New tax increases for flat-rate sole traders in Croatia 

The Croatian government’s new anti-inflation package unveiled yesterday includes higher taxation and contributions for flat-rate sole traders, a growing segment of the country’s small business sector.

The measures were announced on Thursday as part of broader fiscal adjustments, with officials pointing to significant growth in the number of flat-rate entrepreneurs in recent years.

According to Finance Minister Tomislav Ćorić, Croatia had around 27,500 flat-rate sole traders in 2017, while the figure had risen to approximately 101,000 by the end of last year.

He noted that part of this increase reflects a shift from traditional employment into flat-rate business arrangements, describing it as a form of “hidden employment”.

Under the new framework, higher-earning sole traders will be most affected by the changes.

Those earning between €50,000 and €60,000 annually will see the largest increase, with total taxes and contributions rising by 82 percent.

Annual payments in this category will increase from €4,571 to €8,324.

For those earning between €40,000 and €50,000, tax obligations will rise by 49 percent.

Businesses earning between €30,600 and €40,000 will face a 24.6 percent increase.

Those in the €19,900 to €30,600 bracket will see a 7.67 percent rise.

The government said that around 60 percent of flat-rate sole traders earning up to €19,900 annually will not be affected by the changes.

The announcement prompted criticism from The Croatian Chamber of Trades and Crafts, which has expressed opposition to the planned increases in contributions and tax burden for flat-rate entrepreneurs.

It stressed that flat-rate sole traders represent a key form of micro-entrepreneurship, enabling self-employment, project-based work, and professional flexibility, while many also contribute significantly to export-oriented freelance services.

President Dalibor Kratohvil warned that further tax and contribution increases could lead to business closures, movement into the informal economy, reduced competitiveness, and potential outflow of freelancers and digital professionals from Croatia.

In the long term, he added, such measures could reduce rather than increase overall tax revenues.