New Tax Reform Package

The Government of the Republic of Croatia has submitted the final proposals for amendments and additions to nine laws that are part of the tax reform package to the parliamentary procedure. The amendments and additions will come into effect on January 1, 2024.

In comparison to the initial reading, the most significant changes relate to the surtax on income tax abolishment, an increase in the threshold for applying a higher income tax rate and an increase in personal deduction.

Abolishment of the surtax for all income categories

Starting January 1, 2024, all five income categories will no longer have the surtax. Local self-government units can offset the previous surtax revenue by implementing higher income tax rates (limited to income categories from dependent work and income from independent activities) without mandating this option for other income sources, including income from property, property rights, and capital.

New tax rates

The Croatian Government has proposed new tax rates:

• Income from property obtained from rent and lease – increase from 10% + surtax to 12%
• Income from the time-limited transfer of property rights – an increase from 20% + surtax to 24%
• Income from the disposal of specific types of property – increase from 10% + surtax to 12%
• Income from property – disposal of real estate and property rights – increase from 20% + surtax to 24%
• Income from interest – increase from 10% + surtax to 12%
• Income from capital gains – increase from 10% + surtax to 12%
• Income from receipts of dividends and profit shares based on equity participation – increase from 10% + surtax to 12%
• Income from capital based on profit shares obtained through allocation or optional purchase of own shares – an increase from 20% + surtax to 24%
• Income from capital – increase from 30% + surtax to 36%
• Income from independent activities – increase from 10% + surtax to 12%
• Income from other sources increases from 30% (a 100% increase) plus surtax to 36% (a 100% increase), based on the difference between assets and their acquisition value.
• Income based on the refund of contributions – increase from 30% +surtax to 36%.

Other changes

Other tax changes include raising the basic deduction to 560 euros. Additionally, the basis for the personal deduction for dependent family members is increased, with all amounts rounded in favour of taxpayers. Moreover, it raises the threshold for applying the higher tax rate annually from 47,780 to 50,400 euros while reducing the basis for pension insurance in the first pillar.

The tax package also includes changes to the Law on Local Taxes, which include widening the range in which city or municipal councils can determine the amount of the tax on vacation homes from 60 cents to five euros per square meter. Moreover, tips can be left using cards. They will set the non-taxable amount at 3,360 euros and subject any tip amount above the non-taxable part to a 20% tax rate.