Mazars Cinotti Consulting
d.o.o. Strojarska cesta 20, II. Floor, 10 000 – Zagreb, Croatia
(+385) 1 4864 420
(+385) 1 4864 429
Partner – Advisory services
(00385) 1 4864 420
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||since 2004|
|Documentation liability||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||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.|
|Lack of documentation||Not specifically stated, general rules apply|
|Tax shortage||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:
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|
|VAT group registration|
|Cash accounting||EUR 395,000/year|
|Import VAT deferment|
|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|
|- supply of used real estate|
|VAT registration threshold*||EUR 39,000/year|
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%|
|Personal income tax*||-||0,00%||89||8,75%|
*Tax base differs from the gross salary, deductions apply.