VAT in Croatia is generally set at 25% and is due on most goods and services. Lower rates of VAT are applicable to goods such as bread and milk, and the tourism sector. Employers are required to report, withhold and pay authorities all taxes and contributions on behalf of
employees for their incomes. Personal income tax on an employee‘s salary is determined at the following rates: 12% for a net income up to 2 200kn, 25% for the difference between net 2 200kn and 11 000kn and 40% for a net income higher than 13 200kn. Thresholds for tax rates are variable, meaning that the law determines them on the basis of the deductions allowed, an amount that changes once a year. City surtax is applicable; Zagreb residents are taxed 18%. 20% of social contributions are withheld from the employee‘s gross income and the employer pays an additional 15.20%. The minimum startup capital for a limited liability company is the counter value in kunas of 20 000kn. A foreign founder deposits the capital into a temporary account with an authorized business bank. Once the company is Croatian registered business, the founder can freely transfer such funds into regular company accounts.