CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
9. Tax 9.1 Taxation of Business Activities Corporate Profit Tax Taxpayers Business activities in Croatia are subject to corporate profit tax. Corporate profit taxpayers include: • Croatian resident companies and other legal enti - ties engaged in economic activity for the purpose of earning profit; • domestic permanent establishments of non- resident entrepreneurs (eg, local branch offices of foreign founders); and • individuals who meet certain statutory criteria. Obligations The taxpayer has the obligation to make monthly advance payments of corporate profit tax based on the previous year’s tax return. The monthly payments may be adjusted by the Croatian Tax Authority. Upon a company’s request and subject to the Tax Authority’s approval, a company may set its business/financial year differently to the calendar year. Calculation of tax The tax base of corporate profit tax is the profit gen - erated in a fiscal year, calculated in accordance with applicable accounting regulations and then adjusted pursuant to profit tax legislation. The tax base of resi - dent taxpayers is the profit earned worldwide, while the tax base of permanent establishments of non- resident entrepreneurs is the profit earned in Croa - tia. Profit earned in the sale, liquidation, change of legal form and split off/de-merger of a taxpayer is also included in the profit tax base. The tax return must be submitted to the Tax Administration within four months from the end of the financial year. Any shortfalls at the end of the year must be self-assessed and paid. On the other hand, in the case of a surplus, the Tax Authority returns the payments on request or carries the surplus into the next taxable period. The corporate profit tax rate varies depending on the ascertained tax base. In case of earned income below EUR1 million, the tax rate is set at 10%. On the other hand, if the income exceeds EUR1 million (a minimum
is obtained. However, some differences may occur between regulations of different types of transporta - tion in Croatia. Providing cabotage without special approval from the Ministry of the Sea, Transport and Infrastructure is sanctionable by an administrative fine for the legal entity and the responsible person within the legal entity. Fishery Activities Commercial freshwater and marine fishery activities are not allowed in Croatia for non-Croatian legal enti - ties or natural persons, unless otherwise provided in an international agreement. This applies regardless of the fact that foreign entities may own a ship registered with the Croatian Ship Register. Performance of com - mercial freshwater fishing activities by a foreign legal entity or natural person is sanctionable by an admin - istrative fine for the legal entity, responsible person within the legal entity and natural person. Construction, Architectural and Engineering Services Legal entities from EU/EEA/WTO member states, authorised to undertake construction, physical plan - ning and construction-related architectural and engi - neering services in their home jurisdictions, may on a temporary or sporadic basis perform such activities in Croatia if they meet the requirements established by the law, and only after notifying the Ministry of Physi - cal Planning, Construction and State Assets. These activities may be performed on a permanent basis through a local branch or subsidiary incorporated in Croatia. Under the condition of reciprocity, entities from non- EU/EEA/WTO member states, authorised to under - take the aforementioned activities in their home juris - dictions, may provide such activities on a temporary or occasional basis if they meet the requirements prescribed by law, and after notifying the relevant ministry. Such entities are required to incorporate a company in Croatia to carry out such activities on a permanent basis. Non-compliance with the aforementioned provisions is sanctionable by an administrative fine for the legal entity and the responsible person within said entity.
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