Starting January 1, 2025, Croatia is implementing key changes to its Income Tax Law and Local Tax Law that will impact businesses, property owners, and residents. These updates aim to create a more structured and transparent tax system while aligning with broader economic policies. Below, we break down the most critical changes and how they may affect you.
1. Changes to Personal Income Tax
Updated Tax Rates & Deadlines
- Local governments had until November 30, 2024, to set income tax rates for 2025. Any decisions made after this date will not be valid.
- If municipalities did not update their rates in time, the default rates of 20% and 30% will apply.
- Any new or modified decisions between January 1 and February 28, 2025, will take effect from March 1, 2025, but will also apply retroactively for the full tax year.
Lower Maximum Tax Rates
- The government has reduced the upper limits for both lower and higher income tax brackets.
- If a local government’s current tax rates exceed the new thresholds, they must update their tax rates by February 28, 2025.
- Those within the new limits cannot make any further changes during this period.
2. New Rules for Flat-Rate Income Tax on Rental Properties & Tourism
Croatia’s flat-rate tax on private accommodations (such as Airbnbs and vacation rentals) will now be adjusted based on the municipality’s Tourism Development Index (TDI). Here’s how the new rates will work:
| Tourism Development Index (TDI) Category | Tax Range (EUR) | Default Rate (If No Decision Made) |
|---|---|---|
| I (Most Developed Areas) | 100 – 300 | 200 |
| II | 70 – 200 | 135 |
| III | 30 – 150 | 90 |
| IV, 0 (Least Developed Areas) | 20 – 100 | 60 |
- Local governments had until December 15, 2024, to set their flat-rate tax levels.
- If no decision was made, the default rates in the table above will automatically apply.
- Changes can still be made until February 28, 2025, if necessary.
3. Major Shift: Holiday Home Tax Becomes a General Property Tax
What’s Changing?
- The tax previously called the “holiday home tax” will now be renamed the “property tax.”
- Local governments must define the tax rate, responsible tax authority, and any exemptions for vulnerable groups by February 28, 2025.
- The maximum property tax rate will be €8 per square meter based on factors like location, property age, and additional features.
What Happens If No Decision Is Made?
- The same tax rate used in 2024 will automatically apply for 2025.
- If a municipality didn’t previously impose this tax, a default rate of €0.60 per square meter will apply, and the Croatian Tax Administration will oversee collection.
4. Important Deadlines for Compliance
To ensure compliance with the new tax regulations, municipalities and taxpayers must take the following steps:
- January 2025: Begin public consultations on local tax changes.
- February 28, 2025: Deadline for updating income tax rates, flat-rate accommodation taxes, and property tax decisions.
- March 1, 2025: Any new decisions made will apply to income tax prepayments and other tax calculations.
How This Affects You
These tax changes will impact individuals and businesses in different ways:
- Residents & Workers: Pay attention to any new local income tax rates.
- Landlords & Airbnb Hosts: Expect tax adjustments based on your location’s tourism ranking.
- Property Owners: Be aware of the new property tax structure and potential exemptions.
- Municipalities: Must update their regulations in time to avoid default rates.
If you need further guidance, consult a local tax professional or visit Croatia’s Tax Administration website for official updates.
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