Crypto Tax Legislation & Law in Croatia

No tax rule specifically relating to crypto-asset transactions has been introduced. The Croatian tax legislation does not even provide a definition of crypto-assets. However, the potential tax implications of an individual dealing with crypto-assets are quite clear. The tax authorities have over the years, through issuance of official opinions, specified which rules apply for taxation of transactions with crypto-assets. Most of these opinions deal with personal income tax (PIT) aspects of various types of acquisition, holding and disposal of crypto-assets.

In an opinion from 2017, the tax authorities stated that crypto-currency is an equivalent of money market instruments, subclass of financial assets, and that therefore the rules applicable to taxation of capital gains on financial assets apply to gains realised on crypto-assets. 

Exchange of a crypto-asset for a FIAT currency is treated as asset disposal and PIT may be triggered under conditions specified below. If a capital gain (positive difference between the market value at disposal and the acquisition value) is realised on the exchange, PIT at 12% will arise. Tax needs to be paid by the end of February after the year in which the gain was realised. However, if disposal is made after a 2-year holding period, such capital gain is not taxed. Gain on disposal of crypto-assets acquired as a gift will be taxed if more than 2 years have elapsed from the date when the provider of the gift initially acquired the asset. Tax paid abroad may be credited to the Croatian tax liability.

Capital loss (including transactional expenses) realised within 2 years of the acquisition of an asset (other crypto-asset or other financial asset) can be offset with crypto capital gains and gains realised on disposal of other financial assets in the same year. Mere holding of crypto-assets is not taxable.

Exchange of crypto-assets for goods/services is treated as if first disposal of a crypto-asset for FIAT currency occurs, which is then immediately followed with the purchase of goods/services. If the value of the crypto-asset used for the exchange/purchase is higher than at the date of acquisition, the gain may be taxed (the rules on taxation of capital gains and tax treatment of losses stated in answer to Q2 apply). However, exchange for other crypto-assets should not be regarded as disposal (assuming the individual does not receive any FIAT currency) and therefore no taxable capital gain should arise until the crypto is exchanged for FIAT currency. At conversion to FIAT currency, the holding period is calculated from when the crypto-asset (which was afterwards exchanged to another crypto-asset) was initially acquired.

No clear threshold (for example, a number of trades) is prescribed, above which a person’s activities with crypto-assets should be deemed as professional activity. Based on the tax authority’s opinion, this would be the case when such activity is performed continuously over a longer period of time, with the aim of realising income, and would be considered their “primary” occupation. If taxed as professional activity, income should be taxed as self-employment income. Tax rates from 15% to 23.60% apply on the annual tax base below EUR 50,400 and from 25% to 35.40% on income exceeding that amount. The exact tax rate that applies will depend on the place of residence of the individual. The annual tax base is calculated as the difference between receipts and outflows. If a tax loss is generated, it can be carried forward for 5 years and be used to offset the taxable income in those years. Mandatory social contributions to be paid are calculated on the prescribed basis.

Alternatively, an individual may opt for income to be taxed with Croatian Corporate Income Tax (CIT) rather than with PIT. In this case, the annual tax base represents an accounting result (adjusted as necessary per the CIT legislation). If annual revenue is below EUR 1,000,000 a tax rate of 10% applies; if above, a tax rate of 18% applies.

Offset against gains on crypto-assets is possible provided that losses are realised in the same year as the gains and within 2 years from the acquisition of the asset on which the losses were realised.

Offset with other income from other activities with crypto-assets is not possible (for example, income from mining activities cannot be offset with a loss incurred on the sale of crypto-assets, unless the income is taxed as professional income). It is possible to offset capital losses with capital gains made on the disposal of other types of financial assets.

Losses can be utilised only in the year in which they are created, i.e. no carry forward is possible (see the answer to Q4 as well).

Present rules outlined by the tax authority do not specifically mention NFTs. We assume that the taxation rules applicable to crypto-assets would apply nevertheless.

If mining is conducted occasionally, crypto received as a consideration would be classified as other income and taxed at rate from 15% to 23.60% plus pension contributions at 10% and health contributions at 7.5%. The payer of the income needs to calculate and pay tax and mandatory social contributions.

If income is received from abroad, the recipient needs to report and pay PIT and pension contributions within 30 days of receipt. Income is considered a net receipt which needs to be grossed up for the purposes of calculation and payment of tax.

Tax rate from 25% to 35.40% applies on annual level if the individual’s total income (e.g. salary income + income from mining) exceeds EUR 50,400.

In case mining is considered professional activity of the respective individual, or if the individual opts for income to be taxed as professional income, taxation as self-employment income applies (see the answer to Q4 above).

Income from staking is taxed in the same way as income realised on mining (see the answer to Q8 above). The triggering event is receipt of the award. The validator’s income should be taxed in the same way as the income of the delegator.

Crypto-assets acquired through airdrops and hard forks: if the acquired asset is disposed of within 2 years, any capital gain will be taxed at 12% (see the answer to Q2 above). In principle, the sale of private property for crypto-assets is not taxable.

Relevant for taxation of capital gains: it is obligatory to keep detailed information (including supporting documents – contracts, certificates) on acquisitions and disposals of crypto-assets on a transactional level, applying the method of consecutive prices or First In, First Out (FIFO). It is prescribed which information records must contain, for example: type and quantity of crypto-assets, acquisition date and price, date of disposal and price etc. If income is realised from abroad, the taxpayer is also obliged to enter into the Register of Taxpayers on that basis (one-time requirement). In addition, every taxpayer is obliged to submit a reporting “JOPPD form” to the Tax Authority once a year by the end of February. Capital gains should be reported even if the disposal of crypto-assets occurs after a 2-year holding period and is thus not taxable.

Relevant for taxation of other income: the payer of the income or the recipient needs to report (on a JOPPD form) when paying tax and mandatory social contributions. If income is realised from abroad, the taxpayer is also obliged to enter into the Register of Taxpayers on that basis (one-time requirement).

Relevant for taxation of self-employment income: the taxpayer needs to maintain prescribed records and report receipts and outflows via an annual tax return until the end of February for the previous calendar year. Monthly tax prepayments which need to be paid throughout the year are taken into account in the annual tax return.

Relevant for taxation with CIT:  Balance Sheets and Income Statements need to be filed together with the annual CIT return. The CIT return needs to be filed within 4 months of the end of the financial year.

Not at the moment.