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Croatia country profile - 2019

Croatia country profile - 2019

Key tax factors for efficient cross-border business and investment involving Croatia.


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EU Member State


Double Tax Treaties

With the following countries, territories and jurisdictions:

Albania India Norway
Armenia Indonesia Oman
Austria Iran  Poland 
Azerbaijan Ireland
Belarus Israel Portugal
Belgium Italy Romania
Bosnia & Herzegovina Jordan Russia
Bulgaria  Rep. of Korea San Marino
Canada Kosovo Serbia
Chile Kuwait  Slovakia
Latvia Slovenia
Czech Rep
Lithuania South Africa
Luxembourg Spain
Malaysia Sweden
Malta Switzerland
Mauritius  Syria
Morocco Turkey
Moldova Turkmenistan
Montenegro UAE
Netherlands UK 
North Macedonia Ukraine

Most important forms of doing business

Joint-stock company ("dioničko društvo - d.d.") and limited liability company ("društvo s ograničenom odgovornosti - d.o.o.")

Legal entity capital requirements

Registered share capital of HRK 200,000 for joint-stock companies. Registered share capital of HRK 20,000 for limited liability companies.

Residence and tax system

A company is a resident if its registered office or its place of management and supervision of business is located in Croatia.

Resident companies are taxed on their worldwide income. Non-resident companies are taxed only on their Croatian source income.

Compliance requirements for CIT purposes

Taxpayers are required to submit a CIT return no later than four months following the end of the tax period. Medium-sized and large taxpayers as well as all VAT-registered taxpayers are required to submit the CIT return electronically.

A Balance Sheet and Income Statement should be submitted together with the CIT return.

Corporate income tax rate

The standard corporate income tax rate is 18 percent and a 12 percent rate applies to companies with revenue of up to HRK 3 million (approximately EUR 405,000).

This standard rate may be reduced by 50 percent, 75 percent or 100 percent based on certain investment related incentives or if the company is located in a free zone or a special support area, provided certain conditions are met.

Withholding tax rates

On dividends and profit shares paid to non-resident companies

12 percent.

On interest paid to non-resident companies

The WHT rate on interest is generally 15 percent. However, WHT is not applied on interest in relation to:

  • loans provided by banks and other financial institutions;
  • commodity loans for goods purchased in order to conduct
    business activity;
  • corporate and state bonds.

On patent royalties and certain copyright royalties paid to non-resident companies

15 percent.

On other payments

15 percent on payments for market research, tax and business advisory and audit services.

15 percent on fees for performing foreign artists if such fees are payable pursuant to contracts with foreign legal entities.

20 percent on all payments made to non-resident companies in countries regarded as non-cooperative jurisdictions (i.e. companies with registered offices in EU blacklisted jurisdictions).

Branch withholding taxes


Holding rules

Dividend received from resident/non-resident subsidiaries

Dividend income is not subject to corporate tax in Croatia.

Capital gains obtained from resident/non-resident subsidiaries

Capital gains should be included in the annual corporate income tax calculation.

Tax losses

Tax losses can be carried forward for up to five years. Tax loss carry-back is not available.

Tax consolidation rules/Group relief rules


Registration duties


Transfer duties

On the transfer of shares


On the transfer of land and buildings

Real estate transfer tax applies on the transfer of certain types of land and buildings at the rate of 3 percent (levied on the purchaser, represents irrecoverable cost).

Stamp duties


Real estate taxes


Controlled Foreign Company rules

A controlled foreign company (CFC) rule was introduced as of January 1, 2019 on the basis of which, under certain conditions, undistributed profit arising from specific categories of income (e.g. interest, royalties, dividends, income from financial activities, etc.) of the CFC or permanent establishment in another country is attributed to the parent company taxpayer in Croatia and is taxed accordingly. This rule does not apply to a CFC that performs an economic activity of substance, or to a CFC whose specific categories of income comprise one-third or less of total income. Banks and financial companies are not considered CFCs if they generate one-third or less of total income from transactions with related parties.

Transfer pricing rules

General transfer pricing rules


Documentation requirement?

Documentation to the support the arm's length nature of transactions with related parties is required. PD-IPO form (form on transactions with related parties) must be submitted with the CIT return. 

Thin capitalization rules

Yes, limited application, 4:1 debt-to-equity ratio for interest expenses.

The arm’s length interest rate for CIT purposes on loans between related parties is 3.96% per annum, effective as of January 1, 2019 (4.55% per annum for 2018).

Borrowing costs exceeding taxable interest income (or economic equivalent) will be tax deductible only up to: (1) 30 percent of the taxpayer's earnings before interest, tax, depreciation and amortization (EBITDA); or (2) EUR 3,000,000.

Does not apply to standalone taxpayers and taxpayers that are financial companies.

Excessive borrowing costs can be carried forward for three tax periods.

General Anti-Avoidance rules (GAAR)

General anti-avoidance rules apply.

Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions


Advance Ruling system


IP / R&D incentives

R&D incentives are provided in the form of an additional tax base reduction for justified R&D expenses for research and development projects or feasibility studies.

The maximum tax relief that a company may receive is:

  • 100 percent of eligible cost for fundamental research,
  • 50 percent of eligible cost for industrial research,
  • 25 percent of eligible cost for experimental development, and
  • 50 percent of eligible costs for the feasibility study.

The tax relief may be further increased by 15-20 percent, depending on the size of the taxpayer and the type of research undertaken.

Other incentives

Incentives for education and training are available up to a maximum of 80 percent of eligible expenses depending on the type of education and training (general or specific) and the type of business (small, medium or large). These incentives can be further increased by 10 percent if training is provided to ''disadvantaged workers'' (e.g. younger than 25 years of age and that have not previously received regular wage, disabled, etc.).


The standard rate is 25 percent, and the reduced rates are 13 and 5 percent.

Other relevant points of attention



Source: Croatian tax law and local tax administration guidelines, updated 2019.

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Paul Suchar

KPMG in Croatia

T: +385 (0)1 5390 032


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