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Croatia Corporate - Withholding taxes

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General rules

Taxpayers who pay fees for the use of IP rights (the right to reproduction, patents, licences, copyrights, designs or models, manufacturing procedures, production formulas, blueprints, plans, industrial or scientific experience, and such other rights); fees for market research services, tax consulting services, business consulting services, auditing, or interest to foreign legal entities, natural persons excluded, shall, when making the payment, calculate and withhold tax at a rate of 15%.

Interest payments are subject to WHT at a 15% rate, unless they relate to the following:

  • Commodity loans for the purchase of goods used for carrying out a taxpayer’s business activity.
  • Loans granted by a non-resident bank or other financial institution.
  • Holders of government or corporate bonds who are non-resident legal persons.

Exceptionally, WHT on dividends and profit shares are taxed at the rate of 12%. If the company uses a tax allowance for reinvested profit, other than that earned in the banking or the financial non-banking sector, WHT on such dividends and profit shares is not applied. WHT does not apply on dividends and profit shares if they are paid out from the profit realised before 29 February 2012.

Generally, taxpayers who pay fees for the use of IP rights, pay interest, or pay out dividends and shares in profit to natural persons have to withhold 24% in the case of IP rights, 12% for interest, and 12% for dividends and shares in profit.

EU Directives

The CIT Act provisions and certain EU Directives provide special treatment for dividends, royalties, and interest paid to related companies in EU member states.

Regarding interest and royalty payments, full exemption only applies to payments between related companies, provided that:

  • there is a direct minimum holding of 25% for an uninterrupted period of at least two years and
  • the beneficial owner of the interest or royalties is a company of another member state or a PE situated in another member state of a company of a member state.

Regarding dividend and profit shares payments, full exemption applies when dividends and shares of profits are distributed to a parent company of different EU member state, provided that:

  • the recipient of the dividend or profit share has a minimum holding of 10% in the capital of a company distributing the dividend or profit share, and
  • the minimum holding is held for an uninterrupted period of at least two years.

The recipient of a dividend or profit share is any company:

  • that takes one of the forms that are subject to the common system of taxation applicable to parent companies and subsidiaries of different EU member states
  • resident in a member state for tax purposes and, under the terms of a DTT concluded with a third state, not considered to be resident for tax purposes outside the European Union, and 
  • subject to one of the taxes in the common system of taxation applicable to parent companies and subsidiaries of different EU member states, without the possibility of an option or of being exempt.

Treaty rates

If a country has a DTT signed with Croatia, WHT rates are lowered if the treaty rate is lower than the non-treaty rate. There are specific applications that need to be fulfilled in order to benefit from a DTT between countries.

The following countries have a DTT with Croatia:

Recipient Dividends (%) Interest (%) Royalties (%)
Non-treaty countries 12 15 15
Treaty countries:      
Albania 10 0/10 (23) 10
Armenia 0/10 (15) 10 5
Austria 0/15 (1) 5 0
Azerbaijan 5/10 (16) 0/10 (36) 10
Belarus 5/15 (2) 10 10
Belgium 5/15 (3) 0/10 (24) 0
Bosnia and Herzegovina 5/10 (4) 10 10
Bulgaria 5 5 0
Canada 5/15 (5) 10 10
Chile 5/15 (6) 5/15 (25) 5/10 (38)
China 5 0/10 (26) 10
Czech Republic 5 0 10
Denmark 5/10 (18) 5 10
Estonia 5/15 (8) 0/10 (27) 10
Finland 5/15 (2) 0 10
France 0/15 (9) 0 0
Georgia 5 0/5 (37) 5
Germany 5/15 (8) 0 0
Greece 5/10 (4) 10 10
Hungary 5/10 (4) 0 0
Iceland 5/10 (12) 0/10 (27) 10
India 5/15 (39) 10 10
Indonesia 10 0/10 (28) 10
Iran 5/10 (4) 5 5
Ireland 5/10 (10) 0 10
Italy 15 0/10 (29) 5
Israel 5/10/15 (14) 0/5/10 (30) 5
Jordan 5/10 (11) 10 10
Korea 5/10 (4) 5 0
Kuwait 0 0 10
Latvia 5/10 (4) 0/10 (27) 10
Lithuania 5/15 (8) 0/10 (27) 10
Luxembourg * 5/15 (42) 0/10 (43) 5
Macedonia 5/15 (2) 0/10 (26) 10
Malaysia 5/10 (12) 10 10
Malta 5 (19) 0 0
Mauritius 0 0 0
Moldova 5/10 (4) 5 10
Montenegro 5/10 (4) 10 10
Morocco 8/10 (17) 0/10 (31) 10
Netherlands 0/15 (1) 0 0
Norway 15 0 10
Oman 0 0/5 (32) 10
Poland 5/15 (2) 0/10 (26) 10
Portugal 5/10 (40) 10 10
Qatar 0 0 10
Romania 5 0/10 (26) 10
Russia 5/10 (20) 10 10
San Marino 5/10 (4) 0/10 (33) 5
Serbia 5/10 (4) 10 10
Slovakia 5/10 (4) 10 10
Slovenia 5 0/5 (34) 5
South Africa 5/10 (21) 0 5
Spain (35) 0/15 (13) 0 0
Sweden 5/15 (7) 0 0
Switzerland 5/15 (2) 5 0
Syria 5/10 (10) 10 12
Turkey 10 10 10
Turkmenistan 10 0/10 (41) 10
Ukraine 5/10 (4) 10 10
United Kingdom 5/10/15 (22) 0/5 (44) 5

* DTT is applicable as of 1 January 2017.

