Last updated: February 2026. This guide reflects Croatian tax law and administrative practice applicable in 2026.
If you are a foreigner living, investing, working, or running a business in Croatia, your tax exposure depends primarily on one factor: tax residency status.
Croatia follows standard EU taxation principles, but it also applies strict residency rules, withholding taxes, and local tax elements that foreign individuals often underestimate.
This guide explains everything you need to know about tax in Croatia for foreigners in 2026, including:
- Income tax rules for foreign residents and non-residents
- Corporate tax for foreign-owned companies
- Withholding tax on dividends and cross-border payments
- VAT obligations
- Property tax
- Capital gains
- Permanent Establishment (PE) risks
- US expat considerations
Understanding the Broader Croatia Tax System
While this guide focuses specifically on tax in Croatia for foreigners, it is important to understand how the broader Croatian tax framework operates.
Croatia applies a structured system divided between national and local authorities, covering personal income tax, corporate income tax, VAT, capital taxation, property-related taxes, and mandatory social security contributions. Municipalities also have discretion over certain income tax rates and property tax levels.
For a full structural breakdown of how taxation is organised across national and local levels, see our detailed pillar guide on the Croatia Tax System.
Do Foreigners Pay Tax in Croatia?
Yes but how much you pay depends on your residency status.
Croatia distinguishes between:
Croatian tax residents
Taxed on worldwide income
Non-residents
Taxed only on Croatian-source income
This distinction is critical.
In practice, many foreign nationals unintentionally trigger Croatian tax residency by relocating mid-year without reviewing their “center of life” position. Even partial-year relocation can create worldwide taxation exposure if residency criteria are met.
(Croatian tax residency rules are primarily governed by the Croatian Income Tax Act (Zakon o porezu na dohodak) and related implementing regulations issued by the Croatian Tax Administration (Porezna uprava))
When Are You Considered a Croatian Tax Resident?
A foreigner is generally considered a Croatian tax resident if:
- You stay in Croatia more than 183 days in a tax year
- You maintain a permanent home in Croatia
- Your “center of life” (family, economic interests) is in Croatia
If classified as resident, Croatia may tax:
- Salary earned abroad
- Foreign pensions
- Dividends
- Rental income
- Capital gains
Non-residents are taxed only on Croatian-source income.
Croatia Income Tax for Foreigners (2026)
Croatia applies a decentralised income tax system.
Municipalities choose their rates within national bands:
- Lower rate: approx. 15%-23%
- Higher rate: approx. 25%-33%
If a municipality does not set rates, default national rates apply.
Key point for foreigners:
Your tax rate depends on where you live in Croatia, not just how much you earn.
Certain capital income is taxed at final flat rates (most commonly 12%).
Tax on Salary for Foreign Employees
If you work in Croatia:
- Employee pension contribution: 20%
- Employer health contribution: 16.5%
- Income tax applied on taxable base after allowances
Total employment cost in Croatia is significantly higher than net salary due to mandatory contributions.
Tax on Dividends and Capital Gains
Dividend tax (individuals):
10% (final withholding)
Capital gains tax:
12% on shares and financial assets
A two-year holding exemption may apply to certain financial assets.
Real estate capital gains:
Exempt if owned for more than two years and not used for business activity.
Otherwise taxable.
Croatia Corporate Tax for Foreign-Owned Companies
Croatia corporate tax rates (2026):
- 10% (revenue up to €1,000,000)
- 18% (above €1,000,000)
Foreigners can fully own Croatian companies.
Resident companies are taxed on worldwide profits.
Non-resident companies are taxed if they create a Permanent Establishment (PE).
Permanent Establishment (PE) Risk for Foreign Companies
We regularly see foreign investors surprised by the interaction between PE rules and management presence in Croatia.
Foreign companies may become taxable in Croatia if:
- They have a fixed place of business
- A dependent agent operates in Croatia
- Strategic management is exercised from Croatia
If management and control are effectively in Croatia, the company may be treated as Croatian tax resident.
