Croatia

Corporate - Income determination

Last reviewed - 20 February 2020

Inventory valuation

Inventories are generally valued at the lower of their acquisition cost or net realisable value. Taking into consideration the accounting principles set out in the Accounting Act and the International Financial Reporting Standards (IFRS) or Croatian Financial Reporting Standards (CFRS), a company can choose to adopt the most favourable method.

Capital gains

Capital gains or losses are covered by the CIT regime. They are either an increasing or decreasing item to the CIT base.

Dividend income

Dividend and profit shares payments made to resident companies are not taxable. Dividends and profit shares paid to non-resident companies are taxed at the withholding tax (WHT) rate of 12%. Please see the Withholding taxes section for more information.

Interest income

Interest income is taxable at the applicable CIT rate, as a part of total income stated in the P&L account. Interest paid to non-resident companies can be taxed at the WHT rate of 15%. Please see the Withholding taxes section for more information.

Interest income on loans between related companies has to be determined at the minimum interest rate prescribed by the Ministry of Finance as calculated and published by the Croatian National Bank (3.42% as of 1 January 2020). An alternative approach (instead of the interest rate prescribed by the Ministry of Finance) is the interest rate determined according to the transfer pricing rules, if applied to all contracts.

Royalty income

Royalty income is taxable at the applicable CIT rate, as a part of total income stated in the P&L account. Royalties paid to non-resident companies can be taxed at the WHT rate of 15%. Please see the Withholding taxes section for more information.

Foreign income

The tax base of a resident taxpayer subject to CIT is the profit earned both in Croatia and abroad, excluding the case where the taxpayer has registered a branch office abroad and taking into account the provisions of respective double tax treaties (DTTs).