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Croatia: Double tax treaty between Croatia and Kosovo enters into force


Croatia and Kosovo have historically shared a good economic and political relationship and are continuing to strengthen the commercial exchanges between the two countries. Croatia sees Kosovo as a good opportunity for export and substantial investment, in areas such as construction and infrastructure, whereas Kosovo perceives Croatia as one of the most important strategic partners for its entrance into NATO and the EU. The economic cooperation between them has recently become even easier after the agreement on the avoidance of double taxation between the two countries (DTA) entered into force at the beginning of 2018.

Discussions regarding the conclusion of the DTA between Croatia and Kosovo continued for many years, but since 2014 the pace had quickened, particularly given the increasing intensity in economic cooperation. A large number of Croatian companies are now present in Kosovo either directly through their subsidiaries or representative offices, or indirectly through partners and distributors. Finally, in March 2017, the DTA was signed and in November 2017 legally confirmed in the form of an Act by the Croatian Parliament.

The DTA introduces numerous forms of tax relief for a variety of income types, and it has set the stage for boosting the exchange of goods and services. It additionally contains a clause on the exchange of information with the purpose of fighting fiscal evasion, in light of the OECD's BEPS project.

The maximum withholding tax rates between the two countries are agreed as follows:

  • 5% on dividends, if the real beneficiary is a company (except for a partnership) that owns at least 25% of the capital of the company paying the dividend;

  • 10% on dividends in all other cases;

  • 5% on interest; and

  • 5% on income from royalties.

The DTA defines in detail all relevant terms such as: resident, permanent establishment, affiliated companies, dividend, interest, property; and a vast range of income types: profit, salary, income from real estate, board members' fees, royalties, students, and so on. Thanks to these definitions a substantial portion of misinterpretation or misuse of the information contained in the DTA has been removed. One particularity related to the definition of the permanent establishment is connected with the construction industry: a construction site or a construction or installation project will be considered a permanent establishment only if it lasts more than 12 months. The DTA furthermore introduces a clause on the profit from international transportation, regulating the use of profit from the operation of ships, aircraft or road vehicles in international transportation. The rest of the provisions follow the standard structure and principles of the OECD model.

Croatian companies operating in Kosovo finally get the opportunity to enhance their commercial presence in this non-EU country. Concerted effort from both sides has resulted in a favourable agreement, which will open up new prospects for Croatian entrepreneurs. Kosovo is investing heavily in its infrastructure, telecommunication and construction industries and has great potential for important projects in the energy sector. It is also very interested in attracting investors from Croatia, thus strengthening the political partnership assisting Kosovo's efforts in joining NATO and the EU.


Silvia Cancedda

David Jakovljevic

Silvia Cancedda and David Jakovljevic (

Eurofast Croatia

Tel: +385 1 7980 646


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