Last updated: February 2026
This guide reflects Croatian income tax law and administrative practice applicable in 2026.
Croatia income tax operates under a progressive personal taxation system. However, unlike many EU countries, Croatia does not apply a single fixed national rate. Instead, municipalities and cities determine their own income tax rates within legally prescribed bands.
Since 1 January 2024, municipal surtaxes were abolished and replaced by flexible locally determined tax rates. As a result, your Croatia income tax burden depends not only on how much you earn, but also where you live.
This guide explains Croatia income tax rates in 2026, including personal allowances, social contributions, capital income taxation, and foreign residency implications.
For a full structural overview of all taxes in Croatia, see our pillar guide on the Croatia Tax System.
Croatia Income Tax 2026 – How the System Works
Croatia income tax is governed by the Income Tax Act (Zakon o porezu na dohodak) and related implementing regulations. Croatia income tax is progressive and divided into two brackets:
• Lower income band
• Higher income band
The national government sets the legal rate ranges. Cities and municipalities choose their specific rates within those bands.
If a municipality does not actively determine its own rates, default national rates apply.
This decentralised approach makes Croatia income tax different from many EU systems.
Croatia Income Tax 2026 Rate
Under current law, the following bands apply:
Lower income tax rate: approximately 15% to 23%
Higher income tax rate: approximately 25% to 33% (some large cities slightly higher effective rates)
Annual income thresholds typically fall between:
Up to €50,400-€60,000 (lower band)
Above that threshold (higher band)
If a municipality does not adopt its own rates, default rates of roughly 20% (lower band) and 30% (higher band) apply.
In practice, this means two individuals earning the same salary may pay different Croatia income tax depending on their place of residence.
Croatia Personal Income Tax – What Is Taxed?
Croatia personal income tax applies to:
• Employment income
• Self-employment income
• Income from independent personal activities
• Property income
• Capital income
• Other taxable income
Tax residents are generally taxed on worldwide income.
Non-residents are taxed only on Croatian-source income.
For broader foreign taxation rules, see our guide on Tax in Croatia for Foreigners.
Salary Taxation and Social Contributions
Croatia income tax must be distinguished from social security contributions.
Employee Contributions
20% of gross salary
(Pension insurance – Pillar I and Pillar II)
Employer Contributions
16.5% of gross salary
(Health insurance)
These contributions significantly increase total labour cost.
Example:
An employee earning €3,000 gross monthly will face:
• 20% pension contributions
• Progressive Croatia income tax on the taxable base
• Additional employer-side contributions
Total employment cost is therefore materially higher than net salary.
In practice, many founders and foreign employees underestimate the impact of mandatory pension contributions when modelling net salary outcomes. The difference between gross cost and net income in Croatia can be materially higher than expected.
Personal Allowances Under Croatia Income Tax
Croatia personal income tax allows deductions through personal allowances.
Basic Personal Allowance
€600 per month
€7,200 annually
This amount reduces the taxable base before rates are applied.
Dependent Allowances
Additional allowance increases apply for:
• Dependent spouse
• Children
• Disability status
For example:
First child increases monthly allowance
Second child increases further
These allowances reduce effective Croatia income tax liability significantly for families.
Youth Relief Provisions
Croatia income tax includes special relief for young employees:
Under age 25:
100% reduction of income tax liability (lower band only)
Age 26-30:
50% reduction (lower band only)
This relief applies exclusively to employment income.
Croatia Income Tax on Capital Income
Not all income is taxed progressively.
Croatia income tax applies different flat rates to capital income:
Dividends → 12%
Interest → 12%
Capital gains → 12%
Rental income → 12% after 30% lump-sum deduction
This separation is crucial for investors.
For a detailed breakdown of investment taxation, see our guide on Croatia Capital Gains Tax.
Croatia Income Tax for Foreigners
Foreign individuals must carefully assess residency status.
A person is considered Croatian tax resident if:
• Staying more than 183 days in a tax year
• Maintaining a permanent home in Croatia
• Having a “center of life” in Croatia
Residents are taxed on worldwide income.