In practice, Permanent Establishment risks most commonly arise when foreign founders continue operating their overseas company while living in Croatia. Strategic decision-making from Croatian territory may shift the company’s effective management location.
Withholding Tax in Croatia (2026)
Croatia applies withholding tax on payments to non-residents:
- Dividends: 15%
- Interest: 15%
- Royalties: 15%
- Certain service payments: 15%
Rates may be reduced under Double Taxation Treaties or EU directives.
VAT in Croatia for Foreigners
Croatia VAT rate (standard): 25%
Reduced rates: 13% and 5%
VAT registration becomes mandatory once turnover exceeds €40,000 annually.
Foreign entrepreneurs operating in Croatia may need:
- Croatian VAT number
- Local invoicing compliance
- E-fiscalisation reporting
OSS / IOSS systems apply for EU cross-border sales.
In practice, VAT issues for foreign entrepreneurs usually arise from cross-border digital services and misunderstood place-of-supply rules. Early structuring often prevents later compliance penalties.
Property Tax in Croatia for Foreigners
From 1 January 2025, Croatia introduced an annual property tax.
The tax applies primarily to:
- Secondary homes
- Vacant properties
- Non-primary residences
Primary residences are typically exempt.
Rates range from €0.60 to €8.00 per m² per year, depending on municipality.
For a detailed breakdown of exemptions, calculation methods, municipal discretion, and compliance risks, see our full guide to Croatia Property Tax.
Why this matters: Property ownership is one of the most common triggers of unexpected local tax obligations for foreign investors in Croatia.
Real Estate Transfer Tax
Real Estate Transfer Tax (RETT):
- 3% of market value
- Paid by buyer
- Applies when transaction is not subject to VAT
Tax on Foreign Pension Income
If you become Croatian tax resident, your foreign pension may become taxable in Croatia.
Treatment depends on:
- Public vs private pension
- Applicable Double Taxation Treaty
- Credit or exemption method
Proper treaty analysis is essential.
US Citizens Living in Croatia
US citizens remain subject to US taxation regardless of residence.
If resident in Croatia, they may face:
- Croatian worldwide taxation
- US federal filing obligations (Form 1040)
- FBAR reporting
- Treaty coordination
The US–Croatia Double Taxation Treaty helps reduce double taxation but does not remove filing obligations.
OECD Pillar Two (Global Minimum Tax)
Large multinational groups with revenue above €750 million are subject to a 15% global minimum effective tax rate under OECD Pillar Two rules.
Most small foreign founders are unaffected.
E-Invoicing and Fiscalisation (2026)
Croatia expanded mandatory e-invoicing from 1 January 2026.
Applies to:
- B2B
- B2G
- B2C transactions
Foreign businesses operating in Croatia must ensure compliant invoicing software.
Frequently Asked Questions – Tax in Croatia for Foreigners
Do foreigners pay tax in Croatia?
Yes. Tax depends on residency status and income source.
Is Croatia high tax?
Corporate tax is competitive (10% / 18%), but labor taxation is relatively high due to social contributions.
Can Croatia tax my foreign income?
If you are Croatian tax resident, yes.
Is there wealth tax in Croatia?
No general wealth tax exists.
Is property tax high in Croatia?
Annual property tax is moderate compared to many EU states, but varies by municipality.
Do I need an OIB?
Yes. An OIB (Personal Identification Number) is mandatory for tax compliance.
What This Means for Foreigners
Understanding tax in Croatia for foreigners requires more than knowing tax rates.
Residency classification, treaty protection, PE risks, and social contributions can significantly affect your overall tax burden.
Before relocating or starting business operations in Croatia, a structured cross-border tax review is strongly recommended.
Mandracchio Capital Experience in Croatian Tax Matters
Mandracchio Capital, founded by Šime Jozipović, 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 advise clients on tax residency, corporate structuring, cross-border compliance, and property taxation matters in Croatia.
Our work focuses on practical implementation of Croatian tax law in real-world international scenarios.
