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Minister Ćorić Presented Government's Anti-Inflationary Tax Changes
🇭🇷 Croatia /Economy & Trade

Minister Ćorić Presented Government's Anti-Inflationary Tax Changes

From Večernji List · () Croatian

Translated from Croatian, summarized and contextualized by DistantNews.

At a glance

News Named sources New plan
  • Croatia is implementing tax changes as part of an anti-inflation package, including adjustments to the tax treatment of flat-rate businesses and short-term tourist rentals.
  • The annual income limit for flat-rate businesses to maintain their current tax status has been raised to 40,000 euros, with increased tax and contribution amounts for the highest income brackets.
  • The package also introduces a tax on excess profit margins for companies and eliminates income tax on pensions, aiming to simplify business operations and curb rising prices.

Croatia's government is introducing significant tax reforms aimed at curbing inflation and simplifying business operations. Minister of Finance Tomislav Ćorić presented changes to the tax treatment of flat-rate businesses, part of a broader anti-inflationary package. The annual income threshold for these businesses to remain unchanged has been doubled to 40,000 euros, up from the previously proposed 19,900 euros, following negotiations with the Croatian Chamber of Crafts.

Flat-rate taxation was created to simplify business, not to make one form of business much more favorable tax-wise than others. In our case, the latter happened.

— Tomislav ĆorićMinister of Finance explaining the rationale behind the tax changes for flat-rate businesses.

While the majority of flat-rate entrepreneurs (approximately 83.4%) will see no change, the remaining 16.5% will face increased tax and contribution payments starting January 1, 2027. For the sixth tax bracket, the increase amounts to 1,336 euros (30%), reaching 5,728 euros annually. The highest, seventh bracket, with annual incomes from 50,000.01 to 60,000 euros, will experience a 66% rise, or 3,033 euros, bringing their total to 7,605 euros.

Minister Ćorić emphasized that the original intent of flat-rate taxation was simplification, not creating a tax haven. He noted that Croatia's system remains favorable within the EU, even after these adjustments. The government expects around 20,000 new flat-rate entrepreneurs by year-end, indicating the system's previous attractiveness, which Ćorić deemed unfair.

After these changes, the Croatian tax system remains one of the most favorable for this form of work in the EU.

— Tomislav ĆorićMinister of Finance defending the tax adjustments.

The anti-inflationary package also includes changes to the tax treatment of short-term tourist rentals, the introduction of a tax on excess profit margins for about 1,800 medium and large companies (excluding extensive exporters), and the abolition of income tax on pensions. The minister believes that reducing the amount of money circulating in the economy will help decrease aggregate demand and thus combat inflation.

Every euro that does not function in the economy reduces aggregate demand. Money that actors do not have acts anti-inflatorily.

— Tomislav ĆorićMinister of Finance explaining the anti-inflationary effect of the tax changes.
DistantNews Editorial

Originally published by Večernji List in Croatian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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