Croatia
Corporate - Group taxation
Last reviewed - 30 June 2025There are no group taxation provisions in Croatia.
Transfer pricing
Croatian transfer pricing rules are aligned with the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines). According to the recent legislative amendments, the CIT Rulebook explicitly states that the OECD Guidelines will be used to interpret the transfer pricing rules prescribed in the CIT Act and the CIT Rulebook.
Prices between a Croatian entity and its foreign related parties must be set at fair market value (the arm’s-length principle). Provisions on transfer pricing are also introduced in transactions between domestic related parties if one of the parties has:
- beneficial tax status (i.e. reduced tax rates) or
- an entitlement to carry forward tax losses from previous years.
If the prices between related entities are different than those between non-related entities, the tax base must be calculated with prices that would have been charged between unrelated companies. In order to analyse and determine the market value of the related party’s transaction and to confirm their arm's-length nature, the following methods can be used:
- Comparable uncontrolled price.
- Resale price.
- Cost plus.
- Profit split.
- Net profit.
In addition to standard methods, taxpayers can use additional methods in determining if transfer prices comply with market principles. In such cases, the prices determined using these methods must comply with the arm's length principle, and it is necessary to explain why the standard methods are considered less appropriate than the alternative method applied.
Taxpayers in Croatia are required to prepare transfer pricing documentation and to present it upon request of the Tax Administration. The documentation requirements are prescribed within the CIT Rulebook and are aligned with the OECD TP Guidelines. According to the recent legislative changes as of 1 January 2025, the level of details about transactions with related parties that needs to be presented within the transfer pricing documentation has been significantly increased and transfer pricing documentation requirements have been expanded, requiring comprehensive information at the level of the multinational group of companies, as well as the domestic company.
In addition to the transfer pricing documentation, taxpayers are required to prepare a report on transactions with related parties (PD-IPO form) in case the taxpayer recorded transactions with related parties in its business ledgers during the tax period, and to deliver that report along with the CIT return (PD form), i.e. four months upon the financial year-end.
Advance pricing agreements (APAs)
Taxpayers have an option of concluding an APA with the Tax Administration and administrative bodies of other states where related entities involved in transactions with domestic taxpayers are residing is available. The APA determines certain criteria (e.g. methods, comparables, adjustments, key assumptions) applicable to future transactions in order to determine transfer prices for such transactions during a certain period.
Country-by-country (CbC) reporting
Croatia harmonised its legislation with Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) plan by introducing CbC reporting requirements. These provisions are implemented in the Act on Administrative Cooperation in the Field of Taxation and the Rulebook on Automatic Exchange of Information in the Field of Taxation. Taxpayers (members of multinational enterprises whose global consolidated turnover exceeded EUR 750 million in previous year) are required to submit to the Tax Administration the following reports and information:
- CbC report notification, or
- CbC report.
Local companies/branches that are not ultimate parents are obligated to notify the Tax Administration:
- whether they are a surrogate parent company that will file a CbC report instead of the ultimate parent company, or
- if they are a constituent entity of the group.
This is done through CbC report notification, which also includes information on the taxpayer responsible for submission of the CbC report (either the ultimate parent or surrogate parent), its identity, and its tax residence.
CbC report notification is submitted electronically to the Tax Administration together with the annual CIT return, and the deadline to file CbC report notification is the same as for a CIT return (i.e. four months upon the financial year-end). After first submission of the CbC report notification, annual re-submission is not required. Instead, CbC report notification is submitted only in case of change of any information submitted in the CbC report notification that was previously submitted.
Public CbC reporting
Amendments to the Accounting Act in July 2023 introduce the provisions of Council Directive (EU) 2013/34/EU concerning the obligation to file reports on profit tax (public CbC reporting). The Directive aims to enhance corporate tax transparency and the accessibility of income tax information to the public by jurisdiction.
The Accounting Act introduces the obligation to report on income tax information for the financial year commencing on or after 1 January 2024. The report shall be submitted no later than 12 months after the end of the respective year, and the obligation applies to:
- Standalone entities and ultimate parent entities whose revenue, or consolidated revenue, for the previous two consecutive periods exceeds EUR 750 million and that have not been established in or have their fixed places of business or permanent business activity only in the Republic of Croatia.
- Medium-sized and large entities controlled by a non-EU ultimate parent.
- Branches with a non-EU parent (if the ultimate parent does not have a medium-sized or large subsidiary) with their net revenue exceeding EUR 10 million.
The reporting obligation for medium-sized and large entities and branches does not apply if the ultimate parent or a standalone entity has prepared a report on income tax information that has been published and made accessible to the public free of charge in an electronic reporting format that is machine-readable on the website of that ultimate parent or of that standalone entity in at least one of the official languages of the European Union and if the report identifies the name and the registered office of the subsidiary or the branch governed by the law of the Republic of Croatia or another member state.
The reporting obligation does not apply to financial institutions since they are subject to separate reporting requirements.
Thin capitalisation
Interest on loans from a shareholder or a member of a company holding at least 25% of shares or voting power of the taxpayer will not be recognised for tax purposes in relation to the amount of the loan that exceeds four times the amount of the shareholder’s share in the capital or their voting power. Interest on loans obtained from financial institutions is exempt from this provision. Loans from a shareholder or a member of a company are considered to include:
- Third-party loans if guaranteed by a shareholder.
- Loans from related parties.
Interest rate charged between related parties
The Croatian CIT Act and CIT Rulebook stipulate specific (“safe harbour”) rules for the deductibility of interest expenses charged by related parties, as well as income charged to related parties for the purposes of CIT. Accordingly, market interest rate (i.e. the market interest rate for taxation purposes) shall be determined and published by the Minister of Finance before the beginning of the taxation period to which it will apply, taking into consideration that this is an interest rate realised in comparable circumstances or that would have been realised between unrelated parties. The Minister of Finance establishes this market interest rate as the arithmetic mean of the interest rate of the European Central Bank on the main refinancing operations, which was published by the Croatian National Bank in the current calendar year. Accordingly, the Minister stipulated an interest rate of 4.38% for 2025, which is applied in transactions between related parties as follows:
- For the purpose of determining the income from interest on loans granted to related parties, the calculated interest rate must be equal to or higher than the market interest rate at the time of granting a loan. In other words, if the interest rate on granted loans is lower than stipulated, the difference is considered unrealized profit, and the tax base is increased for that amount.
- For the purpose of determining the tax deductible expenditures arising from interest on loans received from related parties, the interest rate must not exceed the market interest rate at the time of receiving a loan. If the interest rate on loans granted is above the stipulated interest rate, the difference is considered not deductible for profit tax purposes, i.e. the tax base must be increased for the exceeding interest amount.
Besides the market interest rate prescribed by the Minister of Finance, taxpayers can opt to determine the interest rate between related parties in a way stipulated for determining the fees agreed between unrelated parties in general (i.e. in accordance with the arm’s-length principle, for example by applying the CUP method or performing the benchmarking analysis to establish the market interest rates), under the condition that the same modality of determining interest applies to all financial agreements that taxpayer has with related parties.
Controlled foreign companies (CFCs)
The CFC rule is applied in Croatia. A CFC is any subject located in another country whose income is not subject to taxation in that county if:
- the taxpayer alone, or together with related parties, participates directly or indirectly with more than 50% of the voting rights or is the direct or indirect owner of more than 50% of the capital or is entitled to more than 50% of the realised profit of specific entity, and
- the actual tax paid in another member state is lower than the difference between the CIT that would be charged to the entity or PE according to the CIT Act and the actual CIT paid by the entity or PE.