Prospera MundiFor Croatian sole trades
Accounting for a sole trade
The costly mistakes usually happen at transitions: from lump-sum taxation to books, from income tax to profit tax, or from active business to closure. Every transition has a deadline and an opening calculation that cannot simply be fixed retroactively.
A sole trade is the business activity of a natural person. That fact shapes the entire tax logic. The first question is therefore not “what does accounting cost?” but which tax regime applies, and is it still the right one?
Three regimes a sole trade can use
| Regime | How tax works | Records |
|---|---|---|
| Lump-sum sole trade | Lump-sum income by receipts band. | Turnover book and prescribed filings. Detailed page. |
| Income-tax sole trade | Income tax on independent activity. | Business books under the income-tax rules. |
| Profit-tax sole trade | 10% below €1,000,000 revenue and 18% at or above €1,000,000. | Double-entry bookkeeping. |
Changing regime is not a clerical formality. It changes the tax logic and what can be planned before year-end.
When a sole trade must move to profit tax
A natural person becomes liable for profit tax if total receipts in the preceding tax period exceed €1,000,000. The threshold follows income-tax receipt rules and excludes VAT.
Old internet summaries can mislead
The current rule no longer adds separate tests for income, asset value or number of employees to this mandatory transition test.
Voluntary transition is possible
Both voluntary and mandatory transitions require timely notification. The chosen or mandatory method generally binds the taxpayer for three years, subject to the statutory exceptions.
The opening balance sheet: the part that surprises owners
A profit-tax sole trade prepares an opening balance sheet for the first day of its first profit-tax period. At the end of that period, specific opening items adjust taxable profit.
Items that can increase profit
Opening inventory, advances paid, customer receivables and certain active accruals.
Items that can reduce profit
Supplier liabilities, customer advances, certain passive accruals and prescribed provisions.
Practical example: a business with substantial stock and customer receivables may enter its first profit-tax year with an increased base. This is why the transition date should be planned rather than discovered after year-end.
Cash principle and VAT on cash receipts
Profit tax on the cash principle
Available up to €1,000,000 revenue; for VAT payers it is linked to using the VAT cash-accounting scheme.
VAT on cash receipts
Available where the preceding year's supplies excluding VAT do not exceed €2,000,000. Output VAT arises on collection and input VAT on payment to the supplier. The choice generally binds for three calendar years.
Whether this helps depends on how customers and suppliers actually pay. Verified Croatian guide (HR).
Obligations through the year
Books
Profit-tax sole trades use double-entry bookkeeping, as limited companies do.
Profit-tax return
Filed electronically no later than four months after the tax period, with a balance sheet and profit-and-loss account.
FINA reporting
A natural person liable for profit tax files the prescribed annual statements and additional data by 30 April for the previous calendar year.
Withdrawals by an owner are not automatically neutral. Certain withdrawals by a natural person conducting an independent activity are taxed at a statutory rate of 36%, so owner payments must be classified before they are made.
Guides for sole traders
Lump-sum threshold
When the simplified regime ends and what comes next.
Disguised employment
The statutory criteria — and why the number of clients is not itself a legal threshold.
Closing a sole trade
Deregistration, suspension and the closing tax calculation.
Are you in the right tax regime?
We review your actual figures, distance from the thresholds and the timing of a possible transition. The initial 15–30 minute qualification call is free.
Request an assessmentAmounts, rates and deadlines reflect the legislation checked on 30 July 2026 and can change. This page is not individual tax advice.