How much lower are Croatian taxes compared to Slovenian ones? This question has ignited discussions on social platforms these days due to an article published in the Slovenian media Finance. The author of the article compared taxes, which represent one of the main pain points in the business world, starting from salaries.
– If an employer in Slovenia wants to ensure a net salary of 1500 euros for an employee, the total cost for the employer will be 2693 euros, including all contributions and taxes (excluding lunch and transportation). In Croatia, this cost amounts to 2513 euros, which is approximately seven percent less. On the other hand, there are employees who naturally want to receive as much of their gross salary as possible in their account. The difference is much greater for the highest salaries. If Jože Colarič lived in Zagreb, his monthly net salary would be 34,717 euros higher than in Slovenia – writes the author of the article, Izidor Vetrih, noting that the average gross salary in Slovenia in March of this year was 2464 euros, while in Croatia it was 1925 euros, with the net salary in Slovenia being 1569 euros and in Croatia 1392 euros.
In Croatia, a company, he adds, must apply for a tax number if its annual revenue exceeds 60,000 euros. The same threshold applies to Slovenian small taxpayers. If their revenues do not exceed 60,000 euros, they are not obliged to calculate VAT, which is lower in Slovenia than in Croatia.
– Both countries recognize a minimum rate of five percent that you will pay if you purchase printed books, brochures, newspapers, magazines, children’s picture books, musical works, and similar printed materials in Slovenia. In Croatia, the lower VAT rate applies not only to books but also to everyday groceries such as bread, milk, oil, and baby food – the article states.
The corporate income tax (CIT) in Slovenia will remain at 22 percent at least until 2028, while Croatia charges corporate income tax based on the amount of annual revenue. Companies with revenue up to one million euros pay only ten percent tax, while above that amount, the tax rate is 18 percent.
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• Slovenia: 22 percent, the general rate for calculating corporate income tax is 19 percent; however, according to Article 64 of the Law on the Renewal, Development, and Assurance of Financial Resources (ZORZFS), the tax is paid at a rate of 22 percent on the tax base for the years 2024, 2025, 2026, 2027, and 2028.
• Croatia: 10 percent up to one million euros in revenue, 18 percent above one million euros in revenue
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Considering that Croatia differentiates the rate according to the level of income, Croatian entrepreneurs have an advantage over Slovenian ones, writes the author of Finance. Corporate income taxes are also influenced by subsidies and incentives, so it makes sense to look at the effective tax rate as well. According to data from the Croatian Tax Administration, the average effective tax rate in 2023 was 14.8 percent, while in Slovenia it was 17.3 percent.
Janez vs. Jakov
In Slovenia, capital gains tax is calculated based on the period of ownership. When selling within the first five years of ownership, you pay 25 percent tax, the tax rate decreases every five years, and after 15 years of ownership, you do not pay tax. In Croatia, the tax is 12 percent, but after two years of ownership, you will be completely exempt from tax.
– Imagine two investors, Slovenian Janez and Croatian Jakov. Both bought shares of NLB for 10,000 euros in May 2023. During that time, the share price increased by about 90 percent. This year, after two years of ownership, they decide to sell their shares. In the case of the sale, Janez would pay 25 percent tax, or 2250 euros, while Jakov would pay nothing. Moreover, during the two-year period, Jakov would also pay a lower dividend tax – writes Finance.
One of the biggest differences is in the taxation of dividends. In Slovenia, an individual pays a 25 percent tax on dividends, while in Croatia, this tax is slightly more than half lower at 12 percent.
Both in Slovenia and Croatia, micro-entrepreneurs have special tax regimes available to them. Slovenian normalized workers pay four percent income tax up to 60,000 euros because the state recognizes 80 percent of their flat-rate expenses; on the remainder, they pay a tax of 20 percent.
Croatian flat-rate taxpayers, similar to our standard workers, can earn up to 60,000 euros annually. The tax rate is relative to their income (for example, between 50,000 and 60,000 euros in revenue, the tax base is nine thousand euros), and various taxes or contributions will be deducted from that, which ultimately amounts to about five percent of annual income.
The attractiveness of the Croatian business environment has also been confirmed by Jure Mikuž, a partner at the South Central Ventures fund that invests in startups in Southeast Europe. The difference is not only in the tax rate; in Croatia, legislation is also implemented more quickly.
– In Slovenia, we still do not have a simplified joint-stock company, which would be crucial for startups, as it allows for easier employee compensation through shares and consequently a greater reward in the event of the company’s success – said Mikuž.
Reaction also came from the Slovenian government
– In Croatia, there is a noticeably more encouraging attitude towards entrepreneurship. The attitude towards entrepreneurs here is still negative. For example, when Google bought Photomath (an app that uses a smartphone camera to recognize and explain mathematical problems), the public accepted it as a great success, even though the money was raised through an English company – writes the author of the article, adding that in Slovenia, public sentiment was not similar regarding the sale of the Slovenian gaming company Outfit7. Moreover, the audience created a negative public opinion. The ultimate result of all of the above, both taxes and the attitude of the public and the state, concludes the article, is that significantly more is invested in startups in Croatia.
This article published in the Slovenian media also prompted a reaction from Slovenian Finance Minister Klemen Boštjančič.
– So, the information about Ivan and Jakov is accurate. But if we are going to comment on taxes again, it would be good to look at what we get for that. Not to complicate too much – so, do we want to compare ourselves with Croatia? Let’s then look at what the level of public services in Croatia is compared to Slovenia. Hmm, I agree, that would be difficult to measure. But well, we know what salaries are, pensions, who probably even knows about their healthcare, infrastructure (digital is, for example, becoming increasingly important) etc. Therefore, I prefer to make some easier, measurable comparisons. Why do we only compare ourselves with Croatia? Slovenians like to seek inspiration in Germany and Austria. So, what tax would an Austrian and a German Johann pay on stock returns after two years? Oh, and I dare say that most Slovenians perceive Denmark as the ‘promised land’. I am sure the author knows how much Johannes would pay in taxes on stock returns after two years. So, as Slovenians, we can easily invest in stocks, for example. Danish Bank, Danes can invest in NLB. So let’s make another comparison, for example: What tax would all the above-mentioned pay (yes, including Jakov) on stock returns after 15 years of ownership, compared to John. But of course, such comparisons would probably be labeled as misleading, incomplete, and taken out of context – concluded, among other things, the Slovenian Finance Minister in his LinkedIn post.
The editor at Finance, Jurij Šimac, responded to the minister with the question of why not compare with Croatia?
– We hear a lot about relocations to our neighbors; after all, we are quite similar, even in GDP per capita. (…) Our neighbors have two more VAT rates. For everyday necessities like bread, the VAT rate is 5 percent, while in our country it is 9.5 percent – writes Šimac, adding that if we set aside the burden of salaries, dividends in Slovenia are taxed twice as much compared to Croatia.
