In the modern era of technology, situations where an employee has an employment contract with a domestic employer in Croatia but brings their laptop to another country and works from there for a longer period are increasingly common. Although this is often simply called "working from home", it has serious consequences from a tax administration perspective.
The general rule of international taxation is: Income from non-independent work is taxed in the country where that work is PHYSICALLY performed.
This means that your tax obligation, following the logic of the law, does not follow your employer's seat but your physical, biological presence. If you are physically in Thailand or Germany while typing code or sending emails, that country on whose soil you stand has the right to tax your work!
The greatest risk of working from abroad falls on <strong>your employer</strong>. If you regularly sign contracts or have a managerial role in a foreign country, that foreign country could declare your living room table a "Permanent Establishment" of your domestic company. This would force your Croatian company to start paying corporate income tax in that foreign country on part of its global revenues! Due to this enormous risk, large corporations strictly limit work outside the borders.
To allow so-called temporary "posted work" (when a domestic company temporarily sends you to Germany for work), the A1 certificate system was developed. <strong>The A1 certificate ensures that you continue to pay pension and health contributions at home in your country</strong> while you are temporarily (up to 24 months) abroad. This prevents the foreign country from "catching" you in its bureaucratic health system during a shorter assignment.
The country that will claim the principal tax at the end of the year is identified by your <strong>tax residency</strong> status. The key international rule is 183 days: you will be considered a tax resident of the country in which you have physically spent <strong>more than 183 days (approximately more than half a year) in one full calendar year</strong>.