Amendments to tax regulations – Year 2025 – Part 2

22. January 2025.

As of January 1, 2025, amended tax regulations in the areas of local taxes, personal income tax, contributions, value added tax and general tax came into force. Below, we present the most significant amendments to the tax regulations.

Personal Income Tax Act

  • Increase of personal allowance – the amount of personal allowance is increased from EUR 560.00 to EUR 600.00.

  • Increase in personal allowances for dependent family members and established disability.
  • Income tax brackets – the threshold for applying a higher income tax rate is raised from EUR 50,400 to EUR 60,000.

  • New upper limits for income tax rates:

Local Government Unit

Lower rate

Higher rate

Municipality15% – 20%25% – 30%
City15% – 21%25% – 31%
Large city and county seat city15% – 22%25% – 32%
City of Zagreb 15% – 23%25% – 33%

  • Exemption for returnees – emigrant Croatian nationals will be exempt from personal income tax for 5 years, provided they have lived abroad continuously for at least 2 years.

  • Equalization of tax liability for tourist and contractual rent – in both cases, it is determined based on the location of the property or accommodation unit.

  • Changes in taxation of flat-rate tax for individuals earning income from property rental in tourism. Local government units will be ranked into four categories.

Category of local government units according to the tourism development index

Amount of flat-rate tax in euros and cents

I100 − 300
II70 − 200
III30 − 150
IV,020 − 100

The annual flat-rate income tax is still determined as the product of the number of beds and the amount of flat-rate tax per bed specified by the Decision on the amount of flat-rate tax for rental and accommodation activities in tourism, adopted by the representative body of the local government unit.

  • Income from the alienation of real estate – new legislative changes (Article 58 of the Personal Income Tax Act) introduce exceptions for determining income from the alienation of real estate. Some of the changes are as follows:

  • Income from the alienation of real estate is not taxed if the property or ownership right is sold more than two years after acquisition or more than two years after the property has been made available for use, if the property was built, reconstructed, or had its form and purpose changed.
  • Exceptionally, income from the alienation of real estate and ownership rights is taxed if more than three properties of the same type or more than three ownership rights of the same type are disposed of within five years from the date of acquisition of the property or ownership right, or within five years from the date when the property was made available for use in the case of construction, reconstruction, or change of form and purpose.
  • Investment costs for which the taxpayer holds valid documentation, as well as alienation costs, can be deducted as expenses.
  • Income from rent – new legislative changes (Article 62 of the Personal Income Tax Act) introduce exceptions that will allow for tax exemption in cases where the property or movable asset is rented without generating income.

Changes are also expected in the amounts of annual non-taxable income receipts, specifically an increase in the amounts of the following non-taxable incomes:

  • Bonus for work results – EUR 1,200

  • Severance pay for retirement – EUR 1,500

  • Allowance for separated living – EUR 300

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Please keep in mind the fact that legislation tends to change frequently. This article is therefore necessarily based on our understanding and correct interpretation of the law and practice at the time of issuing this article. This article will not be updated due to changes in legislation that occur after this article is issued.