Do I have to report and pay tax on side income?
Yes. An occasional fee - for example under a service contract (ugovor o djelu) or an author fee - is in Croatia other income and is taxed at your town income-tax rate, which is usually around 20 to 23 percent. From such a payment pension contributions (10 percent) are also withheld, and the client additionally pays 7.5 percent health insurance; an author fee has 30 percent recognised flat-rate expenses that reduce the base. If the earning is regular and organised, it is no longer an occasional fee but an activity you must register as a trade or a lump-sum (paušal) trade. Here lies the biggest trap: the threshold for the paušal trade and for entering the VAT system since 1 January 2025 is 60,000 euros, no longer 40,000. The myth that small money on the side is invisible and tax-free does not hold - the payer reports it, and the Tax Administration sees it.
📋 The rules
- An occasional fee (service contract, author fee) is other income and is taxed at your town rate, usually around 20 to 23 percent.
- An author fee has 30 percent recognised flat-rate expenses (55 percent for artistic works); an ordinary service contract has none.
- From a service contract pension contributions (10 percent) are withheld, and the client additionally pays 7.5 percent health insurance.
- If the activity is regular and organised, you must register a trade or a paušal trade instead of an occasional fee.
- The threshold for a paušal trade and for entering the VAT system since 1 January 2025 is 60,000 euros - raised from the previous 40,000.
🔓 Exceptions
- For other income the tax and contributions are usually calculated by the payer at source, so the recipient most often files no separate return.
- Up to the 60,000 euro threshold you can operate through a paušal trade with a fixed annual tax by band.
- Occasional sale of your own used items is generally not a taxable activity, unlike regular resale for profit.
⚠️ Penalties & fines
If income you were required to report goes unreported, the Tax Administration can later assess the tax and contributions due, default interest and a misdemeanour fine. It is especially risky to carry on a continuous, organised activity without a registered trade - this is treated as undeclared work rather than an occasional fee, so stricter sanctions and back-collection of contributions follow. If annual receipts cross 60,000 euros, you must register for VAT within 8 days and charge VAT from then on, and the paušal trade is no longer possible. For other income the payer calculates most of the obligations at source, so the exposure to fines is smaller, but you still share responsibility for accuracy. Unreported earnings also do not count towards your pension record or your creditworthiness at the bank.
📎 Official sources
- Tax Administration - other income and income tax →
- Croatian Chamber of Trades and Crafts - lump-sum threshold raised to 60,000 EUR →
- Zakon.hr - Income Tax Act (Zakon o porezu na dohodak) →
❓ Frequently asked
Do I have to report a fee under a service contract?
With a service contract the tax and contributions are usually calculated and paid by the payer at source, so the recipient most often files no separate return. Even so, that income is recorded in your name and can enter the annual income-tax assessment.
When must I open a trade instead of a fee?
When the earning becomes regular and organised, the law treats it as a self-employed activity to be registered as a trade or paušal trade, not as occasional other income. The line is not only the amount but also the frequency and the way you carry on the work.
What is the threshold for a paušal trade?
Since 1 January 2025 the threshold for lump-sum taxation and for entering the VAT system is 60,000 euros of annual receipts, no longer 40,000. Figures that mention the old threshold or an amount of 300,000 kuna are out of date and no longer apply.
What is the tax rate on other income?
Other income is taxed at the lower income-tax rate set by your town, which is usually around 20 to 23 percent. An author fee additionally has 30 percent recognised flat-rate expenses that reduce the base for tax.
What if I sell things online?
Occasional sale of your own used items is generally not a taxable activity, but regular buying and reselling for profit is and must be registered. If you do this continuously, the Tax Administration can treat it as an undeclared activity with all the obligations.
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