Croatia

General rules

Taxpayers who pay fees for the use of copyrights and use of other IP rights (the right to reproduction, patents, licences, trademarks, designs or models, manufacturing procedures, production formulas, blueprints, plans, industrial or scientific experience, and such other rights) to foreign legal entities, natural persons excluded, shall, when making the payment, calculate and withhold tax at a rate of 15%. WHT is also payable at a rate of 10% for the foreign performers fees (artists, entertainers, athletes), in case the fee is payable according to the agreement with a foreign taxpayer other than a natural person. In that case, no PIT and SSC obligation will occur for the performer (i.e. natural person).

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.

WHT on dividends and profit shares is applied at the rate of 10%. 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. 

Croatia applied WHT on fees for market research services, tax consulting services, business consulting services, or auditing services paid to non-residents. However, as of 12 October 2023, the mentioned provision is applicable only to payments to EU non-cooperative jurisdictions.

EU Directives

The CIT Act provisions and certain EU Directives provide special treatment for dividends, interest, and royalties paid to related companies in Switzerland or states of the European Economic Area (EEA; Norway, Iceland, and Liechtenstein).

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

• 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 Switzerland or an EEA state, or a PE located in Switzerland or an EEA state, whose company is headquartered in the Republic of Croatia.

Regarding dividend and profit shares payments, full exemption applies when dividends and shares of profits are distributed to a parent company of Switzerland or an EEA 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 Switzerland or EEA states
• resident in Switzerland or an EEA 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 Switzerland or the European Economic Area, and
• subject to one of the taxes in the common system of taxation applicable to parent companies and subsidiaries of different EEA states or Switzerland, without the possibility of an option or of being exempt.

EU Directives benefits can apply even before the prescribed holding period expires if the taxpayer provides a bank guarantee on the amount of potential WHT liability. If the holding period eventually will not be met, the guarantee will be used to settle the tax liability.

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:

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. N/A
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.
45. The 5% rate applies if the recipient of dividends (beneficial owner) (except partnership) is an entity that directly holds at least 25% of the assets of the payer. The 10% rate applies to other dividends.
46. The 0% rate applies if the dividend is paid to the other contracting state, a political subdivision or a local authority thereof, the Central Bank of the other contracting state, a financial institution, an investment fund or a pension fund or scheme, or either to any agency or public body wholly owned by any of the aforementioned that is a resident of the other contracting state. The 5% rate applies to other dividends.
47. The 0% rate applies if the interest is paid to the other contracting state, a political subdivision or a local authority thereof, a Central Bank of the other contracting state, a financial institution, an investment fund or a pension fund or scheme, or either to any agency or public body wholly owned by any of the aforementioned that is a resident of the other contracting state.
48. The 5% rate applies if the recipient of dividends (beneficial owner) (except partnership) is an entity that directly holds at least 20% of the assets of the payer throughout the 365-day period that includes the day of the dividend payment. The 10% rate applies to other dividends.

Instead of the current WHT rates of 15% and 10%, an increased rate of 25% applies to all types of fees subject to WHT in Croatia, as well as to fees for market research services, tax and business consulting services, and audit services that are paid to foreign entities who have their registered office or place of effective management in the countries listed in the EU list of non-cooperative jurisdictions for tax purposes with which Croatia does not apply a DTT. Per the 26 February 2024 release, the EU non-cooperative jurisdictions are:

Other than the above-mentioned countries, Russia is also listed on the EU list of non-cooperative jurisdictions (effective as of 14 February 2023) for tax purposes. However, considering that Russia has a DTT signed with Croatia, all services and fees listed under ‘General rules’ (see above) paid to Russian entities are taxable by rates described in ‘Treaty rates’ (see above).