We often encounter confusing questions from clients: "My colleague does the same type of identical job, we work for the same foreign remote company with the same agreed Gross figure. However, his final net money is significantly lower! Here we come into direct contact with the power of autonomous local governments in creating and tailoring what we call the 'local budget.'"
Depending on state laws, large cities and municipalities often have autonomy in determining specific tax rates (whether through additional local income taxes, former surtaxes, or independently moving the lower and upper limits of income tax collected by the Tax Administration).
The state provides a tax framework for the legislative base. Local government is left to decide how much it will "take" from the workers' income, and this figure results in salary differences within the same country.
As traditional economics mandates, large metropolises like Zagreb record an immense and above-standard influx of central IT job demand and a huge outflow of funds for managing dense public infrastructure and various traffic solutions. The logical conclusion and response to these increased infrastructure needs is the application of the maximum allowed city tax rate on the total income.
If you reside in a large city with a high tax burden, your same Gross salary will result in a significantly smaller Net amount on your account, despite high average earnings at the state level.
Smaller areas often lower local taxes to the allowed minimum to attract investment and retain the population. For the worker, this means a smaller tax deduction and higher final Net money on their account compared to a colleague from the capital.
Classic Example of Comparative Balance of Living Costs:
This system directly reflects an economic and legal imbalance – while taxation takes a significant fund from monthly nets despite a great secured higher minimum gross income of the region in metropolises – that is precisely where (due to job offers) survival involves the huge and expensive chains of real estate prices. On the other hand, the exempt side at first glance offers fantastic usable earnings for purchasing efficiency. It is important to use a calculator for precise municipal accounting, as average figures drop when the system automatically detects your municipal range.