In the tax system of Croatia, there is a portion of every person’s salary that cannot be taxed. The purpose of this is to guarantee that each person will be able to keep some funds for themselves without tax.
This basic osobni odbitak (personal allowance) is 2.500 kuna per month. To calculate how much from your salary will not be taxed, multiply the basic personal allowance by 1,6. The number you get is 2.500 x 1,6 = 4.000 kuna.
If you have children, there are further tax breaks. For the first child, multiply the basic allowance by 0,7 to calculate the additional amount from your salary that will not be taxed. For the second child, multiply the allowance by 1,0 and 1,4 for the third child.
For more information, view a personal deduction table here.
So what do all of these numbers mean exactly? Below is a simplified example, but SPOILER ALERT, there will be math.
A single person earning a monthly salary of 11.000 kuna will only be taxed on the amount that remains after we subtract the basic personal deduction from his gross salary, that is:
11.000 – 4.000 = 7.000 kuna
A person with two children will be taxed in the following manner:
11.000 – (4.000 + 1.750 + 2.500) = 2.750 kuna
As you can see, there is a considerable difference in taxable income when you have children.
This tax relief may be used jointly by working parents. In some cases, parents with 3 or more children can avoid paying tax on their income tax altogether, because their personal allowance is higher than their gross income.
More information on these regulations and other personal allowances can be found on the Croatian tax agency website.