July the 8th, 2026 – More and more Croatian retirees are having to pay income tax which has risen sharply despite all sorts of government plans to scrap it as of 2027.
Poslovni reports that this increase in Croatian retirees needing to pay income tax is being driven by a simple but irritating problem: pensions continue to rise, but the tax-free personal allowance has remained frozen at 600 euros. As a direct result, even modest pension increases are pushing thousands of retirees over the taxable threshold.
According to figures from the Croatian Pension Insurance Institute (HZMO), 476,128 people claiming a pension paid income tax on their pensions in January 2026. That number climbed to 491,462 in February, before reaching 529,542 pensioners by the month of July, when tax was calculated on June’s pension payments. The trend reflects regular pension indexation linked to wage growth and inflation, while the €600 personal allowance has remained unchanged for years.
Croatia doesn’t tax an entire pension once it exceeds the threshold. Instead, tax is paid only on the amount above the 600 euro tax-free allowance. Pensioners benefit from a reduced tax rate equal to half of the lower local income tax rate, meaning the exact amount varies depending on where they live.
For example, a pensioner in Zagreb pays 11.5% on the taxable portion of their pension, while those in cities including Rijeka, Osijek and Dubrovnik pay 10%. The same rules also apply to recipients of foreign pensions, who must additionally register with the Croatian Tax Administration to avoid double taxation.
The growing number of taxpayers is not solely the result of regular pension adjustments. A 10% increase in disability pensions, the abolition of early-retirement penalties for pensioners aged over 70, and even one-off government support payments have, in some cases, pushed pension incomes above the taxable threshold.
The Croatian government has announced that income tax on pensions will be abolished from 1 January 2027, a measure brought forward by a year as part of a broader package aimed at easing the cost-of-living burden.
However, the financial benefit will not be equal for all pensioners. Someone receiving a 1,000 euro monthly pension in Zagreb could see their monthly income increase by around 46 euros once the tax is removed. A pensioner receiving 800 euros could gain around 23 euros per month, while someone with a 650 euro pension would receive less than 6 euros extra.
Pensioners whose income already falls below the 600 euro tax-free threshold will thankfully see no change, as they don’t currently pay income tax at all.
