When you look at your payslip, the difference between the Gross and Net amount can look confusing. The reason for this is mandatory contributions – contributions and taxes. On this page, we explain in detail exactly which taxes the state charges on your work in Croatia.
Income tax from non-independent work (salary) is the most important and largest tax you pay on your earnings. Unlike contributions (which go into pension or health insurance for your direct benefit in the future or in case of illness), income tax is the revenue of your municipality or city.
This money is used to finance local infrastructure: kindergartens, schools, public transport, street maintenance, and local administration.
Income tax is NOT PAID on the entire Gross amount! It is always paid exclusively on the so-called Tax Base.
The Tax Base is obtained by subtracting your Personal Deduction (the tax-free part of earnings that the state guarantees to every citizen for basic life needs) from your salary (after pension contributions are deducted).
In addition to the basic state income tax, many systems allow local units (cities and municipalities) to charge an additional, local tax to "beef up" their budget. This can be implemented as an addition to the state tax (surtax) or through city autonomy to determine the tax rate itself (depending on what current law of the selected region prescribes).
Important note for the Republic of Croatia: Starting from January 1, 2024, the surtax institution as it once was has been FULLY ABOLISHED by law as part of the tax reform. Instead of surtax, cities are allowed to determine the exact Income Tax rate themselves within specified ranges.
In everyday speech, citizens often confuse contributions and taxes, saying "the state takes 40% of my salary through taxes". Although it is true that you do not receive that money in your account, it is essential to distinguish between these two concepts legally and essentially: