Friday, 14 August 2026
Croatia is considering a temporary tax targeting unusually high corporate profit margins as the government looks for additional measures to contain inflation and discourage price increases that cannot be explained by underlying business conditions.
Under draft legislation published by the Ministry of Finance, qualifying companies could face a 50% tax on the portion of their profit margin considered excessive. The measure is currently designed to apply only to the 2026 tax year and has not yet been adopted by parliament.
The proposal would apply to medium-sized and large companies subject to Croatian corporate profit tax where more than half of their revenue is generated in Croatia. Newly established companies submitting their first corporate profit tax return would be excluded.
Rather than imposing the levy simply on companies reporting higher profits, the proposed system would compare their profitability with their own recent performance.
A company’s 2026 margin would be measured against its average margin during the three preceding tax periods from 2023 to 2025. The additional tax would become relevant where the 2026 margin exceeds that three-year average by more than 15%.
This approach means that the measure could affect businesses differently depending on their historical profitability. Companies that already operated with relatively high margins during the reference period would consequently have a different threshold from businesses whose margins were traditionally lower.
The calculation would also seek to separate ordinary operating performance from exceptional accounting effects. Certain revenue and expense items that do not represent the company’s underlying business would be removed when determining the relevant margin. These include items associated with disposals of non-current assets, depreciation and financial income and expenses.
According to the draft, the intention is to concentrate the levy on profitability generated through regular business activities rather than gains resulting from one-off transactions or accounting movements.
The legislation also provides a mechanism intended to prevent the same profit from being taxed twice through both the normal Croatian corporate profit tax system and the proposed exceptional-margin levy.
The measure represents an unusual attempt to use corporate taxation as part of Croatia’s response to inflation. Rather than introducing general price controls, the government proposal would create a financial disincentive for larger domestically focused companies to allow margins to rise substantially above their recent historical levels.
For companies operating in sectors where costs, selling prices or margins have changed significantly since 2023, the calculation could become particularly important. Businesses potentially falling within the scope of the legislation would need to examine not only expected 2026 earnings but also the composition of revenues and expenses used to establish their reference profitability.
The proposal remains subject to change.
Public consultation is scheduled to continue until 30 August 2026, after which the Ministry of Finance can amend the draft before submitting legislation to the Croatian Parliament.
If approved, the legislation is expected to enter into force eight days after publication in Croatia’s Official Gazette. More detailed procedural rules would subsequently be introduced through implementing regulations within 90 days.
For investors and companies active in Croatia, the immediate issue is therefore not an additional tax already in force, but the potential introduction of a significant new liability for 2026. Medium-sized and large businesses generating most of their income domestically may need to model the impact against their 2023-2025 margins while monitoring changes to the proposal during the legislative process.
Source: CMS
