Croatia to introduce anti-inflationary tax on excessive profits

The Ministry of Finance published a draft bill introducing a 50% tax on excessive profit margin.

According to the proposal, this tax is envisaged as a temporary measure (only for 2026), aiming to control inflation by discouraging unjustified price increases during the current energy crisis and global instability.

Taxpayers in scope

This tax applies only to Croatian corporate profit taxpayers that: (i) are classified as medium or large enterprises under the Accounting Act criteria; and (ii) generated more than 50% of their revenues in Croatia.

Newly established businesses filing their first corporate profit tax return are explicitly exempt from this tax.

Calculation of the tax base

 An excessive profit margin is defined as a profit margin that exceeds the average profit margin of the preceding three tax periods (2023-2025) by more than 15%. The profit margin is calculated as the ratio of adjusted profit to total adjusted revenues, expressed as a percentage.

For purposes of this tax, certain adjustments must be made to revenues, expenses, and profit/loss figures to exclude extraordinary or non-recurring items that do not reflect core operating performance (e.g. gains/losses from disposal of non-current assets, depreciation expense, financial revenues and expenses). This should ensure the calculation focuses on the profit margin from regular business activities.

The draft legislation provides that the same profit is not subject to double taxation under both the regular corporate profit tax and the tax on excessive profit margin.

Legislative procedure

The draft legislation is currently in the public consultation phase, which ends on 30 August 2026.

In the next step, the proposal, including any adjustments to the current version, will be sent to the Parliament for adoption. Once enacted, the new rules should enter into force on the eighth day following publication in the Official Gazette. The Bylaw providing procedural details will follow within 90 days.

Practical Implications

Medium and large Croatian corporate profit taxpayers operating predominantly in Croatia should assess whether their projected 2026 profit margins may exceed the 15% threshold compared to the 2023-2025 average. Affected taxpayers should review pricing strategies and assess the potential effect of this tax. The numerous exclusions from the profit margin calculation require careful analysis to ensure compliance.