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

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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 & shared bottom lb ros

More from across our site

Brazil appears to be adopting protocols to align national taxation with international standards, but recent changes are not immune from criticism, experts tell ITR
The US president did not have the authority to impose the tariffs, a court ruled; in other news, Fried Frank and Crowe Ireland made key tax hires
Pillar two considerations have become a fact of life for taxpayers everywhere, not least in Switzerland, where companies nonetheless continue to be active with investment
The Dutch TP software company’s co-founder tells ITR about speeding up documentation processes, following in Steve Jobs’s footsteps, and what makes tax cool
The ruling underscores the need for companies to provide robust and defensible valuations of intangible assets, one partner tells ITR
Pillar two is certain to be a game-changer for tax advisers and their clients. Russell Gammon of Tax Systems outlines 10 reasons why
Despite a general decline in corporate tax rates around the world, jurisdictions are now more reliant on it than in 1990, a Tax Foundation economist found
Australian law firm Webb Henderson’s report said PwC had met 46 of 47 targets; in other news, the OECD has issued new transfer pricing country profiles
The arrival of a seven-strong team from Baker McKenzie will boost WTS Germany’s transfer pricing capabilities and help it become ‘a European champion’, the firm’s CEO said
Germany has forgotten to think about digital reporting requirements, a WTS partner claimed at ITR’s Indirect Tax Forum 2025
Gift this article