Taxation of foreign pensions—a step-by-step procedure
Determination of residency status for tax purposesThe basic principle of all treaties for the avoidance of double taxation is that they apply only to the residents of the two contracting states.
Therefore, it is important to first determine the state where you are a resident taxpayer.
A resident is a natural person with permanent residence or habitual residence in the Republic of Croatia.
In those cases where two states (the state of residence and the state of pension payment) consider one and the same individual to be their resident, the following rule applies:
- the person shall be deemed to be a resident only of the state in which s/he has a permanent residence available to him/her; if s/he has a permanent residence available to him/her in both States, s/he shall be deemed to be a resident only of the state with which his/her personal and economic relations are closer (centre of vital interests);
- if the state in which s/he has his centre of vital interests cannot be determined, or if s/he has not a permanent residence available to him/her in either State, s/he shall be deemed to be a resident only of the State in which s/he has a habitual residence;
- if s/he has a habitual residence in both states or in neither of them, s/he shall be deemed to be a resident only of the state of which s/he is a national;
- if s/he is a national of both states or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
If the taxpayer holds permanent residence both in the country and abroad, it is considered that they hold permanent residence in the country of permanent residence of their family, and in the case of unmarried taxpayers or if permanent residence of family cannot be established, it is considered that they hold permanent residence in the country where they predominantly go to work or perform business activity or predominantly reside. If the other country does not consider the taxpayer their tax resident, it shall be considered that he holds permanent residence in the country.
If the Republic of Croatia does not have a treaty for the avoidance of double taxation with the country of pension payment, then the residency status is fully regulated by national tax regulations.
When changing the residency status from non-resident to resident of the Republic of Croatia, Questionnaire Form TU should be filled in and submitted to your competent branch office of the Tax Administration.
Find out more about the procedure of residency termination.
You are obliged to apply for entry in the register of income tax payers
All resident taxpayers who are pensioners with foreign pension, whether this pension is taxed or not, are obliged to apply for entry in the register of income tax payers by submitting the RPO form within eight days from the date when they start receiving income.
Aside from the RPO form, you also have to enclose authentic documents on the income received (the decision or certificate of pension, a bank statement for the account to which pension has been paid to, etc.).
The application is to be submitted in the competent branch office of the Tax Administration depending on your place of residence or habitual residence and can be submitted by your proxy or via eTax Administration.
After this, you need to obtain your tax account card for the purpose of using your personal allowance, or non-taxable portion of your income, in the calculation of the advance tax payment in the course of the year, unless your personal allowance is already being used for your Croatian pension paid by the Croatian Pension Insurance Institute, in which case any potentially remaining unused portion of your personal allowance will be used for your foreign pension.
A pensioner receiving pension can be liable for income tax, income tax surcharge and additional health insurance contributions.
For further information about taxation of foreign pensions and your liabilities, call the toll-free number 0800/669-933, visit your local branch office of the Tax Administration in person or use the Write to us section on the Tax Administration’s website.