Returning Croatian workers eligible for major tax breaks, but critics warn of long-term risks

According to the Tax Administration, about 11,000 Croatians returned home last year and found employment. 

Under a government incentive aimed at encouraging return migration, those who spent more than two years working abroad and then returned to Croatia are exempt from paying income tax for five years.

The measure is designed to attract workers who left the country in search of better opportunities. A returnee earning an average salary last year could receive around 2,700 euros in tax refunds this year alone. Over a five-year period, that amount could reach as much as 14,000 euros.

For many returnees, the decision to come back was not based solely on financial incentives.

“I came back primarily for the lifestyle and the sense of peace and security. My daughter is growing up surrounded by beautiful, clean nature and people who still have time for other people,” says sales manager Sara Bujas, who recently returned to Šibenik.

Fran Blažan, who moved back from Germany, found work this year on a multimillion-euro construction project in Bjelovar.

“We saw that business was growing and that more large-scale projects were starting up. We’re currently working in Bjelovar and Daruvar,” says Blažan, a construction subcontractor.

The first tax refunds are expected to be paid out in May. There are no conditions tied to the incentive, meaning returnees are not required to remain in Croatia for a set period of time.

Economist Boris Podobnik notes that similar tax incentives exist in other European countries and says Croatia is in need of workers. However, he believes the measure will not significantly reduce labor shortages in certain sectors.

“Few of these returnees will work in construction, and despite this measure, demand for foreign workers will likely remain very high,” says Podobnik, president of the Entrepreneurs Voice Association.

He also warns the policy could have unintended consequences in the long run.

“Some workers may start wondering whether it makes sense to go to Germany for two years, earn more, and then return to Croatia and pay less in taxes,” Podobnik says.

Critics argue the policy puts those who emigrated in a more favorable position than citizens who never left. Finance Minister Marko Primorac has acknowledged the concerns and says the government is working on measures to improve fairness in the tax system.