All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

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


more across site & bottom lb ros

More from across our site

The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.