Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Mellow by themselves.
To carry on tax accounting in Croatia for your Mellow income, you need to:
Tax residence
Croatia taxes its residents on their worldwide income, while non-residents are taxed on their Croatian-source earnings only.
Individuals are deemed Croatia's resident taxpayers if they:
Have real estate in their ownership or at their disposal for an uninterrupted period of at least 183 days in one or two calendar years in Croatia (stay in the real estate is not a determining factor).
Are physically present in Croatia for at least 183 days in one or two calendar years. Short interruptions of stay, up to one year, are not decisive.
Additional criteria for determining the tax residence status:
If a taxpayer has real estate in one’s ownership or at one’s disposal in Croatia and abroad, one is considered a resident taxpayer in the country in which one's family resides.
If one has no family or place of one’s residence cannot be determined, one is deemed a resident taxpayer in the country from which one usually goes to work to or in which one is predominantly physically present.
In case the other country does not consider the individual from the item above as its resident taxpayer, one is deemed a Croatian resident taxpayer.
If an individual meets none of the above conditions, they are regarded as a non-resident taxpayer in Croatia.
Croatia has double taxation agreements with a number of countries (full list), the provisions of which may override the applicable tax residence rules and other provisions of national legislation.
Taxpayer ID number
The personal identification number (osobni identifikacijski broj, OIB) is assigned to all Croatian citizens at birth or in the process of acquiring Croatian citizenship. In addition, this number is issued to foreign nationals who have the right to stay in the country long-term, by virtue of either having a residence permit or domicile. Unlike Croatian citizens, foreign nationals need to submit an application to the Ministry of Finance's Tax Administration to obtain an OIB.
The OIB number consists of 11 digits. The first 10 are randomly chosen, while the 11th digit is calculated by a special program of the Ministry of Finance's Tax Administration. The OIB is written in a number of ID documents: passport, identity card, residence permit / domicile certificate. Taxpayers can check their personal ID number via SMS or online.
The VAT identification number (PDV identifikacijski broj) is obtained when registering as a VAT payer. Taxpayers engaging in economic activities that give rise to VAT obligations are required to obtain a VAT ID (Article 6 of the Croatian VAT Act). The VAT ID consists of the letters HR followed by the OIB number.
Taxes and contributions payable by freelancers
To fulfill tax obligations associated with earning income in Croatia, freelancers need to register as a sole proprietor (obrt, obrtnik).
In Croatia, there are several types of sole proprietorships (obrti):
Free trade business/craft (slobodni obrti), which does not require any additional confirmation of qualifications before providing services.
Related or “tied” trade business/craft (vezani obrti): Before rendering services, you must pass a professional exam. Other requirements include providing a secondary education certificate or a diploma. Examples of activities: car mechanic, hairdresser, carpenter, and so on.
Preferential trade business/craft (povlašteni obrti): Can only be registered based on a specific privilege/preference (applies to things like fishing).
Registration. Setting up a sole proprietorship is done as follows:
Croatian citizens can register online via the e-Obrt service.
Foreign nationals must apply in person via the Zagreb City Department for Economy.
To learn more about the registration process, see here
IMPORTANT! Mellow does not have the option to choose a tax status for freelancers based in Сroatia, but you can fill in your taxpayer ID in your account.
In Croatia, sole proprietors can choose from the following income taxation models:
Basic tax scheme
The basic tax scheme is the default tax system, i.e., one that is automatically applied to the activities of a sole proprietor (unless they specifically apply for a different one). Taxpayers using this scheme are required to keep accounting records. To learn more about the types of bookkeeping for sole proprietors under the basic tax scheme, see here.
The basic tax scheme includes the following taxes and contributions:
Income tax (porez na dohodak) is paid at a progressive rate set by local government units. The tax base is calculated by applying deductions to and subtracting activity-related expenses from (Articles 14, 15, 16, 23 of the Income Tax Law) the income earned.
Income tax rates vary between 15% and 30%, and depend on the sole proprietor's place of registration and the annual income amount (see the 2024 rates here):
The lower rate (niža stopa) applies if the annual income does not exceed EUR 50,400.
The higher rate (viša stopa) applies if the above threshold is exceeded.
