Corporate Tax 2010 - BMR Advisors

Cipcic-Bragadin
Croatia
2.5 Are there any other transaction taxes
There are no other transaction taxes other then those specified in the
answer to question 2.1.
The thin capitalisation rule does not apply to interest based on
credits (loans) given by banks or other financial institutions.
The thin capitalisation rule does not apply if interest is charged by
the domestic payer of corporate profit tax (CPT).
Croatia
2.6 Are there any other indirect taxes of which we should be
aware
Customs duties are generally payable on import and export of some
goods. Excise taxes are also levied on particular classes of goods
e.g. tobacco, coffee, beer, luxury goods etc.
3.5 If so, is there a “safe harbour” by reference to which tax
relief is assured
No, there are no other “safe harbour” rules except compliance with
debt to equity ratio and incorporation of debt provider which is a
CPT payer in Croatia.
3 Cross-border Payments
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
No, there is no withholding tax imposed on dividends paid by a
locally resident company to a non resident.
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
Yes, in the absence of the relevant double taxation treaty,
withholding tax is levied at a rate of 15% of the gross amount
payments due to a non resident but only if non-resident is not a
natural person. WHT also applies if a local branch makes payments
for royalties to the founder which is non-resident. However, if a
local entity makes payments to a non-resident, and such nonresident
operates in Croatia through “permanent establishment” e.g.
local branch, there shall be no obligation to WHT if such payments
are taxed on the local branch level.
3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
Yes, in the absence of the relevant double taxation treaty, withholding
tax is usually levied at a rate of 15% of the gross amount of interest
paid to a non-resident but only if a non-resident is not a natural person
i.e. without legal personality. However, this does not apply to interest
that should be paid to a non-resident based on:
credits (loans) for the purchase of goods necessary for
business activity;
credits (loans) given by international bank or other financial
institution; and
corporate and government bonds if a non-resident has a legal
personality.
Further, WHT is not levied on financial leasing of goods. The same
rule relating to payments to non-residents “permanent establishment”
apply as described in the answer to question 3.2 above.
3.6 Would any such “thin capitalisation” rules extend to debt
advanced by a third party but guaranteed by a parent
company
Yes, please see the answer to question 3.4 above.
3.7 Are there any restrictions on tax relief for interest
payments by a local company to a non-resident in addition
to any thin capitalisation rules mentioned in questions
3.4-3.6 above
Yes, interest paid of late payment between connected persons
cannot be tax deducted. Interest between connected persons above
reference interest rate is not tax deductible as well.
3.8 Does Croatia have transfer pricing rules
Yes. The law provides the transfer pricing rules if the services and
goods are exchanged between residents and non-residents, which
are considered to be connected parties, are not consistent with the
arm’s length principle. Various methods, prescribed by law could
be used to determine the divergence from the arm’s length.
Further, the law provides for the increase of tax base by regulation
of transactions similar to those that fall within the transfer pricing
rules, but are treated as hidden distribution of profits. Those would
be regulated even if carried out between residents.
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
Corporate profit tax (CPT) is levied at 20% rate.
According to the Investment Promotion Law, the headline rate
could be lowered up to 100% in accordance with the invested
amount, generated new jobs during a specific time period etc.
4.2 When is that tax generally payable
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3.4 Would relief for interest so paid be restricted by reference
to “thin capitalisation” rules
Yes, but only if interest is based on loans received from a
shareholder that holds an equity stake of at least 25% of the total
shares, equity parts or voting rights in the relevant entity (or from
debt advanced by third party but with a guarantee from a relevant
shareholder), and if such loans during a fiscal period exceed the
amount equal to four times its equity stake in capital or voting
rights, relevant to the amount and duration of those loans.
Tax is calculated for the fiscal period which is usually one calendar
year. The tax reports must be filed before 30th April for the last
fiscal period. The tax should be paid on or before the day that the
tax reports are filed with the authority.
Advances of tax are paid throughout the fiscal period at the end of
each month during the period. The amount of tax advances is
relevant to the amount of tax for the last fiscal period divided by the
number of months in the fiscal period.
Start-up companies do not pay tax advances until the first tax report
is filled.
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