The Republic of Croatia has concluded agreements for the avoidance of double taxation with many countries. Pursuant to most of these agreements for the avoidance of double taxation, pensions are taxed only in the country of residence. Pensions of residents are taxed in the same manner as stipulated for pensions acquired in Croatia; that is, in the manner stipulated for employment income which residents earn abroad, unless treaties for the avoidance of double taxation or international treaties stipulate otherwise.
Agreements for the avoidance of double taxation
If the Agreements for the avoidance of double taxation have been concluded between the Republic of Croatia and a foreign country, then share of the right of pension taxation or allocation of exclusive right of pension taxation is clearly defined by the international agreement.
To determine a taxable income, provisions of the agreements for the avoidance of double taxation and bilateral international agreements or treaties shall prevail over provisions of a domestic law.
You can find an updated list of the countries with which the Republic of Croatia has concluded an agreement for the avoidance of double taxation on the Tax Administration website.
Agreements for the avoidance of double taxation
Most of the agreements for the avoidance of double taxation implemented by the Republic of Croatia stipulate that pensions are taxed exclusively in the country of residence.
Determination of residency status for tax purposes
The basic principle of all agreements for the avoidance of double taxation is that they apply only to the residents of the two contracting states. The country where the taxpayer has a residency status has to be determined.
A resident is a natural person with permanent residence or habitual residence in the Republic of Croatia, but also a natural person without permanent residence or habitual residence in the Republic of Croatia, but the or she works as a civil servant and receives a salary in the Republic of Croatia.
In those cases where two states (the state of residence and the state of pension payment) consider one and the same individual to be their resident, the following rule applies:
- persons shall be deemed to be the residents only of the state in which they have a permanent residence ; if they have a permanent residence in both States, they shall be deemed to be the residents only of the state with which their personal and economic relations are closer (centre of their vital interests);
- if the state in which they have their centre of vital interests cannot be determined, or if they have not a permanent residence available to them in either State, they shall be deemed to be a resident only of the State in which they have a habitual residence;
- if they have a habitual residence in both states or in neither of them, they shall be deemed to be the residents only of the state of which they are nationals;
- if they are nationals of both states or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
If the Republic of Croatia does not have an agreement for the avoidance of double taxation with the country of pension payment, then the residency status is fully regulated by national tax regulations.
if taxpayers have a permanent residence both in the Republic of Croatia and abroad, it is considered that they hold permanent residence in Croatia.
Obligations of recipients of pensions
All taxpayers who are retirees with a foreign pension, whether this pension is taxed or not, are obliged to apply for entry in the register of tax payers by submitting the RPO form to the Tax Administration branch office competent for their place of permanent or habitual residence (the form can also be submitted by a proxy) within eight days from the date when they start receiving this income. Aside from the RPO form, they also have to enclose authentic documents on the income received (the decision or certificate of pension, a bank statement for the account to which pension has been paid to, etc.).
Retirees also have to obtain their tax card in the Tax Administration branch office competent for their place of permanent or habitual residence for the purpose of using their personal allowance or non-taxable portion of their income in the calculation of the advance tax payment in the course of the year.
Advance tax payments and reporting
Advance tax on pension income is calculated at a rate of 24% of the monthly tax base (after the personal allowance deduction) up to the amount of HRK 17,500 and at a rate of 36% of the monthly tax base above the amount of HRK 17,500. The advance tax on pension income calculated in this manner is then reduced by 50%.
Taxpayers who receive a pension from abroad or who receive it abroad pay their advance tax on pension income pursuant to the decision of the Tax Administration until the last day of the month for the current month or they pay it quarterly, until the last day of each quarter, if their monthly advance tax on pension income and income surtax does not exceed HRK 100.
If taxpayers receive a foreign pension or also receive a Croatian pension abroad, the Tax Administration will take into consideration the Croatian pension (the amount of personal allowance deduction and taxable base) when calculating their advance tax on foreign pension income.
Until 31 January of the current year, taxpayers who receive a pension from abroad or who receive it abroad have to report a change in the foreign pension amount for the previous year which is 20% higher or lower than the amount of foreign pension based on which the Tax Administration issued its decision. The Tax Administration will conduct its procedure and issue a new decision on the established monthly tax advance and the difference of tax which needs to be paid or refunded for the previous tax period. Taxpayers have to pay the difference of tax to be paid within 15 days from the date of decision receipt.
Taxpayers who are retirees with a foreign pension can request exemption from payment of advance income tax or income tax in Croatia in the course of the year based on the received foreign income if they are simultaneously paying advance income tax or income tax in a foreign country with which the Republic of Croatia does not have an applicable agreement for the avoidance of double taxation or if they receive pension from a country with which the Republic of Croatia shares the right of pension taxation under the existing agreement for the avoidance of double taxation. In order for taxpayers who are the retirees with a foreign pension to obtain the aforementioned exemption, they have to notify the Tax Administration of this in a written statement within eight days from the first receipt in the current year.
Retirees with a foreign pension who pay advance income tax in the course of the year in the source country (a country the person receives the pension from) and who requested exemption have to submit the report (INO-DOH form) on income earned abroad until 31 January of the current year for the previous year for the purpose of calculation of their tax liability, with the possibility of including the tax paid abroad.
For further information about taxation of foreign pensions you can:
- call the toll-free number 0800/669-933 ( working days from 8 a.m. to 3 p.m.)
- use the Write to us section on the Tax Administration’s website.
- visit a local branch office of Tax Administration
