This section shows the most important tax implications of the direct holding of real estate. First, the impact on resident individuals and non-resident individuals will be explained. Then the impact for resident companies and non-resident companies is described.

Resident individuals

Renting for residential purposes

Personal income tax

Income derived from real estate, such as rental income, is subject to individual income tax when rented out for residential purposes. The income will be taxed with a tax rate of 10%. On the amount of tax liability, the municipal surtax (0-18%) will be calculated.

Deductibility of costs, interest and depreciation

The taxable base for income from property on the basis of rental or lease of immovables can be decreased by 30% for expenditures (lump-sum deduction).

Renting for tourism purposes

Annual Flat Rate Tax

When renting to tourists or travellers, an annual flat rate tax is applicable which is calculated through the following formula: (number of beds/accommodation units) X flat tax rate. The amount of flat-rate income tax is set by the representative body of the local self-government unit (minimum HRK 150.00, maximum HRK 1,500.00). On lump-sum tax payment, a municipal surtax (0-18%) will be calculated.

Non-resident individuals

Value added tax

If non-residents rent real estate located in Croatia, they are considered VAT payees by default, in which case, they are obliged to pay VAT at the rate of 25% when renting or 13% when providing accommodation services. On the other hand, rental income for residential purposes is exempt from VAT. 

Annual Flat Rate Tax

If non-residents earn less than HRK 300.000 (cca. 40.000 €) in annual revenue and rent their real estate for tourism purposes, they may opt to pay an annual flat rate tax.

Resident companies

Corporate income tax

Business income such as rental income and capital gains are subject to corporate income tax. Business profits are taxed with a corporate income tax of 10% (for revenue up to HRK 7.500.000,00 during the fiscal year) or 18% % (for revenue equal to or greater than HRK 7.500.000,01 during the fiscal year).

All income gains and expenses of companies are considered on an accrual basis.

Deductibility of costs, interest and depreciation

Depreciation costs, interest costs, maintenance costs and operating costs are tax deductible if, on the basis of the use of the property, in the tax period, the income is equal or greater than 5% of the purchase value of such property. Real estate must be depreciated annually. The annual tax-deductible depreciation rate for real estate is 5%. The annual depreciation rate can be doubled and is a tax-deductible expense (10%).

Value-Added Tax

Rental income is subject to Croatian VAT if the rented object is located in Croatia. In that case, rental income is the basis of tax and the VAT rate is 25% while providing of accommodation services is taxable with 13% of VAT. Rental income for residential purposes is exempt from VAT.

Loss – carry forward

Tax losses may be carried forward and utilised within five years following the year in which the losses were incurred and must be utilised in the order in which they occurred. The losses may not be transferred to any third party except in the case of merger, de-merger, or acquisition.

Non-resident companies

Non-resident companies are treated in the same way as resident companies. In order to do business in Croatia, non-resident companies must establish a subsidiary which effectively make them resident companies. The non-resident company is therefore limitedly taxable in Croatia with the income generated in Croatia.


Taxation of vacation homes

Regarding taxation for holding real estate, i.e., ownership of real estate, the Croatian legislature hasn't yet introduced a periodical (annual) real estate tax. Currently, only the ownership of holiday homes is taxed. Holiday homes are taxed regardless of whether the owner is an individual or a company, or a resident or a non-resident.

The tax on holiday homes is charged at HRK 5 to 15 per square metre of usable floor area, depending on the decision of the municipality or city where the home is located and is paid annually.

Tax exemption

You are not required to pay the tax on holiday homes if you cannot use the holiday home due to it being destructed in a war or natural disaster (fire, flood, earthquake), due to it being old and dilapidated or for the period in which displaced persons and refugees are (were) staying in it. 


​Surtax is paid by those liable to pay income tax who have a domicile or a common residence in the area of the commune/municipality that has prescribed the obligation to pay the tax. Surtax in Croatia ranges from 0% to 18%. The base on which surtax is calculated is the amount of tax liability. The rates of surtax are prescribed by municipalities and cities.

Utility charge

A utility charge is a fee charged and used by local governments with the purpose of financing the maintenance and construction of communal infrastructure. It is paid by all citizens, individuals and companies. The fee is charged to the owners (i.e., users) of residential, garage, business space and building land. The basis for paying this charge is multiplication of the following coefficients: area per square meter (m²), coefficient of purpose (dependant depending on the type of property and activity conducted), zone coefficient (dependant on geographical location) and value of the utility fee point (price per square meter.

The communal contribution is paid by the owner of the land on which the building is being built or where the legalized building is located, i.e., the investor, if the obligation to pay the municipal contribution is transferred to him by a written contract.

The unit value of the communal contribution is determined for individual zones so that this value is the highest for the first zone, and lowest for each subsequent zone.

The unit value of the communal contribution for the first zone cannot be higher than 10% of the average construction costs per cubic meter (m³) of the building in the Republic of Croatia.

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