Corporate income taxes
Last reviewed 21 Aug 2023
Object of taxation
Income
Tax rate
18 %; 10 % for enterprises with annual revenue below EUR
1,000,000
Tax liability
Unlimited
The tax base of a resident taxpayer consists of profit generated domestically and abroad.
Limited
The tax base of a non-resident consists only of profit generated domestically, and is determined pursuant to the provisions of CIT Act.
Financial year
Calendar year, change only permissible if authorised by tax administration.
Accounting
Double-entry bookkeeping
Loss carryback
N/A
Loss carryforward
for a limited period only (five years)
Shell company purchase
Under certain circumstances, loss carryforwards may be lost in case of acquisition of shares and restructuring.
Operating expenses
Expenses of the business:
Transfer prices
Arm’s-length basis, documentation required if requested by tax administration.
Interest on debt financing of acquisition of shares
Deductible provided the investment constitutes assets of the business.
Debt / equity
Maximum debt / equity ratio of 4:1, for 25 % shareholders and other related parties
Tax depreciation
Depreciation: straight-line. Depreciation for tax and accounting purposes must be the same.
Annual depreciation
Possible doubling of depreciation rates
Provisions
Provisions are not recognized as an expense, unless created for specific purposes: for risks and costs in accordance with the law or other regulations and provisions stemming from agreements (severance provisions, provisions for costs of renewing natural resources, provisions for guarantee period costs and provisions for costs of started legal proceedings).
Provisions for unused annual leave pursuant to accounting regulations.
Motor vehicle expenses
Depreciation over five years.
Depreciation for personal vehicles and other means of personal transportation is recognised up to costs of EUR 54,000 for procurement of one vehicle.
50 % of motor vehicle expenses not deductible if no benefit in kind is calculated (in that case 100%)
Non-deductible expenses
Expenses that are not directly related to profit earning, illegal gifts and donations, etc. 50% of entertainment expenses.
Interest barrier
Interest surplus which exceeds 30% of the EBITDA or EUR 3 million (interest barrier) with rules for loss carryforward.
Interest and royalties to intra-group companies
If any foreign related party provides debt financing to a Croatian company, any interest charged in excess of the current 4.38% (for 2025), previous 3.25% per year will not be
a tax-deductible expense for the Croatian company.
Withholding taxes
Generally at 15 %. A lower rate may be provided in the applicable double taxation agreement (DTA).
Withholding tax is not paid on tax advisory services, business consulting services and market research services
Interest
15 % (a lower rate may be provided in the applicable DTA) Interest and royalties paid to EU and EEA parents are not subject to withholding tax if:
- minimum direct holding 25 % for at least two years (alternatively bank guarantee)
Royalties
15 %
(a lower rate may be provided in the applicable DTA)
Interest and royalties paid to EU and EEA parents are not subject to withholding tax if:
- minimum direct holding 25% for at least two years (alternatively bank guarantee)
Dividends
10 % on payments of dividends and shares in profits paid to foreign legal entities (a lower rate may be provided in the applicable DTA)
Dividends paid to EU and EEA parents are not subject to withholding tax if:
- minimum holding 10% for at least two years (alternatively bank guarantee)
Controlled foreign corporation (CFC) rules
Taxation of certain income of foreign corporations/permanent establishments at the level of the controlling Croatian company. Controlled foreign company of a taxpayer is any subject situated in another country whose income is subject to taxation in that country:
1. in the case of an entity, if the taxpayer alone or together with associated parties, participates directly or indirectly with more than 50% of voting rights or owns directly or indirectly more than 50% of capital or is entitled to receive more than 50% of the profits of that entity;
2. the actual profit tax paid in another member state is lower than the difference between the corporate profit tax that would be charged to the entity or PE according to the CIT Act and the actual CIT paid by the entity or PE.
Where an entity or PE is treated as a CFC, the taxpayer shall include in the tax base the non-distributed profit of an entity or PE arising from the following revenue categories:
1. interest or other revenue arising from assets,
2. royalties or any other revenue from intellectual property,
3. dividends, carried interests and revenue from disposal of stocks or shares,
4. financial leasing,
5. insurance, banking and other financial activities,
6. from sales and services, arising from goods and services acquired from associated companies and sold to associated companies with little or no added economic value.
The CFC rule will not apply if the controlled foreign company performs a substantive economic activity (supported by staff, equipment, assets and premises), or to a CFC whose specific categories of income comprise one-third or less of total income.
Hybrid mismatches
The hybrid mismatch rules prevent entities that are liable to income tax in Croatia from being able to avoid income taxation or obtain a double non-taxation benefit by exploiting differences between the tax treatment of entities and instruments across different countries.If a mismatch arises, it is neutralized by:
- disallowance of deduction of expenditure under the hybrid arrangement to the extent that the corresponding income is not included in the tax base or is deducted twice; and
- inclusion of the income arising from the hybrid arrangement as taxable income to the extent that it is deductible for the payer.
National parent- subsidiary exemption
No qualifying period / no minimum holding. Dividends are tax free.
Gains on disposal are tax free.
International investments
N/A
International parent- subsidiary exemption and portfolio investments
No qualifying period / no minimum holding. Dividends are tax free
Gains on disposal are taxable, unless DTA provide tax exemption
Goodwill amortisation
In accordance with Croatian accounting standards
Group taxation / pooling
N/A
Tax groups
N/A
Pooling
N/A
