A legal entity or a natural person, who inherits or receives assets without any compensation, is subject to the inheritance and gift tax. In the event the heir renounces the inheritance or cedes it, the inheritance tax has to be paid by the person who benefits from this act. The inheritance and gifts tax is not paid if VAT is paid on the inherited or donated movables.
The taxable base is the amount of cash and the market value of the financial and other assets on the day the tax liability is determined, after the deduction of debts and costs that relate to the assets on which the tax is being paid. The tax rate is up to 5%.
The inheritance and gifts tax has to be paid on cash, monetary claims and securities and on movables if the individual market value is more than 50,000 kuna on the day of the determination of the tax liability. Inheritance, giving, or acquisition of real estate is taxed according to the provisions of the Real Estate Transfer Tax Law.
The inheritance and gifts tax has not to be paid by the wife/husband, first-degree relatives, and the adopted children or adoptive parents of the deceased or the donor; siblings, their progeny, sons-in-law and daughters-in-law of the testator or donor if they lived together in a joint household with the testator at the moment of the decease or with the donor at the moment of the receipt of the gift. A common household is presumed to involve common acquisition of income and assets and disposal of the income and assets that is inherited or given.
Natural persons and legal entities who receive from the Republic of Croatia or a unit of local and regional self-government gives movables without compensation for the sake of payment of damages or some other reasons in connection with the war are exempted from the gift tax.
The Republic of Croatia and units of local and regional self-government, bodies of the state administration and bodies of units of local and regional self-government, public institutes, religious communities, foundations, the Red Cross and other humanitarian and charitable associations founded pursuant to separate regulations are also exempt from the gift tax.
Finally, gift tax is not paid by natural persons and legal entities that receive gifts (donations) for purposes laid down in separate regulations.