croatia

mazars in croatia

Mazars Cinotti Consulting
d.o.o. Strojarska cesta 20, II. Floor, 10 000 – Zagreb, Croatia

Phone:
(+385) 1 4864 420

Fax:
(+385) 1 4864 429

www.mazars.hr

Kristijan CINOTTI

Kristijan CINOTTI

Partner – Advisory services

Phone:
(00385) 1 4864 420

Mobile:
(00385) 99 4877 112

croatia

Corporate tax and other direct taxes

The CIT rate for 2016 is 20%. From 2017 onwards, CIT rates are 18% or 12% for enterprises with annual revenues below HRK 3 million for taxable periods which ends after 1.1.2017. The tax base is accounting profit modified by several increasing and decreasing items. Enterprises with annual revenues below HRK 3 million have the option of determining the profit tax base by cash flow principle. Losses can be carried forward within 5 years but special limitations are applicable in case of M&A transactions. Capital gains are included in the annual corporate profits tax return. Croatia uses thin capitalization (4:1), but thin capitalization does not apply if shareholders are financial institutions, CIT payers in Croatia or PIT payers in Croatia. There is a range of tax allowances for new investments and R&D (up to 150% of qualified costs), the education of employees, etc. In 2016, the tax base can be decreased for reinvested earning benefits, i.e. increase of share capital in amount of investment in tangible and intangible assets.

A withholding tax of 15% is applied on interest, royalty and business consultancy services paid by a Croatian company to a foreign company while WHT on dividends and profit shares is 12%.  However, Croatia has more than 50 active DTT treaties used to avoid withholding tax. A withholding tax of 20% is applied on all payments to offshore companies for the services not mentioned in Law. The EU Directives on withholding tax apply.
Real estate transfer tax (RETT) is applied on the transfer of immovable property at the rate of 4%. The tax base is the selling price of the transferred property and the taxable person is the buyer.
Other taxes include contribution to the Croatian Commercial Chamber (fixed monthly fee), forestry tax (annual percentage) and tourist tax (for certain activities).

Transfer pricing in Croatia
Arm’s length principle Ok since 2004
Documentation liability No Deliver to Tax Administration upon request. Together with tax return for 2016, taxpayers have to deliver Report on business transactions with related parties ( PD-IPO form) (deadline is 30 April)
APA Ok APA is available as from January 1, 2017. The application fee will be charged. There is no practice and no practical guidelines on this matter.
Penalty
Lack of documentation No Not specifically stated, general rules apply
Tax shortage Ok Additional tax charged and 100% of that tax is not deductible
Related parties 50% (25%) < Direct or indirect control (25% is commonly used by tax authority and advisors) or joint control functions
Safe harbours Interest on IC loans is determined by the Minister of Finance, for 2016 5,14% and for 2017 interest is 4,97%

Level of attention paid by Tax Authority:

7/10

VAT and other indirect taxes

The tax rate is 25%; a reduced rate of 13% applies to tourist accommodation services, newspapers, specific input for agricultural production, delivery of electrical energy, etc., while a reduced rate of 5% applies on milk, books, etc. VAT-exempt services are mainly banking services, insurance, investment-related services, educational services (under certain conditions), games of luck, certain services provided by medical doctors and dentists, and certain other activities which are tax exempt with regard to their public interest or their special character. Tax is deductible on food donation to non-profit humanitarian legal entities up to 2 percent of total revenues of previous year.

Other indirect tax types in Croatia are excise duty and insurance tax.

VAT Options in Bosnia Herzegovina
Distance selling EUR 36,000/year
Call-off stock
VAT group registration No
Cash accounting EUR 395,000/year
Import VAT deferment No
Local reverse charge construction work, the supply of used material, the transfer of allowances to emit greenhouse gase, the supply of immovable property in certain conditions
Option for taxation
- letting of real estate No
- supply of used real estate
VAT registration threshold* EUR 39,000/year

Personal Income Tax / Social Security contributions

Personal income tax rates are 24% (monthly tax base up to HRK 17,500) and 36% (above HRK 17,500), while 12% rate is withheld from certain types of income, e.g. dividends, capital gains, lease of the real estate etc.. Active incomes fall under the scope of the SSC system: individual pension social contributions equal 20% (employee contribution) and health and unemployment contributions of 17.2% represent employer contribution. Passive incomes are generally subject only to taxes. The examples below show the cost of the employer and the employee in case of minimum and average wage level in the private sector. Basic personal allowance amounts to HRK 3,800 and surtax is determined by municipality/city and amounts from 0% to 18%.

2016 in Croatia Minimum wage Average wage in private sector
Exchange rate HRK/EUR  7,6 in EUR in HRK in EUR in HRK
  431 3 276 1 018 7 739
TOTAL WAGE COST 505 117,20% 1 193 117,20%
Employer's SS and other contributions 74 17,20% 175 17,20%
Gross salary 431 100,00% 1 018 100,00%
Employees' contributions 86 20,00% 204 20,00%
Personal income tax* - 0,00% 89 8,75%
Net salary 345 80,00% 726 71,25%

*Tax base differs from the gross salary, deductions apply.

 
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