Hiring foreign workers and other individuals who do not have Croatian tax resident status is becoming an increasingly common part of business practice for Croatian employers. However, payroll calculation for a non-resident may differ from payroll calculation for an employee who is a Croatian tax resident.

Income tax, personal allowance, social security contributions, and the application of international treaties are just some of the issues that need to be reviewed before the first payroll calculation.

Special attention should be paid to the employee’s tax status. It is not enough to determine only their citizenship or place of residence. For a correct payroll calculation, it is necessary to establish whether the person is a tax resident or non-resident and whether there is an agreement between the Republic of Croatia and the employee’s country of residence that affects taxation or compulsory social security.

Below is an overview of the most important rules employers should take into account when calculating payroll for non-residents in 2026.

Who Is Considered a Non-Resident?

When calculating payroll, the first step is to correctly determine the employee’s tax status.

Non-resident status is important because it determines how certain Croatian rules on income tax, personal allowance, and other payroll elements will apply.

Therefore, before the first payroll calculation, the employer should determine and document the employee’s tax status and check whether there is an international agreement applicable to the specific situation.

How Is Tax on a Non-Resident’s Salary Calculated?

Salary earned by a non-resident in the Republic of Croatia on the basis of employment is subject to income tax on employment income.

The employer is required to calculate, withhold, and pay the advance income tax from the employee’s salary.

However, if a double taxation agreement is in force between the Republic of Croatia and the country of which the employee is a resident, its provisions must also be taken into account.

This means that the tax treatment of a non-resident’s salary cannot always be determined correctly by applying Croatian regulations alone. In international employment relationships, it is necessary to check whether an applicable international treaty exists and how its provisions affect the specific case.

Are Non-Residents Entitled to a Personal Allowance?

Yes, but there are important differences compared with Croatian tax residents.

The basic personal allowance in 2026 amounts to EUR 600 per month, or EUR 7,200 per year.

A non-resident may be entitled to the basic personal allowance for the months in which they earn income in Croatia.

For the personal allowance to be applied in the monthly payroll calculation, the tax card, i.e. Form PK, is important. Without a tax card, the employer cannot apply the personal allowance when calculating the advance income tax.

What About Personal Allowances for Children and Dependants?

This is one of the key differences between residents and non-residents.

During the monthly payroll calculation, a non-resident is not entitled to an increased personal allowance for:

• dependent children
• dependent immediate family members
• disability.

During the year, a non-resident may use only the basic personal allowance, provided the conditions for its use are met.

However, certain non-residents may be entitled to additional personal allowances in the annual tax assessment.

Special Rule for Employees from the EU and EEA

An individual who is a resident of another Member State of the European Union or European Economic Area may, under certain conditions, also be entitled to additional personal allowances in the annual tax assessment.

Two conditions must be met:

1. income earned in Croatia must account for at least 90% of the employee’s total worldwide income in the relevant tax period
2. that income must be exempt from taxation or otherwise not taxed in the employee’s country of residence.

Both conditions must be met and supported by credible documentation.

This right does not apply to all non-residents. According to the source provided, the rule applies to residents of EU and EEA Member States, but not, for example, to residents of Bosnia and Herzegovina or Serbia.

Example: Slovenian Resident Employed in Croatia

Assume that a Croatian company employs an individual who is a tax resident of Slovenia and works in Croatia from March to November, i.e. for nine months.

If the employee has the appropriate Form PK, they may use the basic personal allowance of EUR 600 per month during those nine months.

The total basic personal allowance recognised during the year would therefore amount to:

9 × EUR 600 = EUR 5,400.

If the employee has two dependent children, the additional personal allowance for the children cannot be used in the monthly payroll calculations.

However, as a resident of an EU Member State, the employee may claim it in the annual tax assessment if both of the previously mentioned conditions are met.

How Are Social Security Contributions Calculated for Non-Residents?

In addition to income tax, the employer must also determine the obligation to calculate social security contributions.

According to the information provided, an employer generally has an obligation to calculate, withhold, and pay compulsory contributions for an employed non-resident.

Special rules may apply if an agreement on social security is in force between the Republic of Croatia and the employee’s country of residence.

In that case, the provisions of the relevant international agreement apply, provided the non-resident has properly regulated compulsory insurance status.

For this reason, when employing a non-resident it is necessary to check not only the employee’s tax status, but also their status in the social security system.

What If the Employee Works for a Foreign Employer?

A specific situation arises when a non-resident performs work in Croatia for an employer established abroad that does not have a registered permanent establishment in Croatia.

According to the source provided, in such a case there is an obligation to register the employee for compulsory insurance in the Republic of Croatia.

The Tax Administration determines the contribution liability by decision based on data on the commencement of insurance received from the Croatian Pension Insurance Institute and the Croatian Health Insurance Fund.

If an international social security agreement applies, its provisions must also be taken into account.

Why Is Form PK Important?

Form PK is particularly important for the correct application of the personal allowance.

Without the appropriate tax card, the employer cannot recognise the personal allowance for a non-resident in the monthly payroll calculation. In that case, the advance income tax is calculated without the personal allowance, while any difference may be resolved later through the annual tax assessment or tax return.

For this reason, obtaining and checking Form PK should form part of the procedure before the first payroll calculation for a non-resident employee.

What Should Employers Pay Particular Attention To?

Before making the first payment to a non-resident employee, employers should check:

• the employee’s tax status
• the country of tax residence
• whether a double taxation agreement applies
• whether a social security agreement applies
• whether the employee has the appropriate Form PK
• which personal allowance the employee is entitled to
• whether the employee earns income in Croatia for only part of the year
• whether additional personal allowances may be claimed in the annual tax assessment.

For employees from the EU and EEA, particular attention should be paid to the 90% rule and to obtaining the required documentation in time to claim additional rights in the annual tax assessment.

Common Mistakes in Payroll Calculation for Non-Residents

Payroll calculation for a non-resident may appear similar to a standard payroll calculation, but several details can significantly affect the final tax treatment.

In practice, particular attention should be paid to situations where:

• the employee’s tax status is not determined before the first payroll calculation
• the same rules as for a Croatian tax resident are applied automatically
• the personal allowance is used without the appropriate Form PK
• additional allowances for children or dependants are granted to the non-resident during the year
• the applicable double taxation agreement is ignored
• the employer fails to check whether an international social security agreement applies.

Correctly determining the employee’s status before the first payment can prevent later payroll corrections, additional tax liabilities, and administrative complications.

Conclusion

Payroll calculation for non-residents requires more than a standard calculation of taxes and contributions.

Before the first payment, it is necessary to determine the employee’s tax status, review the application of international treaties, regulate compulsory insurance status, and correctly determine entitlement to the personal allowance.

In 2026, the basic personal allowance amounts to EUR 600 per month, but the way it is applied to non-residents differs from the rules applicable to Croatian tax residents. Special rules also apply to residents of EU and EEA Member States who, under prescribed conditions, may claim additional rights in the annual tax assessment.

For this reason, each case involving the employment of a non-resident should be assessed individually, taking into account Croatian tax regulations, the employee’s country of residence, and the international agreements applicable to the specific situation.

If you employ non-residents or are unsure whether you are calculating tax, contributions, and personal allowances correctly, contact brandom. Our team can assist you with accurate payroll calculations and help ensure that your business is compliant with applicable tax and accounting regulations.