Notes

  1. The 0% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 10% of the capital of the payer. The 15% rate applies to other dividends.
  2. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer. The 15% rate applies to other dividends.
  3. The 5% rate applies if the recipient (beneficial owner) is an entity that directly or indirectly holds at least 10% of the capital of the payer. The 15% rate applies to other dividends.
  4. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer. The 10% rate applies to other dividends.
  5. The 5% rate applies if the recipient (beneficial owner) is an entity that directly or indirectly controls at least 10% of the voting power of the payer, or directly holds at least 25% of the capital of the payer. The 15% rate applies to dividends paid by an investment corporation resident of Canada that is owned by a non-resident and in all other cases.
  6. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 20% of the capital of the payer. The 15% applies to other dividends.
  7. The 5% rate applies if the recipient is an entity that directly holds at least 25% of the voting power of the payer. The 15% applies to other dividends.
  8. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 10% of the capital of the payer. The 15% rate applies to other dividends.
  9. The 0% rate applies if the recipient (beneficial owner) is an entity that directly or indirectly holds at least 10% of the capital of the payer. The 15% rate applies to other dividends.
  10. The 5% rate applies if the recipient (beneficial owner) is an entity that directly controls at least 10% of the voting power of the payer. The 10% rate applies to other dividends.
  11. The 5% rate applies if the recipient (beneficial owner) is an entity that holds at least 25% of the capital of the payer, provided that ownership is not achieved for the purposes of exploiting these provisions. The 10% rate applies to other dividends.
  12. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 10% of the capital of the payer. The 10% rate applies to other dividends.
  13. The 0% rate applies if the recipient is an entity that directly holds at least 25% of the capital of the payer. The 15% rate applies to other dividends.
  14. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer. The 10% rate applies if the recipient is an entity (beneficial owner) that directly holds at least 10% of the capital of the payer, which is a resident of Israel and dividends are paid out of the profit that is subject to lower corporate tax rate than usual. The 15% rate applies to other dividends.
  15. The 0% rate applies if the recipient (beneficial owner) is an entity that directly or indirectly holds at least 25% of the capital of the payer and if the dividends aren't subject to CIT in the other contracting state. The 10% rate applies to other dividends.
  16. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer and has invested in the payer at least EUR 150,000. The 10% rate applies to other dividends.
  17. The 8% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer. The 10% rate applies to other dividends.
  18. The 5% rate applies if the recipient (beneficial owner) is an entity (except a partnership) that directly holds at least 25% of the capital of the payer if dividends are held for at least one year without interruption and are published within this period. The 5% also applies if the beneficial owner is a pension fund or other similar institution. The 10% rate applies to other dividends.
  19. The 5% rate applies if dividends are paid from a Croatian resident to a resident in Malta. If a resident from Malta pays dividends to a Croatian resident the rate cannot be higher than the CIT on profit from which dividends are paid out.
  20. The 5% rate applies if the recipient (beneficial owner) is an entity that directly holds at least 25% of the capital of the payer and that share shall be at least 100,000 United States dollars (USD). The 10% rate applies to other dividends.
  21. The 5% rate applies if the recipient (beneficial owner) is an entity that holds at least 25% of the capital of the payer. The 10% rate applies to other dividends.
  22. The 5% rate applies if the recipient of dividends (beneficial owner) is an entity that directly or indirectly holds at least 25% of the capital of the payer. The 15% rate applies for the dividends that are paid out of the profit derived directly or indirectly from the real estate from an investment company (that distributes most of the profit on an annual basis and when income from such real estate is not taxable). The 10% rate applies to other dividends.
  23. Interest to the government, local authority, and the Central Bank is exempt from WHT.
  24. Interest on commercial claims for debts, interest on an issued, guaranteed, or insured loan or credit with the purpose of promotion of export, interest on loan from banks, interest on deposits held in banks, and interest that is paid to the state or local authority is exempt from WHT.
  25. The 5% rate applies to interests on loans granted by bank and insurance companies. The 15% rate applies to other interest.
  26. Interest arising in a contracting state and derived by the government of the other contracting state, a local authority, and the Central Bank thereof or any financial institution wholly owned by that government, or by any resident of that other contracting state with respect to debt and claims indirectly financed by the government of that other contracting state, or the local authority, or the Central Bank thereof or any financial institution wholly owned by the government is exempt from WHT.
  27. Interest arising in a contracting state and derived by the government of the other contracting state, local authority, and the Central Bank thereof or any financial institution wholly owned by that government, or interest on loans from the government is exempt from WHT.
