How to pay international contractors in Croatia [2025]

Croatia’s economy is one of the strongest in Southeast Europe. And the labor market is expected to grow slightly through 2030, with office professionals, teaching professionals, and legal and social professionals projected to be the fastest-growing occupations.

There are plenty of opportunities to find skilled contractors in Croatia, whether in the capital of Zagreb or in the next largest cities, Split and Rijeka. But many foreign companies aren’t aware of the country’s labor and tax laws. What steps do you need to take to comply with European and Croatian labor laws when paying contractors?

We’ve got you covered. This guide outlines how to correctly classify, onboard, and pay Croatian contractors—with tips on how to automate parts of the process.

Step #1: Classify your workers in Croatia

Correctly classifying your Croatian workers as contractors or employees is a crucial first step. If you don’t correctly classify Croatian workers, you run the risk of fines, back taxes, and penalties from Croatian courts. Moreover, misclassification could harm your company’s reputation among contractors, employees, and potential customers. 

There are several factors to consider when classifying workers, as listed in the table below:

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Step #2: Determine the best way to pay your contractors in Croatia

Before you work with Croatian contractors, you need to figure out how you’ll compliantly pay them. With the rise of remote work and global workforces, there are many payment options you can choose from, including: 

• Bank transfers: You can set up an account in a Croatian bank to deposit money into the contractor's account. Or you can go through your bank to send a wire transfer to Croatia.

• International money orders: This traditional payment method is slower and more expensive since you have to buy the money order physically, and the contractor has to deposit it in person. It also comes with heftier fees and exchange rates.

• Digital wallets or payment platforms: Some digital payment platforms like Wise work for cross-border money transfers, but not all are accessible in Croatia. Exchange rates can fluctuate day to day, impacting your total costs.

• Global payroll services: Contractors usually send invoices for their work instead of being part of the payroll like regular employees. However, with a solution like Rippling, you can pay Croatian contractors alongside the rest of your global workforce. 

Step #3: Use global payroll software to process payments for Croatian contractors 

While there are several ways you can send paychecks to Croatian contractors’ bank accounts, the simplest way is using global payroll software. 

Rippling lets you pay your Croatian contractors in the same system as your other international contractors. Here’s a sneak peek into how Rippling’s global payroll system works:

Step #4: Find out whether you need to withhold taxes from Croatian contractors 

Independent contractors can operate as freelancers in Croatia without opening a company. If you hire a contractor in Croatia without their own company, you must deduct their taxes, healthcare, and pension contributions according to their city regulations.

However, many Croatian contractors open a company to make it easier for employers to work with them. A popular option for contractors is to open a “paušalni obrt” (sole proprietorship), which can be established under the Croatian Crafts Act. Contractors can also open a d.o.o. (limited liability company) or a j.d.o.o (simple limited liability company). If you work with contractors who have their own company, you do not need to deduct their taxes or social security contributions. Contractors will pay their own taxes to the Croatian Tax Administration, which operates within the Ministry of Finance. 

Many contractors file taxes via self-employment (“paušalni obrt”) and need:

• An OIB (which stands for “osobni identifikacijski broj”) Croatian identification number

• PDV registration (value-added tax in Croatia) if their business income exceeds 40,000 euros per year. The PDV tax rate for most goods and services is 25%, although there are certain exceptions. 

Croatian taxpayers who earn self-employment income need to make monthly tax prepayments in accordance with their annual tax returns. Self-employed workers in Croatia also need to make social security contributions in compliance with special rules.

Note: If your company is based in the US, you’ll need to have the Croatian contractor complete a W-8BEN form, which certifies their contract status for the US government.

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Frequently asked questions about running payroll for contractors in Croatia