The Ministry of Finance has published a Draft Proposal for amendments to the Corporate Income Tax Act, and it brings one, but very significant, novelty. If your company performed better in 2026 than in the previous three years, it’s time to take a closer look at this Draft. Below we provide an overview of what is known so far, and, more importantly, what you should do already now.
What is this actually about?
As part of the Anti-inflationary Policy Measures presented by the Government on May 28, 2026, the Ministry of Finance submitted for public consultation a Draft Proposal of the law amending and supplementing the Corporate Income Tax Act. The consultation ran from July 31 to August 30, 2026.
Unlike the other tax changes from the same package, which affect flat rate craftsmen, pensioners, and the VAT system, and don’t take effect until January 1, 2027, this measure moves faster and goes deeper. The law would take effect as early as the eighth day after publication in the Official Gazette (Narodne novine), applying to the entire 2026 business year. In other words, retroactively, and immediately.
What exactly is changing in the law?
The Corporate Income Tax Act retains the existing rates of 10% and 18%. They move from the current Article 28 to a new Article 27a. In their place comes a completely new provision: a tax on excess profit margin, at a rate of as much as 50%.
The Government is clear about its motives. This is not a measure to fill the budget, but an attempt to prevent unjustified price increases at a time of heightened inflationary pressures.
Who is at risk?
The measure applies exclusively to businesses that simultaneously meet both of the following conditions:
- are classified as medium or large enterprises in 2026 under the Accounting Act (criteria: net revenue, assets, number of employees), and
- generate more than 50% of total revenue in Croatia.
Good news for newly established companies: if you’re filing your first corporate income tax return in 2026, this measure doesn’t apply to you. Bad news for those created through a spin off or division of an existing company. The exemption doesn’t apply to them. For companies undergoing status changes or changing their tax period, the Draft announces special rules; details are expected in a future Regulation (Pravilnik).
How is the “excess” margin calculated?
This is the part that deserves your full attention, because the calculation is anything but trivial.
Your profit margin for 2026 is compared to the average margin from 2023, 2024, and 2025. If profit was generated in only two of those three years, the year with the higher margin is used, which is a more favorable outcome for you. For cases where no profit was generated in any of the three years, the Draft currently doesn’t prescribe a calculation methodology; this will likely be addressed by the future Regulation.
If the 2026 margin exceeds that average by more than 15%, the difference is taxed. There is, however, an awkward ambiguity hidden here. The Draft’s text can be read two ways: either the average is multiplied by 1.15 (the milder variant), or 15 percentage points are simply added to it (a significantly stricter variant). At an average margin of 8%, the difference between these two interpretations is enormous: a threshold of 9.2% versus a threshold of 23%. We expect the future Regulation will clarify this, but until then, we recommend including both scenarios in your projections.
A 50% rate is applied to the difference above the threshold, with a reduction to avoid double taxing the same portion of profit.
What is NOT included in the margin?
Not every good business move or one off event should push you into the taxable zone. Excluded from the calculation are, among others:
- dividends and shares in profit,
- income from debt write offs in bankruptcy proceedings,
- income from the sale of assets in bankruptcy proceedings for creditor settlement,
- damages awarded by a court,
- financial income and expenses (except in the financial sector),
- depreciation of fixed assets used in production and service provision,
- realized and unrealized effects from financial assets,
- effects of status changes, as well as income and expenses of foreign business units,
- profit or loss from the sale of fixed assets, shares, and equity interests (the latter only for interests exceeding 10%).
Important warning: the exemption for the sale of assets, shares, and equity interests applies only to transactions carried out by June 30, 2026. After that, such transactions can no longer be used to “soften” the tax base. The Government set this deadline to prevent the calculation from being artificially manipulated through transactions with related parties.
Deadlines you shouldn’t miss
- The tax is reported on a special form, together with the regular corporate income tax return.
- It’s due on the same day as the regular 2026 corporate income tax.
- Details of the calculation, form, and payment account will be prescribed by the Corporate Income Tax Regulation, no later than 90 days after the law takes effect.
- If you fail to correctly determine the tax base, the law also provides for a misdemeanor penalty provision.
What does this mean for you, specifically?
If you’re a medium or large enterprise that performed above average in 2026, now is the time to act, not to wait for the final text of the law. We recommend:
- Calculate your reference (average) profit margin for 2023 to 2025.
- Project your margin for the entire 2026 and check how close you are to the 15% threshold, under both possible interpretations.
- Review which items in your business fall under the exemptions (asset sales, dividends, depreciation, etc.).
- If you’re planning to sell fixed assets, shares, or equity interests, check the transaction date against the June 30, 2026 deadline.
- Follow the publication of the Corporate Income Tax Regulation. It will resolve the key ambiguities around the calculation.
Need a second opinion?
This is a draft that has just gone through public consultation. The final text, the scope of taxpayers, and the calculation details can still change in the Croatian Parliament (Sabor). That’s exactly why it makes sense to do a preliminary assessment of this measure’s impact on your business already now, while there’s still time to adapt. Get in touch with us and let’s go through your numbers together.
