Effective 1 January 2020, Croatia has introduced exit tax rules in line with the EU Anti-Tax Avoidance Directive (ATAD1). Under the exit tax rules, the unrealized value of assets will be considered taxable income in certain transactions such as:
- Where the taxpayer transfers property from his permanent establishment in another State to Croatia, and such transfer is not subject to tax in Croatia although the property is legally and economically owned by the taxpayer;
- Where the taxpayer transfers property from a permanent establishment in Croatia to the head office or to a permanent establishment in another State, and such assets are not subject to tax in Croatia;
- Where the tax residence of a company subject to tax in Croatia is transferred to another country, except in cases where the assets remain connected to a permanent establishment in Croatia; or
- Where the business of a permanent establishment in Croatia is carried out in another State, and such business is subject to tax in the other State without being resident of such other State.
The exit tax provisions will not apply where the assets transferred are repaid before 12 months, or if the assets relate to the financing of securities, or are provided as a security, or are transferred for the purpose of prudential capital requirements/ liquidity management.
Further, the payment of exit tax may be deferred and paid in installments over five tax periods if the transfer is to another EU Member State or EEA state with which Croatia has an agreement for mutual assistance for the recovery of taxes.