  28. Interest arising in the contracting state and derived by the government of the other contracting state, local authority, the Central Bank, or any other financial institution wholly owned by the government is exempt from WHT.
  29. Interest is exempt from WHT when the payer of interest is the government or local authority in the contracting state or when interest is paid to the government, local authority, or agency of the other contracting state that is wholly owned by the government or local authority, or when interest is paid to any other agency on loans arising from the application of contracts between contracting states.
  30. The 5% rate applies to interest on all type of loans granted by banks. The rate of 10% applies to other interest. Interest arising in a contracting state and derived by the government of the other contracting state, a local authority, and the Central Bank thereof, or on a loan that is approved, guaranteed, or insured by an insurance institution, or financing of international business transactions to the extent that it acts on behalf of the other contracting state is exempt from WHT. Interest arising in a contracting state and paid to a resident of the other contracting state who is the beneficial owner is also exempt from WHT to the extent that such interest is paid to the seller of any industrial, commercial, or scientific equipment or other property that is sold on credit.
  31. Interest paid to the government or Central Bank of the other contracting state is exempt from WHT.
  32. Interest paid to the government is exempt from WHT.
  33. Interest is exempt from WHT when the payer is the government or local authority, when the receiver is the government, local authority, or body wholly owned by the government or the local authority, and when interest is paid in the name of the government to the other bodies (including financial institutions) related with a loan that the government received under the agreement between the governments of the contracting states.
  34. Interest on loans that give, approve, or guarantee the government, local authority, Central Bank, or institution authorised for insurance and financing of international business transactions is exempt from WHT.
  35. Reduced WHT rates or exemptions are not levied/applied if the income is paid to a company resident in a contracting state more than 50% of whose shares are directly or indirectly held by non-residents. This clause will not apply if the company can prove that it carries out important industrial or commercial activities and does not merely manage or hold shares.
  36. Interest arising in a contracting state and derived by the government of the other contracting state, a local authority, and the Central Bank thereof, or on a loan that is approved, guaranteed, or insured by the government of the contracting state, Central Bank, or the agency (including financial institution) that is owned or controlled by the government is exempt from WHT.
  37. Interest is exempt from WHT when the payer of interest is the government, Central Bank, or government agency or institution.
  38. The 5% rate applies on royalties for use or the right to use any type of industrial, commercial, or scientific equipment. The 10% rate applies to other royalties.
  39. The 5% rate applies if the recipient of dividends (beneficial owner) (except partnership) is an entity that directly holds at least 10% of the capital of the payer. The 15% rate applies to other dividends.
  40. The 5% rate applies if the recipient of dividends (beneficial owner) (except partnership) is an entity that directly holds at least 10% of the assets of the payer. The 10% rate applies to other dividends.
  41. Interest is exempt from WHT when sourced in one contracting party and paid to another contracting party or to central bank of the contracting party.
  42. The 5% rate applies if the recipient of dividends (beneficial owner), except a partnership, is an entity that directly holds at least 10% of the assets of the payer. The 15% rate applies to other dividends.
  43. Interest is exempt from WHT when paid by the government, Central Bank, or local authority if interest is paid by the country, local authority, or official body in which interest occurs, if interest is paid on loan or receivables owned or guaranteed by that country, local authority, or export financial agency, or if paid to a financial institution or subject for joint investment.
  44. Interest is exempt from WHT when paid regarding the sale on credit of industrial, commercial, and scientific equipment, the sale on credit of any commodity between two companies, or on bank loans.

In addition to the current WHT rates of 15% and 12%, an increased rate of 20% applies to all services not listed under ‘General rules’ (see above) paid to foreign entities whose place of seat or management is in countries considered to be tax havens or financial centres on the list of countries published by the Ministry of Finance. This provision does not apply to EU member countries and countries with which Croatia has signed a DTT.

Countries listed by the Ministry of Finance are as follows:

Andorra Fiji Netherlands Antilles
Anguilla Gibraltar Niue
Antigua and Barbuda Grenada Palau
Aruba Guam Panama
Bahamas Guernsey Saint Kitts and Nevis
Bahrain Guyana Saint Lucia
Barbados Hong Kong Saint Vincent and the Grenadines
Belize Isle of Man Samoa
Bermuda Jersey Seychelles
British Virgin Islands Liberia Solomon Islands
Brunei Darussalam Liechtenstein Tonga
Cayman Islands Macau Trinidad and Tobago
Christmas Island Maldives Turks and Caicos Islands
Cook Islands Marshall Islands Tuvalu
Dominica, Commonwealth of Monaco United States (US) Virgin Islands
Dominican Republic Monserrat Vanuatu
Falkland Islands Nauru  

Last Reviewed - 29 November 2017

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