Non-residents are taxed only on Croatian-source income.
This distinction significantly affects Croatia income tax exposure for expats and retirees.
See also: Tax in Croatia for Foreigners.
In practice, foreign employees relocating mid-year often face partial-year residency classification issues, which may trigger worldwide taxation earlier than anticipated.
Digital Nomad Income Tax Treatment
Under Croatia income tax rules, digital nomads (as defined by the Foreigners Act) are generally exempt from Croatian income tax on income earned from foreign employers.
However:
• Social security classification must be analysed
• Misclassification risks may exist
• Local invoicing and residency factors matter
In practice, digital nomad taxation is frequently misunderstood.
Interaction With the Croatia Tax System
Croatia income tax does not operate in isolation.
It interacts with:
• Croatia corporate tax (10% / 18%)
• Croatia VAT Rate (25% standard, 13% / 5% reduced)
• Capital gains tax
• Social contribution obligations
For structural understanding, review our full Croatia Tax System guide.
For company profit taxation, see Croatia Corporate Tax.
For indirect tax obligations, see Croatia VAT Rate.
Corporate vs Personal Income Structuring
For founders and consultants, income structuring decisions matter.
Option 1: Employment income
→ Progressive Croatia income tax + contributions
Option 2: Company structure
→ Corporate tax (10% / 18%) + dividend tax (10%)
Effective tax burden depends on:
• Revenue level
• Profit margin
• Distribution strategy
• Residency status
Proper modelling is recommended before selecting a structure.
In practice, remuneration structuring between salary and dividends significantly alters the effective tax burden and should be modelled before implementation.
Double Taxation Treaties
Croatia maintains an extensive double taxation treaty network.
If foreign income is also taxed abroad:
• Treaty allocation rules apply
• Foreign tax credit may reduce Croatian liability
• Reporting obligations remain
Treaty coordination is particularly important for:
• Cross-border employees
• Retirees
• Remote founders
Frequently Asked Questions – Croatia Income Tax
What are Croatia income tax rates in 2026?
Croatia income tax operates under a progressive two-band system. The lower tax band generally ranges from approximately 15% to 23%, while the higher band ranges from approximately 25% to 33%, depending on the municipality. Cities and municipalities set their own rates within nationally prescribed limits. If a municipality does not determine its own rates, default national rates typically apply.
Is Croatia personal income tax progressive?
Yes. Croatia personal income tax is progressive and divided into two tax brackets. However, unlike many EU countries, tax rates are set locally by cities and municipalities within national legal bands. This means effective tax burden may vary depending on place of residence.
Are Croatian tax residents taxed on worldwide income?
Yes. Individuals classified as Croatian tax residents are generally taxed on their worldwide income, including foreign salary, dividends, rental income, and capital gains. Non-residents are taxed only on Croatian-source income. Residency is determined based on the 183-day rule, permanent home, or center-of-life criteria.
Is there a flat income tax in Croatia?
No. Croatia does not operate a flat income tax system. Instead, it applies progressive rates combined with personal allowances and mandatory social contributions, which together determine the effective tax burden.
Is Croatia a high-tax country?
Croatia’s corporate income tax is competitive at 10% or 18%, depending on revenue. However, labour taxation can be moderate to relatively high due to mandatory pension (20%) and employer health (16.5%) contributions. The overall tax burden depends heavily on income type and structure.
Why Croatia Income Tax Planning Matters
Croatia income tax may appear straightforward at first glance, but effective tax burden depends on:
• Municipality of residence
• Income type
• Allowances
• Social contributions
• Corporate structuring
• Residency classification
In practice, many foreigners underestimate how residency status expands worldwide taxation exposure.
Income tax planning should always be assessed within the broader Croatia Tax System to avoid unintended exposure.
Advisory Perspective
Mandracchio Capital advises foreign founders, investors, and expatriates on Croatia income tax structuring, residency classification, and cross-border compliance.
This guide is provided for informational purposes only and does not constitute legal or tax advice.
