Taxation of Foreign Companies in Croatia
Taxation of Foreign Companies in CroatiaUpdated on Tuesday 24th September 2019
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All Croatian companies and any legal or natural person with residency in Croatia are taxable subjects. The corporate income tax rate is 12% for revenues up to HRK 3 million and 18% rate for more than HRK 3 million. Any foreign company based in Croatia has to pay the corporate tax on all its profits from Croatia and abroad. Our lawyers in Croatia can tell you more about the taxation of foreign companies in the local economy and can also provide support and legal assistance for starting a business in Croatia.
What types of incomes are levied in Croatia?
Corporate income tax in Croatia
Businessmen who want to invest in Croatia and start a company must know that a foreign company is considered resident of Croatia if it is incorporated and registered within the country. The difference between revenue and expenses assessed in the profit and loss statements under the accounting rules, which is then adjusted for tax specific items under the corporate tax provisions, is the taxable income of foreign companies in Croatia. The corporate income tax in Croatia is paid at a rate of 12% and is applicable to enterprises which conduct economic activities with the purpose of deriving profit, to branches of foreign businesses and to Croatian companies which pay the corporate income tax. The corporate income tax usually includes the following items:
- • Dividends – taxation of foreign companies in Croatia does not include dividends; nevertheless, they are subject to withholding tax, except for dividends paid to a resident entity;
- • Capital gains – they are taxed at the standard corporate income tax rate;
- • Losses – may be carried forward up to five consecutive years.
No surtax, alternative minimum tax, participation exemption and holding company regime applies to foreign companies operating in Croatia. There are several tax incentives provided by the local authorities. These include: tax deductions for specific activities (investments), business support activities and activities with higher value added. For these activities, the taxation base may be reduced by 50% up to 100%. Our attorneys in Croatia can provide you with detailed information about the tax incentives available for foreign companies.
Is there a wealth tax in Croatia?
The VAT in Croatia
The dividend tax in Croatia
Double tax treaties signed by Croatia
- • for 2018, the FDI inward flow was USD 1,159 million;
- • the “2019 World Doing Business" report ranks Croatia 58th among 190 worldwide economies;
- • according to UNCTAD 2019 World Investment Report, the total FDI stock for 2018 in Croatia was USD 32.8 million;
- • around 30% of the foreign investments in Croatia were directed to the financial services sector in 2018.
Taxable profits of foreign companies in Croatia
Every company based in Croatia is subject to the local taxation system. Foreign enterprises must pay company tax on all their profits from Croatia and abroad. Taxable profits of foreign companies in Croatia include the money resulted from investments, doing business and selling assets for more than they cost (chargeable gains).
If you want to start a company in Croatia and need tax consultancy, feel free to contact our law firm in Croatia.