Key tax factors for efficient cross-border business and investment involving Croatia.
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Joint-stock company ("dioničko društvo - d.d.") and limited liability company ("društvo s ograničenom odgovornosti - d.o.o.").
Registered share capital of HRK 200,000 for joint-stock companies. Registered share capital of HRK 20,000 for limited liability companies.
A company is 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.
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 taxpayers are required to submit the CIT return electronically.
Balance Sheet and Income Statement should be submitted together with the CIT return.
The standard corporate income tax rate is 20 percent. This may be reduced to 10 percent, 5 percent or 0 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.
12 percent on dividends and profit shares.
The WHT rate on interest is generally 15 percent. However, WHT is not applied on interest in relation to the following:
20% if payments are made to tax havens.
15% on payments for market research, tax and business advisory and audit services.
Dividends are not taxable in Croatia when received.
Capital gains should be included in the annual corporate income tax calculation.
Tax losses can be carried forward for up to five years. Tax loss carry-back is not available.
Real estate transfer tax applies on transfer of land and certain buildings at 5 percent.
Supporting documentation of the arm's length nature of transactions with related parties is required.
Yes, limited application, 4:1 debt-to-equity ratio for interest expenses.
General anti-avoidance rules apply.
Taxpayers can additionally decrease their taxable base by 150 percent of eligible expenses incurred for basic research, 125 percent for practical research, 100 percent for developmental research. In addition, small and medium-sized entrepreneurs, as defined by the Accounting Law, can additionally increase the abovementioned incentives by 20 percent (small) or 10 percent (medium-sized) of the eligible R&D expenses for practical and developmental research.
Incentives for education and training are also available up to a maximum of 70 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 5 percent or 10 percent if the business activity is carried out in the areas that meet the conditions for the application of regional state support and by a further 10 percent if the worker sent on education and training is a disadvantaged worker (e.g. is younger than 25 years of age and has never had any job with regular pay, is disabled, etc.).
The standard rate is 25 percent, and the reduced rates are 13 and 5 percent.
WHT of 15 percent applies on business advisory services (i.e. market research services, tax and business consultancy, and audit services).
A WHT rate of 20 percent on payments for services also applies under domestic tax law, but only for payments for services to entities tax resident in certain countries.
KPMG in Croatia
T: +385 (0)1 5390 032