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

Croatia: Croatia signs double taxation avoidance agreement with the UK


David Jakovljevic

Croatia and the UK have signed an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital gains. The agreement was duly signed on January 15 2015 and will enter into force when both countries complete their parliamentary procedures and exchange a diplomatic note, which is expected by the end of 2015. The agreement applies to persons who are residents of one or both contracting states and covers (i) the taxes on income and on (ii) capital gains imposed on behalf of a contracting state, irrespective of the manner in which they are levied. The agreement is expected to facilitate an increase in direct investments between Croatia and UK.

Legal entities conducting international transport of goods between UK and Croatia pay income tax only in their resident state. The same also applies to the corporate income tax in general, including income from international shipping and air transportation, provided that the company does not have a permanent establishment (PE) in the other state. In that case, the company's PE will be liable for tax in the state where the services were provided.

According to the agreement a 5% withholding tax rate will also be applicable in the source state, on interest and royalty payments. With regards to dividends, a 5% withholding tax rate will apply, provided that the beneficiary has a controlling interest (directly or indirectly) of at least 25% in the share capital of the dividend paying company. A 15% rate will apply if the dividends are paid out of income (including gains) which is derived directly or indirectly from immovable property by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax. In a different context, a 10% withholding tax will apply.

Conclusively, board members, artists, sport professionals and workers can pay their income tax within the contractual state where the income is created, whereas the pension income is taxed in the state where the beneficiary is resident.

Equal treatment towards companies of both countries is also stipulated in the agreement as the principle, as is the procedure of mutual cooperation with the use of diplomatic channels, which would contribute to more effective problem solving.

The agreement will have a significant impact on transactions between the UK and Croatia, even though the UK restricted free movement of workers from and to Croatia for seven years as of July 1 2013.

David Jakovljevic (

Eurofast Global Croatia


More from across our site

The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree