Croatia: Treaty analysis: Croatia-Luxembourg DTA enters into force
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Croatia: Treaty analysis: Croatia-Luxembourg DTA enters into force

Jakovljevic

David Jakovljevic

Croatia and Luxembourg signed a treaty on the avoidance of double taxation (double tax agreement, DTA) on June 20 2014, which recently entered into force on January 13 2016.

The treaty applies to persons who are residents of one or both of the contracting states in regards to corporate income tax, personal income tax and any type of surtax in line with the general OECD guidelines.

According to the agreement, the profits of a company of one state are taxable only in that state unless the company maintains a permanent establishment (PE) in the other state.

In case a company resident in one state pays dividends to a resident of the other state, the withholding tax applicable cannot exceed:

  • 5% of the gross amount of dividends if the beneficial owner holds at least 10% of the capital of the company paying the dividends; or

  • 15% of the gross amount of the dividends if no such participation criteria is fulfilled.

In regards to interest withholding tax rates, taxation cannot exceed 10% of the gross amount paid. On the other hand, the withholding tax rate for royalties and copyrights cannot exceed 5% of the gross amount.

As far as income from employment wages and similar remuneration is concerned, such income derived by a resident of one state is taxable only in that state unless employment is exercised in the other state in duration exceeding 183 days within 12 months.

The treaty stipulates that double taxation will be avoided in Croatia by allowing a tax deduction in amount of the tax paid in Luxembourg. The double taxation in Luxembourg will be eliminated by exempting income or capital from Luxembourg tax if tax was paid in Croatia. This elimination is applicable to taxes subject to the treaty with the exception of withholding tax on dividends, interest, royalties and income of artists and sportsmen for which the tax deduction method will be applied.

The agreement will be effective as of January 1 2017.

David Jakovljevic (david.jakovljevic@eurofast.eu)

Eurofast Global Croatia

Website: www.eurofast.eu

more across site & bottom lb ros

More from across our site

Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
Gift this article