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8.2.2. Withholding Taxes

Dividend

Dividends (and other profit share distributions) paid to non-residents are subject to withholding tax at the rate of 10% (12% until 31 December 2020) unless a lower rate or exemption applies under a tax treaty or the EU law.

There is no withholding tax on dividend payments (and other profit share distributions) to an EU parent company, provided the recipient holds at least 10% in the capital of the distributing company for an uninterrupted period of at least 2 years. Effective 1 January 2019, the withholding tax exemption under the Directive may be provisionally applied even if the minimum 2-year holding period is not yet met, subject to the provision of a bank guarantee for the potential tax that would become due in case the condition is ultimately not met.

Effective 9 June 2016, the withholding tax exemption under the EU Parent-Subsidiary Directive is disallowed if an arrangement or a series of arrangements are put in place with the main purpose or one of the main purposes to receive a tax benefit and not for valid commercial reasons that reflect economic reality.

An increased withholding tax of 20% applies to dividends distributed to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list), unless the relevant jurisdiction has a tax treaty with Croatia.

Interest

Tax is withheld at the rate of 15% on interest paid to non-residents (other than natural persons) unless a reduced rate or exemption applies under a tax treaty or EU law.

Under domestic law, an exemption from withholding tax applies to:

  • Interest on commodity loans, i.e., loans used to purchase goods necessary for the activity of the taxpayer;
  • Interest on loans granted by a non-resident banking institution; and
  • Interest on government and corporate bonds.

Pursuant to the EU Interest and Royalty Directive, there is no withholding tax on interest paid to an associated EU company. Two EU companies are deemed to be associated for these purposes, if one directly holds an interest of at least 25% for at least 2 years in the capital of the other, or if a third company directly holds an interest of at least 25% for at least 2 years in the capital of both companies. Effective 1 January 2019, the withholding tax exemption under the Directive may be provisionally applied even if the minimum 2-year holding period is not yet met, subject to the provision of a bank guarantee for the potential tax that would become due in case the condition is ultimately not met.

An increased withholding tax of 20% applies to interest payments made to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list), unless the relevant jurisdiction has a tax treaty with Croatia.

Royalty Copyright

Tax is withheld at the rate of 15% from gross royalties paid to non-residents unless a lower rate or exemption applies under a tax treaty or EU law.

Pursuant to the EU Interest and Royalty Directive, there is no withholding tax on royalties paid to an associated EU company. Two EU companies are deemed to be associated for these purposes, if one directly holds an interest of at least 25% for at least 2 years in the capital of the other, or if a third company directly holds an interest of at least 25% for at least 2 years in the capital of both companies.  Effective 1 January 2019, the withholding tax exemption under the Directive may be provisionally applied even if the minimum 2-year holding period is not yet met, subject to the provision of a bank guarantee for the potential tax that would become due in case the condition is ultimately not met.

An increased withholding tax of 20% applies to royalty payments made to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list), unless the relevant jurisdiction has a tax treaty with Croatia.

Royalty Patent

Tax is withheld at the rate of 15% from gross royalties paid to non-residents unless a reduced rate or exemption applies under a tax treaty or EU law.

Pursuant to the EU Interest and Royalty Directive, there is no withholding tax on royalties paid to an associated EU company. Two EU companies are deemed to be associated for these purposes, if one directly holds an interest of at least 25% for at least 2 years in the capital of the other, or if a third company directly holds an interest of at least 25% for at least 2 years in the capital of both companies. Effective 1 January 2019, the withholding tax exemption under the Directive may be provisionally applied even if the minimum 2-year holding period is not yet met, subject to the provision of a bank guarantee for the potential tax that would become due in case the condition is ultimately not met.

An increased withholding tax of 20% applies to royalty payments made to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list)unless the relevant jurisdiction has a tax treaty with Croatia.

Royalty Trademark

Tax is withheld at the rate of 15% from gross royalties paid to non-residents unless a reduced rate or exemption applies under a tax treaty or EU law.

Pursuant to the EU Interest and Royalty Directive, there is no withholding tax on royalties paid to an associated EU company. Two EU companies are deemed to be associated for these purposes, if one directly holds an interest of at least 25% for at least 2 years in the capital of the other, or if a third company directly holds an interest of at least 25% for at least 2 years in the capital of both companies. Effective 1 January 2019, the withholding tax exemption under the Directive may be provisionally applied even if the minimum 2-year holding period is not yet met, subject to the provision of a bank guarantee for the potential tax that would become due in case the condition is ultimately not met.  

An increased withholding tax of 20% applies to royalty payments made to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list), with which, Croatia has no double taxation treaties.

Service Management

Tax is withheld at the rate of 15% if the payment relates to market research, auditing, or tax and business consulting and is paid to a non-resident legal entity.  

An increased withholding tax of 20% applies to service management fees paid to residents in non-cooperative jurisdictions as listed by the EU (see Sec. 13.5. for the list), with which, Croatia has no double taxation treaties.

Service Technical

Tax is withheld at the rate of 15% if the payment relates to market research, auditing, or tax and business consulting.

Fees for services of any type other than those listed above are subject to withholding tax at the rate of 20%, if paid to persons having their headquarters or place of effective management, or supervision of business, in jurisdictions listed as non-cooperative (see Sec. 13.5. for the list) by the EU, unless the relevant jurisdiction has a tax treaty with Croatia.

Others

Fees paid to foreign enterprises for the performance of non-resident artists, entertainers, and sportspersons are subject to withholding tax at the rate of 10% (15% until 31 December 2020).

Below is a discussion of domestic withholding tax rules for most of the common cross border payments.

Capital Gains 0.0 %
Dividends 10.0 %
Interest 15.0 %
Royalty Copyright 15.0 %
Royalty Patent 15.0 %
Royalty Trademark 15.0 %
Sales 0.0 %
Service Management 15.0 %
Service Technical 15.0 %

* Rates are current as of 25 September 2022