Croatia to abolish pension income tax in 2027, affecting over 500,000 retirees

More than half a million Croatian pensioners currently pay income tax on their pensions because earnings above the €600 personal allowance are taxed at reduced rates that vary by city – for example 11.5% in Zagreb and 10% in Osijek, Rijeka or Dubrovnik. The number of taxed pensioners has risen each month, from 476,128 in January 2026 to 529,542 in July 2026, as pension adjustments, disability increases and supplemental government payments push incomes above the threshold.

The government announced that the pension‑income tax will be fully abolished on 1 January 2027, a step accelerated by a year to ease the impact of rising living costs. While the measure is presented as a social‑justice reform, analysis shows the benefit will be uneven: a retiree with a €1,000 pension in Zagreb could gain about €46 per month, versus roughly €5.75 for someone earning €650, just above the tax threshold. Those whose pensions remain below €600 will see no change because they have not paid tax.

The policy change is expected to increase disposable income for up to half a million citizens, but the distribution of gains will favor higher‑pension earners.