Accountancy in Croatia

>> Withholding Taxes in Croatia

In terms of the Profit Tax Act, withholding tax is tax on the corporate income (profit) derived by a non-resident in the Republic of Croatia. The taxable person liable to pay withholding tax is:

  • An inland paying agent that pays to foreign entities-recipients (non-residents) who are not citizens,
  • The permanent establishments of a non-resident entrepreneur, when they pay to the parent company interest, as well as royalties and other intellectual property rights (copyright, patent, licensing, trade mark, design pattern, production procedure, production formulas, draft, plan, industrial or scientific experience and similar rights). Exceptionally, the withholding tax shall not be paid if considerations are recognized as the revenues of a resident permanent establishment of a non-resident entrepreneur.

 

The withholding tax shall be paid at the tax rate of:

  • 12% on dividends and shares in corporate income (profit) paid to a non-resident (unless the rate is reduced or an exemption applies under the signed treaty or under the EU parent-subsidiary directive),
  • 15% on royalties and other intellectual property rights) paid to a non-resident (unless the rate is reduced or an exemption applies under the signed treaty or under the EU parent-subsidiary directive),
  • 15% on interests) paid to a non-resident (unless the rate is reduced or an exemption applies under the signed treaty or under the EU parent-subsidiary directive),

 

15% on market research services, tax and business counselling and audit services paid to a non-resident, (unless the rate is reduced or an exemption applies under the signed treaty),

  • 20% on all types of services that are paid to entities who have their headquarters or place of effective management and supervision of operations in countries other than EU member states and states that have signed a tax treaty with Croatia, where the general or average nominal rate of income tax is lower than 12,5%, and state was published in the list of countries that made the minister of finance.

The withholding tax base shall be the gross amount of a consideration paid by a resident payer to a non-resident recipient.

Withholding is paid at a lower rate if with the state in which the foreign recipient of remunerations, interest or dividends has its headquarters there is in force a tax treaty, along with the agreed on lower rates of taxation.

From the day of the accession of the Republic of Croatia to the European Union withholding tax on dividends and shares in corporate income (profit) is not paid when dividends and shares in corporate income (profit) are distributed to a company taking one of the forms that are subject to the common taxation system applicable to parent companies and their subsidiaries from different EU Member states, provided that the recipient of dividend or share of corporate income (profit) has a minimum holding od 10% in the capital

of the company distributing dividend or share of corporate income (profit) for an uninterrupted period of 24 months.

Interest

The withholding tax shall not be paid on interest paid to a non-residnet:

  • on commodity loans for the purchase of good used for carrying out of a taxable person’s business activity,
  • on loans granted by non-resident bank or other financial institution,
  • to holders of government or corporate bonds, who are non-resident legal persons.

Royalties

Royalties and other intellectual property rights (copyright, patent, licensing, trade mark, design or pattern, production procedure, production formulas, draft, plan, industrial or scientific experience and similar rights) for which considerations are paid to non-residents who are not natural persons, market research services, tax and business counselling and auditor services paid to non-residents.

Dividends

Dividends and corporate income (profit) shares which are paid from 1 March 2012.

Dividends and corporate income (profit) shares acquired before 31 December 2000 are not taxed, regardless of the distribution date.

From the day of the accession of the Republic of Croatia to the European Union with- holding tax on dividends and corporate income (profit) shares shall not be paid when dividends and corporate income (profit) shares are distributed to a company taking one of the forms that are subject to the common taxation system applicable to parent companies and their subsidiaries from different EU Member states provided that:

  • the recipient of dividend or share of corporate income (profit) has a minimum holding of 10% in the capital of the company distributing dividend or share of corporate income (profit),
  • the lowest percentage as referred to in item 1 is held for an uninterrupted period of 24 months.

Latest version updated 5th April 2019

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