Introduction
⚠️ The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️
A more comprehensive set of information for this country and work relationship is available on Easop.
If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡
Regular employee
You can definitely grant non-qualified stock options (NSO) to employees in Croatia!
It’s safe, easy to put in place and favorably taxed compared to cash bonuses so it’s probably one of the best ways to incentivize your team members in Croatia.
In a nutshell, what does taxation look like?
- At grant 👉 There’s no taxation.
- At exercise 👉 The difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price would be taxed as capital based income.
- At sale 👉 The difference between the sale price and the FMV of the shares at the time of exercise would be taxed as capital gains. Tax exemption may apply under certain conditions.
There are additional surcharge taxes payable in Croatia, that depends on the grantee’s place of residence within Croatia.
Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?
Yes, stock options are favorably taxed in Croatia when they’re offered by a foreign parent company to employees of a local subsidiary, and this translates into 2 different advantages.
Employee via EoR
You can definitely grant non-qualified stock options (NSO) to EoR employees in Croatia!
It’s safe, easy to put in place and favorably taxed compared to cash bonuses so it’s probably one of the best ways to incentivize your team members in Croatia.
In a nutshell, what does taxation look like?
- At grant 👉 There’s no taxation.
- At exercise 👉 The difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price would be taxed as "other income".
- At sale 👉 The difference between the sale price and the FMV of the shares at the time of exercise would be taxed as capital gains. Tax exemption may apply under certain conditions.
There are additional surcharge taxes payable in Croatia, that depends on the grantee’s place of residence within Croatia.
Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?
Yes, stock options may favorably tbe axed in Croatia even when they are offered to employees working via an EoR.
Contractor
You can definitely grant non-qualified stock options (NSO) to contractors in Croatia!
It’s safe, easy to put in place and favorably taxed compared to cash bonuses so it’s probably one of the best ways to incentivize your team members in Croatia.
Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).
In a nutshell, what does taxation look like?
- At grant 👉 There’s no taxation.
- At exercise 👉 The difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price would be taxed as "other income"
- At sale 👉 The difference between the sale price and the FMV of the shares at the time of exercise would be taxed as capital gains. Tax exemption may apply under certain conditions.
There are additional surcharge taxes payable in Croatia, that depends on the grantee’s place of residence within Croatia.
Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?
Yes, stock options may favorably be axed in Croatia even when they are offered to contractors.
What you should know if the grantee works via a personal management company?
It’s quite common for contractors to work via personal management companies in Croatia.
A personal management company is a corporate vehicle used in some countries outside of the United States, usually set up for limitation of liability, personal accounting and tax purposes, owned and managed by the same natural person and through which such person provides services as a contractor/freelancer.
If a contractor works via a personal management company, it usually makes more sense from a tax perspective to offer the stock options to the management company, which in turn immediately transfers it to the natural person behind the management company.
This should be provided in an agreement and allowed in the relevant documentation.
