Croatia Tax Laws and Tax System

Croatia Income Taxes

May 2010

Individual Income Tax: Croatia's individual income tax rates for 2010 are progressive, from 15% to 45%.

Personal annual tax rates 2010 (HRK)

Income (HRK)	%
1-43,200	15
43,201-108,000	25
108,001-302,400	35
over 302,401	45

There is also an additional "crisis tax " which is imposed on individuals. The rates are 2% for income of HRK 3,001- HRK 6,000 and 4% for income above HRK 6,001. The tax is due till the end of 2010.

Corporate Tax: Croatia's corporate tax rate for 2010 is 20%. Certain small companies pay a lower corporate tax rate.
Capital Gains: Capital gains of companies are added to the regular income and are taxable at 20% rate.
Individuals: Pay 15% -35%.

Croatia Capital Gains Tax

Croatia Residence

A foreign company is resident if incorporated in Croatia or have its actual management in Croatia.
An individual is resident when having a permanent residence in Croatia or when having a place of abode for more than 183 days in a tax year.
Residents pay tax on their worldwide income. Non residents pay tax only on Croatia source income.

Croatia Tax Deductions

Losses are carried forward for 5 years. There is no carry back of losses.
Depreciation is deducted using the straight line method for tangible and intangible assets. The depraciation rate for buildings is 5%,for machinery 25% and 50% for computers, software and cellolar phones.
There is no company consolidation for tax purpose, each company has to file seperatel.
Thin capitalisation rules relate to interest expenses . Interest paid to a shareholder having 25% or more of the voting rights and his loan to equity ratio exceeds 4:1 is not deductible.
Transfer pricing rules in Croatia are in accordance with the OECD guidelines.

Croatia Personal Credits and Deductions

For Croatian residents there is a basic deduction of HRK 21,600 per year. The sum is increased for a dependent spouse and dependent children, ranging from HRK for the first child and HRK 21,600 for the third child.
Deductions are also permitted for payments to Croatian pension plans, insurance and cost of purchase of the first residence up to HRK 12,000 per year.
2% of donations are deductible, subject to a ceiling.
For companies, dividend income is tax exempt.

Deduction of Tax at Source

In Croatia tax is deducted at source from the following payments to non residents:
Dividend- 0%.
Interest- 15%.
Royalties- 15%.
Branch remittance to head office- 0%.

Croatia Social Security

The contributions by the employer and the employee are subject to to ceiling defined by law.

Employer: 17.2% of the gross salary.
Employee: 20% of the gross salary. (pension).

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