Tax returns and payment. The tax is paid via monthly advance payments (the monthly payment requirement does not apply during the first year). The tax amount is then adjusted based on the filed tax return (obrazac DOH), which must be submitted before the end of February of the year following the reporting year. You can file the tax return either personally or through the following portals: ePorezna, mPorezna.
VAT(porez na dodanu vrijednost) is payable if the amount of income for the previous calendar year exceeds EUR 40,000. In this case, the sole proprietor must register as a VAT payer by submitting an application (P-PDV) before the first day of the month following the month when they exceeded the threshold (for example, if the income threshold is exceeded on April 15, then the application must be submitted before May 1, and the sole proprietor will become a VAT payer from May 1).
The standard VAT rate is 25%. There are also reduced rates: 13%, 5%, and 0%.
Tax returns and payment. VAT is payable on a monthly basis. The tax return is also filed on a monthly basis, before the 20th day of the current month. If in the previous year taxable income does not exceed 110,000 euros, you may file the tax return quarterly. For instructions on filling out the return, see here.
Social security contributions (obvezni doprinosi) are calculated using a fixed base and paid at the following rates (Article 6 of the Order on Basic Amounts for Calculating Compulsory Insurance Contributions for 2024):
20%: Pension insurance (levels I and II)
16.5%: Compulsory health insurance
To start paying taxes and contributions, you must register by submitting two applications (forms М-11P and eM-1P) to the Croatian Pension Insurance Institute (Hrvatski zavod za mirovinsko osiguranje) within 8 days from setting up a sole proprietorship.
Accounting and payment. There are no special accounting requirements for social contributions. Contributions are paid before the 15th day of the month following the reporting one (for example, contributions for April must be paid before May 15). Use the following payment details:
Health insurance: IBAN – HR6510010051550100001, payer's OIB – 8478.
Pension insurance (level I): IBAN – HR1210010051863000160, payer's OIB – 8214.
Pension insurance (level II): IBAN – HR7610010051700036001, payer's OIB – HR68 2046.
Flat-rate tax scheme
The flat-rate tax scheme (paušalno oporezivanje) is available to sole proprietors whose income over the past calendar year does not exceed 40,000 euros (and, accordingly, who are not VAT payers).
You opt into the flat-rate scheme when registering with the tax authorities. You have 8 days after the start of your taxable activities to register, or before January 15 of the year following the reporting one (when changing the tax scheme).
Sole proprietors under this tax scheme must keep income and expense records (KPR).
The flat-rate tax scheme provides for the following taxes and contributions:
Income tax (paušalni porez na dohodak), which is paid in fixed quarterly installments.
The tax rate is 12%. The exact amount of the quarterly payment depends on annual income. To learn more about the 2024 payment amounts, see here.
Tax returns and payment. The tax is paid on a quarterly basis, before the last day of the quarter (so, before March 31, June 30, September 30, and December 31). The advance payment is determined either based of the tax return submitted for the previous tax period, or on the basis of information provided to the tax authority before the start of activities (obrazac RPO). The taxpayer remits the tax payment to the bank account of the municipality where they are registered. The account number starts with HR68, and the payer's details should include the following: poziv na broj 1449 - OIB. Taxpayers must file the PO-SD return by January 15 of the year following the reporting year. See here for instructions on filing the tax via the mPorezna portal, and here for a guide on manually filling out the document.
The social security contributions under the flat-rate scheme are largely the same as under the basic tax scheme. The only difference is the fixed base for calculating contributions: here, it is 624 euros for 2024 (Article 7 of the Order on the Base Amounts for Calculating Compulsory Insurance Contributions for 2024).
The total contributions for 2024 stand at 227.76 euros (124.8 euros for pension insurance and 102.96 euros for compulsory health insurance).
Additional info
Croatian Tax Administration (Porezna uprava).
Croatian Pension Insurance Institute (Hrvatski zavod za mirovinsko osiguranje).
A calculator for choosing the optimal tax scheme.
Income received via Mellow is declared based on certificates and invoices, and as per the offer agreement.
If you have any questions, get in touch via the chat in your Mellow account, or email [email protected].