Our valued sponsor

Passive income taxation in Croatia

Bank Accounts, Company Formations, Tax Planning, Residency Solutions, and more
CALL US ON +971 50 4467827 - TO SETUP YOUR NON-CRS COMPANY STRUCTURE IN DUBAI.

zeroflag

New member
Jan 14, 2023
7
1
3
39
Hungary
I'm thinking about moving to Croatia from another EU country and living on passive income coming from a stock portfolio. I'd like to realize capital gains by selling shares (once or twice I year, so no active trading) and receiving dividends mainly from US companies.

I'm interested in the tax implications of this. I don't want to get a job or form a company, I'd like to remain a private, personal investor and generate passive income.

I've just learnt that Croatia didn't have a double taxation treaty with the US up until this point so US dividends were taxed with a rate of 30%. But the upcoming treaty is going to reduce this to 15%. Anyone can confirm this?


My understanding is that capital gains on shares are taxed with a rate of 10% (or 12%?) but there is a tax exemption after a 2 years holding period.

There is also a local municipal surtax which can be up to 18% depending on the city. But the base of this is not the full amount but the taxed amount. Anyone knows if this is applicable to both dividends and capital gains?

Is there any additional social or health care contribution tax which affects dividends and capital gains?
 

Jerry1911

Entrepreneur
Oct 5, 2019
595
294
63
I've just learnt that Croatia didn't have a double taxation treaty with the US up until this point so US dividends were taxed with a rate of 30%. But the upcoming treaty is going to reduce this to 15%. Anyone can confirm this?
See https://home.treasury.gov/system/files/131/Treaty-Croatia-12-7-2022.pdf

It was taxed with 30% but you would be exemptfrom paying tax on dividends in Croatia (the 12% + local surtax). There was also a similar thing for Croatian LLCs owning US stocks - the 30% US WHT would count as an expense.

My understanding is that capital gains on shares are taxed with a rate of 10% (or 12%?) but there is a tax exemption after a 2 years holding period.
Correct, and it's 10%, not 12%. It was 12% up until last year, or something like that.

There is also a local municipal surtax which can be up to 18% depending on the city. But the base of this is not the full amount but the taxed amount. Anyone knows if this is applicable to both dividends and capital gains?
Correct, and yes, it's applicable to both dividends and cap gains.

Is there any additional social or health care contribution tax which affects dividends and capital gains?
No.

By the way, keep in mind that there's no case law regarding private foundations, trusts and place of effective management in Croatia.
 
Last edited:
  • Like
Reactions: pipona and zeroflag

zeroflag

New member
Jan 14, 2023
7
1
3
39
Hungary
Thanks for the reply.

So if I live in Zagrab where the surtax is 18%. And I make 100$ capital gains within 2 years, I'll pay 10$ tax + 1.8$ surtax. But if I hold more than 2 years and only sell after, I pay 0 tax and 0 surtax?

If Starbux pays me 100$ dividends and the USA withheld 30$ (let's say there is no double tax treaty) then I'll still need to pay the 18% surtax on the 30$ ( 30 * 18/100 = 5.4$) to Zagrab?
 

Jerry1911

Entrepreneur
Oct 5, 2019
595
294
63
So if I live in Zagrab where the surtax is 18%. And I make 100$ capital gains within 2 years, I'll pay 10$ tax + 1.8$ surtax. But if I hold more than 2 years and only sell after, I pay 0 tax and 0 surtax?
Correct
If Starbux pays me 100$ dividends and the USA withheld 30$ (let's say there is no double tax treaty) then I'll still need to pay the 18% surtax on the 30$ ( 30 * 18/100 = 5.4$) to Zagrab?
No. See what Mazio wrote.
 
  • Like
Reactions: zeroflag

zeroflag

New member
Jan 14, 2023
7
1
3
39
Hungary
Oh I see, it makes sense.

I wonder how it would look like if there was already a double tax treaty between the US with a cap of 15% max. Then I would receive 85$ from the US.
My understanding is that the treaty would prevent me paying taxes in HR if the tax was already paid in the US, which might eliminate the surtax.
 

pipona

Entrepreneur
Jul 10, 2011
71
39
18
South Sandwich Islands
By the way, keep in mind that there's no case law regarding private foundations, trusts and place of effective management in Croatia.

Is this a potential benefit or drawback? Please forgive my ignorance. Would Croatia be an attractive place from which to run an offshore company because the authorities wouldn't hassle you and claim it's effectively managed there?
 

Latest Threads