In terms of the CIT Act, residents are legal or natural persons whose seat is recorded in the Register of Companies or other register in Croatia, or whose place of effective management and control of business is in Croatia. Residents are also entrepreneurs/natural persons with domicile or habitual residence in Croatia whose business activity is recorded in a register or other records.
A non-resident is any person who does not satisfy one of the requirements referred to above.
Permanent establishment (PE)
The definition of a business unit of a non-resident is based on the Organisation for Economic Co-operation and Development (OECD) guidelines, which provides that a non-resident’s business unit is a place of management, a branch, an office, a factory, a workshop, a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources or construction site or project for a period longer than six months, including agents acting in its name, having the right to conclude contracts or hold stock of products that it distributes on the Croatian market in the name of a foreign entrepreneur. The business unit of a non-resident also includes the performance of services (i.e. advisory and business consulting services) for the same or a related project, which lasts for more than three months in a 12-month period. As of 1 January 2019, PE definition has been expanded in line with recent base erosion and profit shifting (BEPS) developments, mainly by introducing anti-fragmentation rules, expanding the definition of a dependant agent, and limiting the exemption scope for preparatory and auxiliary activities.