After the Croatian Employers’ Association (HUP) filed a lawsuit on 11 September 2012 questioning the constitutionality of the government’s amendments to the Income Tax Act, the Constitutional Court has decided to suspend the government’s amendments on 3 April 2013. HUP considers the law unconstitutional because it refers to retroactive taxation and that it was also discriminatory. Consequently, dividends and shares in profit realised prior to 1 January 2001 and between 1 January 2005 and 1 January 2012 will temporarily not be subject to a withholding tax at a rate of 12%.
Temporary suspension will remain in force until the Constitutional Court’s final decision on compliance of the acts of the Law on amendments to the Income Tax Act with the Constitution of the Republic of Croatia.
Impact on investors: Dividends and shares in profit realised prior to 1 January 2001 and between 1 January 2005 and 1 January 2012 will temporarily not be subjects to a withholding tax at a rate of 12%.