Over the last few years, Croatia has made significant strides in tax policy, positioning itself increasingly as an attractive destination for work, investment, and business in Central and Eastern Europe. New data and analyses indicate that Croatia is approaching the regional average, and in some segments, it offers more competitive conditions than its neighboring countries.
Key changes and competitiveness
Croatia implemented a series of reforms aimed at reducing the tax burden on labor, thereby increasing the economy’s competitiveness and attracting the interest of investors. The share of total benefits (taxes and contributions) in the total cost of work, known as the tax wedge, in Croatia is approximately 40% at the average gross salary level in the private sector. This is slightly above the regional average (38%), but significantly lower than in countries like Slovakia and Germany (49%). Kosovo and Moldova have the lowest tax burden (13-16%).
The average gross salary in the private sector in Croatia exceeds 1,900 euros, which is higher than in most countries of Central and Eastern Europe. However, it remains lower than in Austria and Germany. Croatia offers numerous tax incentives for investments, particularly for projects that create new jobs, introduce innovations, and facilitate the digitization of businesses. For larger investments, it is also possible to be completely exempt from income tax for a period of up to ten years, provided certain conditions are met.
Tax reform in 2025.
The minimum gross salary has increased to 970 euros, and the basic personal deduction has been set at 600 euros, which directly reduces the tax base and increases net income. Tax-free awards, severance pay, and scholarships have been increased, which further relieves the burden on workers and employers.
A new real estate tax was introduced to replace the previous tax on vacation homes, aiming to achieve fairer property taxation. Croatian citizens returning from abroad are exempt from paying tax on income from self-employment for five years.
Comparison with the region
| COUNTRY | TAX WEDGE (%) | AVERAGE GROSS SALARY (€) |
|---|---|---|
| Croatia | 40 | 1900+ |
| Slovakia | 49 | – |
| Germany | 49 | 4000+ |
| Kosovo | 13-16 | – |
| Moldavia | 13-16 | – |
SOURCE: Forvis Mazars, 2025.
Thanks to tax reforms, work relief, competitive incentives for investments, and wage growth, Croatia is increasingly perceived as the “tax mecca” of Central and Eastern Europe. Although there are still areas where additional load reduction is possible, current trends and measures make Croatia a desirable destination for work, life, and business in the regional context.
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