The interest rate on loans between related parties—the arm’s length interest rate—is reduced to 3.96% (down from 4.55%) per annum, effective 1 January 2019.
With this rate reduction, the maximum rate of interest that is deductible for tax purposes with respect to loans received by Croatian taxpayers from foreign related parties in 2019 is 3.96% per annum. If a higher interest rate than the prescribed arm’s length interest rate is applied, the difference between the applied interest rate and the prescribed interest rate will be non-deductible for corporate profit tax purposes.
On the other hand, the minimum interest rate on loans provided by Croatian taxpayers to foreign related parties in 2019 is 3.96% per annum. If a lower interest rate is applied, the difference between the applied interest rate and the prescribed interest rate will be considered taxable for corporate profit tax purposes.
Read a January 2019 report prepared by the KPMG member firm in Croatia
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.