Worldwide transfer pricing reference guide 2014

Croatia (continued)
Documentation requirements (continued)
• The transfer pricing method applied, including a description of the data, methods and analysis performed in the process of determining
transfer prices, and provide reasons why the particular method was selected;
• Assumptions and evaluations used in the process of determining transfer prices (in line with the principle of unbiased transactions),
with reference to comparability, functional analysis and risk analysis;
• All calculations of transfer pricing based on the selected method (such documentation should enable a comparison with the prices
applied by other comparable taxpayers);
• Update the transfer pricing documentation from previous years documentation, reflecting adjustments made due to changes in relevant
facts and circumstances; and
• Provision of additional documents upon which the transfer pricing analysis was based or to which the documentation refers.
The taxpayer must maintain the documentation concerning related parties and intercompany transactions.
Documentation deadlines
There is no specific deadline for the preparation of the transfer pricing documentation prescribed by the legislation. The law requires
the transfer pricing documentation to be readily available and be provided to the tax authorities upon their request in a tax audit.
The documentation should be in Croatian.
Although not prescribed by CIT legislation, in practice the tax authorities start requesting, on a case by case basis, a statement on
transfer pricing method applied and/or transfer pricing documentation to be submitted as supporting documentation upon submission of
the corporate income tax return (four months after the end of the taxpayer’s fiscal year).
Statute of limitations on transfer pricing assessments
The general statute of limitations for determination of tax liabilities and rights in a particular tax period expires at the end of the third
year following the year in which a tax return should have been filed (e.g., as the 2014 corporate income tax return has to be filed by 30
April 2015, filings for 2014 become statute-barred on 1 January 2019). However, the general statute of limitations may be extended,
and starts again after intervention by the tax authority concerning a tax return which has been filed. The absolute statute of limitations
expires at the end of the sixth year following the year in which the tax return should have been filed. Therefore, filings for 2014 become
statute-barred on 1 January 2022, regardless of the number of intervening events initiated by the tax authority.
Note however that the amendments to the law provisions regulating the statute of limitation period of the right to assess tax, are in
effect as of 1 January 2013. Based on the new rules, the statute of limitation period mentioned above could be prolonged in cases where
investigations are initiated over a director, shareholder or related party in connection to the abuse of rights (e.g., deliberate actions
aimed at non-payment of tax) or unexplained sources of assets.
Return disclosures/related party disclosures
Based on the CIT legislation, no specific disclosures are required in the annual tax return.
Transfer pricing–specific returns
No specific requirements for a separate return (including an information return) for related party transactions are prescribed by the
Croatian legislation.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
In the past few years, the tax authorities have increased their focus on prices applied in transactions with related parties and thus, the
frequency of transfer pricing audits has increased. Initially, due to limited experience in transfer pricing, the tax authorities tend to
dispute over service charges between related companies. However, there is a noticeable trend towards an increase in transfer pricing
knowledge of tax inspectors and awareness of the transfer pricing issues.
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