Get to know the authorCroatia might not be the first country that comes to mind when you think of sunny beaches, stunning medieval architecture, and breathtaking national parks, and yet this small Balkan nation offers all of those things and more. It makes sense, then, that Croatia is becoming a growing hub for US expats.
If Croatia is calling to you, it’s important to research what a move there would involve — including the tax implications. Below, we’ve put together an easy-to-understand guide on taxation in Croatia for US expats. Read on for the full download!
Snapshot of taxes in Croatia
- Primary tax forms: DOH, INO-DOH, ZPP-DOH
- Tax deadline: The last day of February
- Reporting website: e-Citizens Information and Services1
- Administrative language(s): Croatian
- Tax treaty: Yes
- Totalization agreement: No
Taxes in Croatia for foreigners
How someone is taxed in Croatia depends on whether or not they’re a tax resident. Non-tax residents are only subject to taxation on Croatian-sourced income, while tax residents are subject to taxation on their global income.
Those who are subject to Croatian income taxes may need to fill out one of these forms:
- DOH: The standard income tax return form, mainly filed by people who have either:
- Earned money from self-employment or activities not related to employment
- Been asked by the Croatian government to file it
- INO-DOH: The form to report income earned abroad, or to claim a credit for taxes paid in another country
- ZPP-DOH: The form to request personal allowances for taxpayers and their family members, or to claim a credit for taxes paid in another country (if not already included in INO-DOH form)
Who qualifies as a tax resident in Croatia?
Croatia defines tax residents as those who either rent/own a residence in Croatia for at least 183 consecutive days over two consecutive calendar years, or have a habitual abode in Croatia which they reside in for at least 183 days over two consecutive calendar years.2
According to Visaguide.world, some of the more common long-term Croatian visas that US expats hold include the:
Work visa
For those who have been offered a job by a Croatian employer.
Student visa
For those who plan to study in a Croatian educational institution.
Family visa
For spouses, partners, and minor children of Croatian residents, or parents of a minor Croatian resident.
Digital nomad visa
For those working remotely for an employer or client based outside of Croatia.
Croatia digital nomad taxes
One of the main benefits of the Croatian digital nomad visa is that it exempts holders from Croatian income taxes for its entire duration. To stay in Croatia on a long-term basis after that, however, someone would need to apply for one of the other visas mentioned above, which do not exempt holders from taxes.
Income tax rates in Croatia
Income tax rates in Croatia for the 2023 tax year are as follows:
| Annual Income (EUR) | Annual Income (USD) | Tax Rate |
|---|---|---|
| ~€0 – €47,780 | ~$0 – $51,262 | 20% |
| ~€47,781+ | ~$51,263+ | 30% |
Note that these rates apply only to employees — self-employed individuals will be subject to different rates depending on how they file (e.g. sole proprietor, limited liability company, etc.).
And depending on the city/municipality someone lives in, they may need to pay an additional municipal income tax of 0% to 18%.3
Property taxes in Croatia
Property owners in Croatia don’t pay a fixed annual tax unless they own a holiday home (in which case, rates are €.66 to €1.99 per square meter.4 There are taxes on the sale or acquisition of property, however.
Those who acquire an existing property pay a real estate transfer tax (RETT) of 3%, while those who acquire newly-developed property are taxed at VAT rates (more on that below). Those who sell property, meanwhile, are taxed at capital gains rates.2
Capital gains tax in Croatia
Croatia’s capital gains tax rate varies depending on the type of asset sold:5
- Interest, dividends, & property: 10%
- Shares & stock: 20%
- Withdrawals of assets & use of services: 30%
A city or municipal tax may be levied as well, depending on location.
Pro tip:
There are certain allowances and exceptions for particular types of assets (e.g. primary residences), so refer to the eTaxServices website (1) or a Croatian tax professional when in doubt.
Payroll tax in Croatia
Employees in Croatia have 20% of their gross salary (up to ~€8,203 per month, or ~€98,437 per year) automatically withheld from their paychecks to fund social security and pensions. Employers assume the full tax liability for health insurance, at a rate of 16.5% of an employee’s gross salary.2
Do I have to pay social security contributions in Croatia?
