New Round of Tax Reforms
The new round of tax reforms introduces the following changes:
1) Taxation of property
Property tax will replace the existing tax on holiday homes. Both individuals and legal entities will be liable to pay the property tax. The tax will be paid in accordance with the decision of the municipality or city, ranging from 0.6 to 8 euros per square meter.
| Old | New | |
| Name: Tax on Holiday Homes | Name: Property Tax | |
| Optional | Mandatory | |
| Maximum amount: EUR 5/m2 |
Maximum amount: EUR 8/m2 | |
The property tax provides exemptions in cases where the property is used for permanent residence, long-term rental, properties owned by companies intended for sale, etc.
The municipality or city will determine the amount of tax depending on the location, street, neighbourhood, or zone where the property is situated. It may also be adjusted based on other criteria, such as the age of the property and surrounding infrastructure.
2) Renting Tourist Accommodation
The tax on tourist rentals charged per “rented” bed will range from 20 to 300 euros per bed, depending on the tourism development index. Until now, the lump sum tax per bed ranged from 19.91 euros to 199.08 euros.
3) VAT
The threshold for entering the VAT system has been raised from 40,000 to 50,000 euros.
4) Income Tax
- Personal allowance will be increased from 560 to 600 euros, and personal allowance for dependents and disabilities is also being raised.
- Due to this, other non-taxable payments, such as severance pay, performance bonuses, and similar payments, are also being increased.
- The threshold for applying the higher personal income tax rate is being raised from 50,400 to 60,000 euros.
- The maximum levels of the lower and higher income tax rates are being reduced with the aim of further easing the tax burden on income, as shown below.
| Municipality / city | Personal Income Tax rate | |||
| From 1st January 2024 | Proposal from 1st January 2025 | |||
| Lower rate | Higher rate | Lower rate | Higher rate | |
| Municipalities | 15% - 22% | 25% - 33% | 15% - 20% | 25% - 30% |
| Cities | 15% - 22,4% | 25% - 33,6% | 15% - 21% | 25% - 31% |
| Large cities and county seats |
15% - 23% | 25% - 34,5% | 15% - 22% | 25% - 32% |
| Zagreb city | 15% - 23,6% | 25% - 35,4% | 15% - 23% | 25% - 33% |
5) Returnee Croatians
Croatian citizens returning to Croatia or descendants of Croatian emigrants will be exempt from paying Croatian personal income tax for a period of 5 years.
6) Mandatory contributions
The exemption from paying health insurance contributions (16.5%) on employment income of employees who are being employed for the first time, for up to one year from the date of establishing the employment relationship, will remain in force.
The exemption from paying health insurance contributions (16.5%) on employment income of young workers for a duration of 5 years is being abolished.
* * *
The final texts of the laws are not ready for parliamentary procedure, and it is expected that the laws will be adopted in the Parliament during November.