Croatia’s new “excess profit tax” for companies explained

Zagreb

The Croatian government presented a new anti-inflation package on Thursday, introducing a tax on excessive profit margins for large and medium-sized companies operating in the country.

The measures form part of a broader economic strategy aimed at addressing inflationary pressures and ensuring balanced market conditions during a period of strong economic growth.

Under the new framework, around 1,740 large and medium-sized legal entities in Croatia will be subject to the new tax on “excess profit” once certain conditions are met.

The model will assess company performance by comparing gross profit results in 2026 with the average achieved over the 2023, 2024 and 2025 financial years.

Businesses will be allowed a 15 per cent deviation above this average to account for productivity growth.

Any profit increase beyond this threshold will be considered excessive and taxed at a rate of 50 per cent.

The policy is designed to target surplus profit margins that emerge in certain companies, particularly during periods of heightened demand and price volatility.

The new tax will not apply to companies generating more than 50 per cent of their revenue outside Croatia, effectively excluding businesses with predominantly international operations.

According to the Croatian government, the aim of the measure is to help stabilise inflationary pressures in the wider economy while maintaining sustainable growth conditions.

The introduction of the measure comes as Croatia continues to record strong economic growth and elevated aggregate demand, factors which authorities say can increase sensitivity to price shocks and contribute to inflationary trends.

Croatian Finance Minister Tomislav Ćorić said the measure addresses excess profit margins generated within certain legal entities in Croatia. He also highlighted broader macroeconomic conditions, noting that sustained growth and strong demand require careful management of inflation risks.

The measure is expected to be closely monitored by businesses and economic analysts as details of implementation and compliance mechanisms are further developed.