Croatia: Withholding Tax Taxation

Alessandro PasutWithholding tax taxation is governed by the provisions of the Corporate Income Tax and corresponding Regulations and the provisions of Agreements on Avoidance of Double Taxation. Upon Croatia’s accession to European Union, certain provisions contained in EU directives relating to the treatment of payments made between EU Member States come into force.
The main change affects certain payments between related companies established in the EU, which would be exempt of withholding tax.
Provisions of the EU Directive require that related parties must have one of the forms to which the common system of taxation is applied to, and which is valid for to the parent companies and subsidiaries of different EU Member States. They must be, for tax purposes, considered as a resident of a EU Member State in accordance with the laws of that country and be subject to one of the taxes to which the common system of taxation applicable to parent companies and related parties of different EU member states is applied.
The changes affect especially the payment of interests and royalties made between related parties of different EU Member States.

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