Croatia: Croatia implements BEPS Action 13

Silvia Cancedda	David Jakovljevic

Action 13 of the OECD's BEPS Project has now been fully implemented in Croatia, with the full legal framework in place.

With a total of 15 action points, the OECD's BEPS Project aims to fight profit shifting from jurisdictions with high taxes to tax havens, often as a part of an entirely legal strategy used by MNEs. BEPS Action 13 (transfer pricing documentation and country-by-country reporting) imposes country-by-country reporting (CbCR) on multinationals, requiring them to annually report certain information about their business. The CbC report is filed in every tax jurisdiction in which an MNE operates.

In Croatia, the Act on Administrative Cooperation in the Field of Taxation entered into force on January 1 2017 as a separate section of the old General Tax Act. It adopts and implements various EU Directives in the area of administrative support and automatic exchange of information between EU member states. Based on this Act, the Ordinance on Automatic Exchange of Information in the Field of Taxation was issued and entered into force on March 9 2017.

In late March 2017, the Croatian tax office also published the CbCR requirements that are applicable to constituent entities of Croatian-resident MNE groups with consolidated revenue exceeding €750 million ($793 million) as of January 1 2015.

The first automatic exchange of information for Croatia will be conducted for the fiscal year 2016, with the first notification deadline set at April 30 2017. The details of the notifications and reports required are as follows:

• Each constituent entity of an MNE resident in Croatia must inform the Croatian tax office on whether the ultimate parent entity, a surrogate parent entity or a constituent entity (as defined in the Ordinance), has the obligation to file the CbC report on behalf of the MNE in question. The deadline submitting such a notification is four months after the fiscal year ends. Thus, for the fiscal year that ended on December 31 2016, the deadline is April 30, 2017;
• Each constituent entity of an MNE resident in Croatia that is neither the ultimate parent entity, a surrogate parent entity or a constituent entity, has the obligation to inform the Croatian tax office of the identity and tax residency (name of the country) of the entity that will file the CbC report on behalf of the MNE in question. The deadline is the same as above; and
• The ultimate parent entity of an MNE or its surrogate parent entity has the obligation to file to the Croatian tax office the first CbC Report for the fiscal year that started on January 1 2016 or any time after this date, within 12 months from the end of the fiscal year. Thus, for the fiscal year that ended on December 31 2016, the deadline is December 31 2017. By virtue of an exception, a constituent entity meeting the conditions set out in Article 102 of the Ordinance must file its first CbC report for the fiscal year that started on January 1 2017 or any time after this date, within 12 months from the fiscal year end.

Affected MNEs should note that the notifications discussed above are to be filed to the tax administration's central office, specifically to the Department for Normative Affairs and International Cooperation. The CbC reports due at the end of the year will be submitted electronically, with detailed instructions pending publication by the tax authorities.

Silvia Cancedda and David Jakovljevic (zagreb@eurofast.eu)
Eurofast Croatia
Tel: +385 1 7980 646
Website: www.eurofast.eu

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