Tax 2026 Rate
Income tax rates are set by local governments within statutory limits:
- Lower income tax rate: approximately 15%–23%
- Higher income tax rate: approximately 25%–33%
If a municipality does not set its own rates, default national rates apply (commonly around 20% and 30%). Certain capital and passive income types are taxed at final flat rates, most commonly 12%.
Social Security Contributions in Croatia
Social security contributions are mandatory and separate from income tax.
- Employee contributions
- 20% of gross salary (pension insurance)
- Employer contributions
- 16.5% of gross salary (health insurance)
These contributions significantly increase the total employment cost and are a core component of the Croatian tax burden on labor.
Croatia Corporate Tax
Corporate Income Tax (CIT) applies to:
- Croatian resident companies on worldwide income
- Non-resident companies with a permanent establishment in Croatia
Taxable profit is based on accounting profit adjusted for tax-deductible and non-deductible expenses.
Croatia Corporate Tax Rate (2026)
Croatia uses a two-tier corporate tax system:
- 10% for companies with annual revenue up to €1,000,000
- 18% for companies with annual revenue above €1,000,000
This structure supports small and medium-sized enterprises while maintaining EU competitiveness.
Capital Gains Tax Croatia
Capital gains earned by individuals are generally taxed under the personal income tax regime.
- Standard capital gains tax rate: 12%
- Applies to gains from shares, securities, and certain financial assets
- Exemptions may apply depending on the holding period and asset type
Capital gains related to real estate follow specific rules and may be exempt after a defined ownership period.
Croatia VAT Rate
Croatia VAT System (PDV)
When starting a business in Croatia for foreigner in Croatia, Value Added Tax (VAT) is referred to as PDV (Porez na dodanu vrijednost).
VAT applies to the supply of goods and services within Croatia, as well as to imports. Businesses are generally required to register for VAT once their annual turnover exceeds the statutory registration threshold. Voluntary registration is also possible under certain circumstances.
For EU-based economic operators gradually building commercial activity or primarily serving international clients, timing of VAT registration may influence cash-flow structure and reporting obligations. The applicable VAT treatment will depend on factors such as place of supply rules, cross-border services, and reverse-charge mechanisms under EU VAT directives.
For non-EU residents (US, UK, Canada, Australia, New Zealand, etc) engaging in commercial activity in Croatia, VAT compliance typically requires careful structuring. Even where clients are predominantly located outside Croatia, domestic invoicing standards, accounting consistency, and periodic reporting obligations remain applicable under Croatian tax law.
Croatia VAT Rate 2026
- Standard VAT rate: 25%
- Reduced VAT rates:
- 13% – accommodation services, food services, utilities, selected goods
- 5% – basic food items, books, medicines, medical equipment
VAT registration may be mandatory or voluntary, depending on turnover and business activity.
Croatia Property Tax
From 1 January 2025, Croatia introduced a new annual property tax, replacing the former holiday home tax. The tax is assessed annually and administered at the municipal level.
It generally applies to residential and commercial properties, with exemptions commonly available for primary residences.
Croatia Property Tax 2026 Rate
Municipalities set annual rates within a national range:
- Approximately €0.60 – €8.00 per m² per year
Rates depend on:
- Location
- Property type
- Usage (residential, commercial, vacant)
Real Estate Transfer Tax Croatia
Real Estate Transfer Tax (RETT) applies to property transactions not subject to VAT.
- Rate: 3% of the market value
- Payable by the buyer
- Reported within 30 days of acquisition
If VAT applies (typically to new constructions), RETT does not apply.
Croatia Tax News 2026
Croatia Property Tax News
- Full implementation of the annual property tax
- Increased municipal discretion over rates and exemptions
Croatia Real Estate Tax News
- Continued distinction between VAT-liable new builds and RETT-liable transfers
- Increased reporting and valuation scrutiny by tax authorities
Real Estate Transfer Tax Croatia News
- RETT remains at 3%
- Stricter enforcement of reporting deadlines and valuation accuracy
Croatia Business Tax News
- Amendments to the Corporate Income Tax Act effective 2026
- Expanded deductions for sponsorships and clarified advance pricing rules
Croatia VAT Rate News Today
- No change to the 25% standard VAT rate
- Ongoing review of reduced-rate categories in line with EU VAT harmonisation
E-Fiscalisation and Mandatory E-Invoicing in Croatia
As of 1 January 2026, Croatia introduced mandatory e-invoicing and real-time fiscalisation reporting across multiple transaction categories, significantly expanding its digital tax compliance framework.
The reform applies to business-to-business (B2B), business-to-government (B2G), and business-to-consumer (B2C) transactions and represents a major shift in invoicing and reporting obligations.
E-Fiscalisation Obligations from 1 January 2026
From 1 January 2026, the following requirements are in force:
- Mandatory issuance and fiscalisation of e-invoices in the B2B sphere
- Extension of fiscalisation to e-invoices in the B2G sphere
- Extension of fiscalisation to all B2C invoices, including those paid via bank transfer, which were previously outside the fiscalisation scope
All affected invoices must be issued in electronic format and reported in real time to the Croatian Tax Administration through the fiscalisation system.
Expansion of E-Invoicing Obligations from 1 January 2027
From 1 January 2027, the obligation to issue e-invoices will further expand to include:
- All companies
- Tradesmen and freelancers
- State administration bodies
- Local and regional self-government units
- Budgetary and extra-budgetary beneficiaries of the state budget
- Local and regional entities registered in the Register of Budgetary and Extra-Budgetary Beneficiaries
This expansion applies even to entities that are not VAT payers, whereas previously these entities were generally required only to receive e-invoices, not issue them.
Impact on Businesses and Foreign Taxpayers
The e-fiscalisation reform significantly increases digital compliance and reporting transparency. Businesses operating in Croatia, including foreign companies and expats conducting business activities, must ensure that:
- Invoicing software is compliant with Croatian e-invoice standards
- Internal accounting processes support real-time reporting
- Cross-border transactions are properly classified under B2B, B2G, or B2C rules
Failure to comply may result in administrative penalties and tax audits.
About Mandracchio Capital
Mandracchio Capital is a Croatia-based legal and business advisory firm working with international founders, investors, and expatriates navigating the Croatian and EU regulatory landscape. We regularly advises international clients navigating the Croatia tax system in a cross-border context.
Our work focuses on company formation, tax structuring, residency and immigration matters, and cross-border compliance, with particular experience supporting foreign individuals and businesses operating in Croatia.
The information in this guide is provided for general informational purposes and reflects our practical experience with the Croatian tax system. It does not constitute formal tax or legal advice. Individual circumstances may require tailored professional analysis.