US expats who are tax residents of Croatia must pay Croatian social security taxes at the rates mentioned above (except for digital nomad visa holders). Unfortunately, the US doesn’t have a totalization agreement with Croatia, so they must also pay US social security taxes.
The good news, though, is that there are a number of different tax breaks that US expats can leverage to reduce or even offset this extra tax liability, which we’ll cover in more detail a bit later.
VAT
Croatia’s value-added tax (VAT) — the tax placed upon the sale of most goods and services — is referred to locally as PDV. The standard rate is 25%, although there are reduced rates:
- 13% VAT: Tourist accommodation services, certain utilities, certain personal hygiene products, etc.
- 5% VAT: Certain staple groceries, event tickets, certain medicines, etc.
- Exempt from VAT: Health services, education services, financial services, etc.6
What are the filing deadlines in Croatia?
The primary Croatian tax return form (DOH) is due on the last day of February. If someone has to fill out a supplemental form, the deadlines are:
- INO-DOH: January 31st
- ZPP-DOH: Last day of February2
Do US expats living in Croatia also have to file US taxes?
Yes. All US citizens and Green Card holders who meet the minimum earnings threshold must file a federal US tax return, regardless of where they live or where their income is generated. While US tax bills are still due by April 15th, expats get an automatic filing extension on the return itself until June 15th, which can be extended further to October 15th upon request.
Does Croatia have a tax treaty with the US?
As of December 2022, Croatia now has a tax treaty with the US.7 Tax treaties like this are designed (at least in principle) to prevent US citizens living abroad from being taxed twice on the same income. To claim the benefits of a tax treaty, file Form 8833.
The actual benefits may be limited, however, as a provision called the savings clause allows the IRS to treat US citizens as if the treaty didn’t exist. Usually, the safest bet to avoid double taxation is to claim one of the tax breaks below.
Common tax breaks available for expats in Croatia
Foreign Tax Credit (FTC)
The Foreign Tax Credit (FTC) provides US taxpayers with a dollar-for-dollar US tax credit for any foreign income tax they’ve paid, which typically eliminates US tax bills altogether. To claim it, file Form 1116.
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion (FEIE) lets you exclude the first $120,000 of foreign-earned income (for tax year 2023) from taxation. Those who qualify for the FEIE can also leverage the Foreign Housing Exclusion/Deduction to write off certain housing expenses.
To benefit from these tax breaks, you must pass one of the following tests:
Physical Presence Test
To pass the Physical Presence Test, you must have been physically outside of the US for 330 days in a 365-day period.
Bona Fide Residence Test
To pass the Bona Fide Residence Test, you must prove that you’re an official resident of Croatia. Official documents like residence cards, letters of employment, and rental contracts can help support your claim.
Child Tax Credit
US expats living in Croatia with qualifying dependents can claim the Child Tax Credit (CTC) just as they would in the US. Typically, they receive up to $1,500 per qualifying dependent.
Tax implications of renting out your US residence while in Croatia
Those who own property in the US often choose to rent it out while living abroad. If you do this, just remember to report it on Form 1040. And keep in mind that because rental income is passive vs. earned, it does not qualify for exclusion via the FEIE.
US expats living in Croatia may need to file an FBAR
If you had a total of more than $10,000 in foreign accounts at any time during the tax year, you must also file FinCEN Form 114, otherwise known as a Foreign Bank Account Report (FBAR).
And if you have overseas assets worth over $200,000 by the last day of the tax year, or over $300,000 at any point in the tax year, you must declare them on Form 8938.
Getting caught up on your US taxes with the Streamlined Procedure (SLP)
If you’ve been living in Croatia but weren’t aware you had to file US taxes, you’ll want to catch up as soon as possible. Look into the IRS Streamlined Procedure in particular — this amnesty program allows US taxpayers to catch up on back taxes without additional penalties.
To qualify, you must not currently be under IRS investigation, not have already received notice about overdue tax returns, and not have deliberately avoided taxes.
Enjoy Croatia while Bright!Tax optimizes your US tax strategy
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