Dividend Tax in Croatia
Dividend Tax in CroatiaUpdated on Friday 22nd February 2019
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The tax structure in Croatia offers several gates for foreigners willing to expand their business portfolios in this country. Entrepreneurs can benefit from varied tax reliefs in Croatia, among which we mention the ones imposed on dividends for which there is no corporate income tax. However, a withholding tax is enforced under certain circumstances, meaning that only companies from abroad will be subject to such levy. Our attorneys in Croatia are at your disposal with information and legal advice about the taxes to be paid by a company with establishments in Croatia. Also, our team of advisors can offer legal support when registering a business in Croatia.
Abolished dividend tax in Croatia
The Croatian government decided in 2005 to eliminate the dividend tax with the support of several laws regarding the profits of companies established in Croatia, whether with foreign capital or not. The tax relief encourages foreign investments and places Croatia among states with a proper business climate from a taxation point of view.
Nevertheless, a withholding tax of 12% is imposed on dividends in Croatia for the ones paid to non-resident companies. It is good to know that in cases of double tax treaties with Croatia, the withholding tax for non-resident enterprises can be at a lower rate compared to the one mentioned above. Before starting a business in Croatia, it is suggested to know and understand the taxation system and the legislation related. In this sense, our Croatian lawyers can provide you with legal advice.
Other taxes in Croatia
The royalties and the interests of foreign companies in Croatia are subject to a withholding tax of 15%. The same is available for the technical service fee which is imposed on business consulting or audit services in Croatia. Still related to the tax regime, entrepreneurs who decide to open companies in Croatia can benefit from other tax reliefs, such as:
- • no branch remittance tax;
- • no payroll or capital duty taxes.
Short facts about the corporate income tax in Croatia
Companies with establishments in Croatia are subject to the standard corporate income tax rate of 18%, with the mention that profits under HRK 3 million are levied with a 12% corporate income tax (CIT). This kind of tax enters the attention of branches and subsidiaries of companies from abroad, companies engaged in long-term independent activities and having profits. It is good to know that the corporate income tax applies to companies with registered revenues in Croatia. Moreover, a reduced CIT is applicable to incomes from profit sharing and dividends. It is important to have a complete idea about the taxes you need to pay in Croatia if you have a business in this country. This is a matter where you can receive complete legal advice from our team of lawyers in Croatia who can also handle the requirements for opening a business in Croatia.
Taxes for foreigners in Croatia
The business income is subject to taxation in Croatia and the same thing is available in the employment field and the revenues registered as a worker in this country. Independent personal activities developed in Croatia and the revenues from insurance or capital originating within Croatia are subject to taxation in this state. Foreign investors with real estate properties in Croatia are also levied.
Taxes for LLC or DOO in Croatia
Limited liability companies established in Croatia must pay the corporate income tax of 18% or 12%, depending on the generated revenues. The good news is that there is no dividend tax imposed for LLCs in Croatia, as this tax has been abolished a few years ago. The taxation of capital gains of DOOs in Croatia is established at a rate of 18% or 12% if the annual revenues are under HRK 3 million.
Starting a business in Croatia – the main advantages
Having no dividend tax and a reduced corporate income tax are among the tax benefits a foreigner can enjoy when having a business in Croatia. Having access to the Adriatic Sea and countries worldwide make foreign investors decide for varied operations and activities in the tourism sector in Croatia. here are a few facts you should bear in mind when thinking of Croatia for business:
- Hotels, deluxe resorts, tourism agencies, and also logistics companies are preferred types of businesses in Croatia for which the incorporation is fast and simple.
- For example, a limited liability company can be set up with a minimum share capital of HRK 20,000 and can enjoy several tax exemptions in the case they decide for hiring the local workforce.
- It is good to know that partnerships in Croatia are not subject to minimum share capital, and more than that, the reinvested profits are free from taxes.
- Large companies from abroad can decide on establishing branches and subsidiaries in an easy manner, with fewer formalities and with respect to the local rules.
Knowing the fact that investors from abroad are attracted by Croatia in a large number, the authorities implemented the same business rules addresses to local investors for those from abroad, treating them in the same equal manner when it comes to the right of doing business in Croatia. In other words, both domestic and foreign entrepreneurs enjoy the same business regulations in Croatia and a series of benefits related to the taxation in this country and the way of doing business.
Short conclusion about the dividend tax and other fees in Croatia
The decision of eliminating the dividend tax in Croatia came naturally considering that this was an important step in attracting investors from abroad. Also, having no profit tax for 10 years under special conditions make foreigners decide on doing business in Croatia. Also, the taxation of interest on corporate fixed income securities which are repaid to non-resident entrepreneurs is not imposed. There is no wealth tax imposed in Croatia and no other taxes on pension funds, securities, interest payments on loans, gifts and inheritance in Croatia. We remind that the generated incomes from independent activities, and from companies having operations related to the transfer of products and people in airports and seaports are subject to taxation in Croatia.
When opening a business in Croatia, one must observe the start-up costs involved, including the ones related to the notary and registration. We remind that our team of lawyers in Croatia are at the disposal of foreign investors who want to do business in this country and who want to know the taxation structure for each type of company. You should pay attention to the tax regime and observe the tax benefits involved, such as the dividend tax which is not applicable in Croatia.
If you want to understand better how business is made in Croatia and how the legislation on foreign investments encourages entrepreneurs to set up their companies here, we invite you to get in touch with our law firm in Croatia.