Croatia's government has sent a bill to Parliament that would abolish income tax on pensions altogether, a change that would put money back in the pockets of roughly 541,000 pensioners from the start of 2027.
The proposal amends the Income Tax Act by raising the current 50 percent reduction on pension tax to a full 100 percent for pensions taxed at the lower rate — in practice, a zero-euro bill. The government's own worked example shows the difference: on an 800-euro pension with a 600-euro personal allowance, the taxable base is 200 euros. At a 20 percent rate that's 40 euros in tax, halved to 20 euros under today's rules. Under the new proposal, it becomes nothing.
There is a catch for local budgets. Municipalities and other local authorities, which receive this pension tax revenue, stand to lose around 180 million euros a year in total, and the government will need to work out how — or whether — to compensate them. Finance Minister Tomislav Ćorić has previously confirmed the scale of the change, and the amendments are due to take effect at the beginning of 2027, subject to parliamentary approval.
Why does this matter to travellers? Croatia has quietly become one of Europe's most popular places to base yourself for an extended stay or retirement abroad — the Dalmatian coast in particular draws Brits, Germans and Scandinavians who spend months at a time in Split, Zadar or on the islands. Foreign pensioners resident in Croatia are generally taxed on their pensions under the same domestic rules, and many more northern Europeans spend enough of the year there to care intensely about the cost-of-living maths. A policy that leaves an average pensioner 20 to 40 euros better off each month, and higher earners considerably more, nudges Croatia further ahead of rivals like Portugal or Spain in the long-stay stakes, where golden-visa and tax regimes have recently been tightened.
The measure still has to clear Parliament, so nothing is certain until the law passes. But if you're weighing up a winter-long rental on the Adriatic or planning a full-time move in 2027, the direction of travel is clear: Croatia is positioning itself as a friendlier place to live on a pension, alongside its flat 12-month appeal of islands, Roman towns and some of the continent's most reliable summer sun. Keep an eye on the bill's progress through Zagreb before you commit to anything — but the numbers, at least, are moving in retirees' favour.
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