The Croatian government sent a comprehensive tax reform package to the Parliament on September 10th, bringing the biggest tax changes in a decade, effective January 1, 2027.
🎯 Key changes
The package amends the Income Tax Law, Contributions Law, VAT Law, and introduces an entirely new concept — the Croatian Investment Account (HIR).
✅ 1. Pensions completely tax-free
Currently, retirees get a 50% reduction on income tax for pensions. The new law raises this to 100% — meaning zero income tax on pensions.
Example calculation: €800 pension, €600 personal deduction, €200 tax base. 20% tax = €40. Currently with 50% reduction: €20. From 2027 with 100% reduction: €0.
Exemption applies to all pensions up to €5,000/month. Local budgets lose ~€180 million annually.
✅ 2. Croatian Investment Account
Every adult citizen can open one HIR account (parents for minor children too) and invest in stocks, bonds, funds, and ETFs with completely tax-free returns. Basic limit: €200,000, plus €50,000 for long-term investments. If conditions are breached, returns are taxed at 12%.
⚠️ 3. Excess profit tax
One-time anti-inflation measure targeting ~1,800 large and medium companies. If 2026 profit margin exceeds 3-year average by 15%, the difference is taxed at 50%.
⚠️ 4. Higher costs for some self-employed
83.4% of self-employed (earning up to €40,000/year) remain unchanged. Those earning €40,001-€50,000: deductible expenses drop from 85% to 70%, contributions +12.5%. Those earning €50,001-€60,000: deductions drop to 55%, contributions +25%.
⚠️ 5. Tourist rental minimum tax increases
Minimum per-bed tax rises: Category I from €100 to €150, Category II from €70 to €100.
✅ 6. VAT and digital age
Alignment with EU ViDA directive. Small gift threshold raised from €22/quarter to €100/year per recipient.
📅 Timeline
September 10, 2026 → sent to Parliament → expected adoption by end of 2026 → effective January 1, 2027.