Croatia Cross-Border Tax Guide 2026

Withholding Taxes on Outbound Payments

Croatia imposes withholding tax on certain payments to non-residents. The rates depend on the type of payment and whether a double tax treaty applies:

• Dividends: 10% domestic rate. 0% to EU companies with ≥ 10% holding for ≥ 2 years (EU Parent-Subsidiary Directive). Under DTTs: typically 5% for substantial holdings, 10% for portfolio (e.g., US 5%/15%, UK 0%/10%, Germany 5%/15%).
• Interest: 15% domestic rate to non-residents. 0% to EU related parties under the EU Interest and Royalties Directive. Under DTTs: typically 0–10% (e.g., US 0%, UK 0%, Germany 0%).
• Royalties: 15% domestic rate. 0% to EU companies with ≥ 25% holding for ≥ 2 years (EU Interest and Royalties Directive). Under DTTs: typically 5–10% (e.g., US 10%, UK 0%, Germany 0%).

The reduced rates and exemptions under EU directives require the recipient to be the beneficial owner and to have sufficient economic substance in the EU member state. The Croatian Tax Administration applies a strict beneficial ownership test.

Double Tax Treaty Network

Croatia has one of the most extensive DTT networks in Southeast Europe, with over 65 treaties in force. Key treaty partners include:

EU members: Austria, Belgium, Bulgaria, Cyprus, Czech, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden (27 EU treaties). Non-EU: Albania, Armenia, Australia, Azerbaijan, Belarus, Bosnia, Canada, China, Georgia, Iceland, India, Indonesia, Iran, Israel, Japan, Jordan, Kazakhstan, Kosovo, Kuwait, Malaysia, Moldova, Montenegro, Morocco, North Macedonia, Norway, Oman, Pakistan, Philippines, Qatar, Russia, San Marino, Saudi Arabia, Serbia, Singapore, South Africa, South Korea, Sri Lanka, Switzerland, Thailand, Tunisia, Turkey, UAE, Ukraine, UK, USA, Uzbekistan. The treaties generally follow the OECD Model Convention and provide for reduced WHT rates, PE thresholds of 12 months (construction/services), and mutual agreement procedures for dispute resolution.

Transfer Pricing Rules

Croatia's transfer pricing rules follow the OECD Transfer Pricing Guidelines. Key requirements:

• Arm's length principle: All transactions between related parties must be conducted at arm's length prices
• Documentation threshold: Transfer pricing documentation required if related-party transactions exceed: EUR 750,000 for goods; EUR 200,000 for services; EUR 100,000 for royalties and interest; EUR 400,000 for other transactions
• Master file and local file: Required for multinational groups exceeding EUR 50 million group revenue
• Country-by-country reporting: Required for groups with consolidated revenue ≥ EUR 750 million
• Advance pricing agreements: Available from the Tax Administration (bilateral and unilateral)

CFC Rules and Anti-Avoidance

Croatia has implemented Controlled Foreign Company (CFC) rules under the EU ATAD Directive. CFC rules apply if: a Croatian parent (tax resident or PE) controls a foreign entity (≥ 50% control); the foreign entity pays low effective tax (less than 50% of Croatian CIT); and at least one-third of the entity's income is passive (interest, royalties, dividends, insurance, financial leasing). Exemptions apply if the foreign entity has substantial economic substance (premises, staff, equipment) or if the undistributed income is less than EUR 750,000. General anti-abuse rules (GAAR) apply to transactions lacking commercial substance.

EU Directives Applicability

As a full EU member since 2013, Croatia applies all major EU tax directives: EU Parent-Subsidiary Directive (exemption for dividends between related EU companies); EU Interest and Royalties Directive (0% WHT on qualifying interest/royalties); EU Merger Directive (tax-neutral reorganisations); VAT Directive (via implementation in PDV law); Mutual Assistance Directive (automatic exchange of tax information); DAC6 (mandatory disclosure of cross-border arrangements); and ATAD (anti-tax avoidance rules).

FAQs

What is the withholding tax on dividends paid to non-residents?

10% domestic rate. 0% to EU companies with ≥10% holding. Reduced under DTTs to 5–15%.

Does Croatia have transfer pricing rules?

Yes, following OECD guidelines. Documentation required above prescribed transaction thresholds.

How many double tax treaties does Croatia have?

Over 65 treaties, including all EU members, US, Canada, China, UAE, Japan, Australia, and many others.

Does Croatia have CFC rules?

Yes, under EU ATAD. CFC rules apply to controlled foreign entities with low effective tax and predominantly passive income.