Income tax primarily refers to the taxation of income from self-employment, therefore, considering the complexity and economic importance, this tax form is constantly exposed to reform changes with the aim of creating a fairer and more tolerable tax burden for taxpayers, and the economic competitiveness of work.

Who is a TAX PAYER?

Natural person – who earns taxable income
If more than one person earns income – each person is liable for their part (independent activities)
Heir – for all obligations arising from the earned income that the decedent left before death

Sources of income – tax base

RESIDENT

– Natural person who has residence/residence in the Republic of Croatia

– A natural person who has neither residence/residence in the Republic of Croatia and is employed in the civil service in the Republic of Croatia and receives a salary on that basis

NON-RESIDENT

Physical person that does not have domicile/residence in the Republic of Croatia and earns taxable income in the Republic of Croatia in accordance with the Income Tax Act

Residency in accordance with the provisions of Art. 43 of the Tax Code, the taxpayer has his residence where he owns an apartment continuously for at least 183 days in one or two calendar years. Staying in the apartment is not mandatory. If there are several apartments in the ownership/possession – the place of residence is determined according to the place of residence of his family, and for a single person – the place where he mostly stays or the place from where he mostly goes to work, or performs his activities.

SOURCES OF INCOME

1. From non-self-employed work (wages based on the employment relationship)

2. From self-employment (craft activities and free professions)

3. From property and property rights (rents, rents, royalties)

4. From capital (interest on loans, dividends and profit shares, exemptions for private purposes)

5. Other income (work contract, copyright/artist fees)

TAX BASE for RESIDENT

– at home and abroad (principle of worldwide income)-minus the personal deduction

The total amount of income realized by all bases:

TAX BASE for NON-RESIDENT

only in the country (principle of domestic income) – minus the personal deduction

TAX PERIOD

Calendar year (01.01.-31.12.)

Shorter in case of: birth, moving in/out, death of the taxpayer

Types of income and income tax rates

In the case of income from self-employment, the employer or payer of the receipt (salary or pension), that is, the taxpayer himself, calculates, suspends and pays the advance tax at each payment, according to the regulations valid on the day of payment.

The advance tax on income from self-employment is calculated from the tax base, which includes all receipts realized during one month, less the expenses paid and the amount of the basic monthly personal deduction (which in 2024 is €560.00) or the increased personal deduction based on data from tax cards.

In accordance with the Law on Income Tax (Official Gazette 115/16 to 114/23) and the amendments that entered into force on January 1, 2024, two rates of tax on income from self-employment are currently applicable in the Republic of Croatia

The rates for calculating advance tax are as follows:

The lower rate is applied to the monthly tax base up to the amount of EUR 4,200.00.
The higher rate is applied to the part of the tax base that exceeds the amount of EUR 4,200.00

As of January 1, 2024, the surtax on income tax was abolished and it was possible for local self-government units (LGUs), i.e. municipalities and cities, to independently prescribe the level of the tax rate of annual taxes for income from self-employment, self-employment and other income.

If the city/municipality/LGU has not made a decision on the amended rate, the rates prescribed by law shall be applied:

lower 20% – for income up to €4,200.00
higher 30% – for income above €4,200.01

The complete overview of annual income tax rates for cities and municipalities that apply from January 1, 2024 was updated with the publication of the Decision in the Official Gazette no. 158/23., and are available on the link of the Tax Administration: https://www.porezna-uprava.hr/Stranice/Vijest.aspx?NewsID=3638&List=Vijesti

The basic personal deduction and parts of the personal deduction for dependent members of the immediate family and children, as well as disability/physical impairment, are calculated by applying the prescribed coefficients and the above-mentioned personal deduction base in accordance with Art. 14 of the Law on Income Tax (Official Gazette No. 115/16 to 114/23) and the Ordinance on Income Tax (Official Gazette No. 10/17 – 143/23).

 

Author, Admin – FINACRO doo