The Croatian Parliament has adopted a package of legislation including amendments to the Profit Tax Act, introducing the same tax treatment for non-resident legal entities when collecting cash dividends and shares in profit on the Croatian market as for physical persons.
Above changes abolish the collection of withholding tax on cash dividends and shares in profit if the respective profit was realised prior to 29 February 2012.
Amendments to the Income Tax Act prescribe the introduction of withholding tax for physical persons on interest, as follows:
- interest received on domestic and foreign currency savings,
- interest received from securities,
- interest received on loans, and
- receipts based on revenue-sharing of investment fund in the form of interest.
The following is not considered as interest: penalty interest; charged interest at court rulings and decisions of local and regional government; interest on the balance on the giro account, current account and foreign exchange account (if interest is up to 0.50 pct annually); proceeds from interest earned by investing in bonds, regardless of the issuer and type of bond; and receipts related to the yield on life insurance with savings option.
In addition, the amendments to the Income Tax Act introduce taxation of capital gains for physical persons, which will beapplicable on all investments starting as of 1 January 2016.
The taxable receipts in scope are those which result from disposal of the following types of financial assets: transferable securities and structured products; money market instruments; UCITS units; derivatives; proportional part of the liquidation estate in the event of the liquidation of an investment fund; and other revenues generated from the ownership stake in case of liquidation, cessation or offset. Capital gains will not be taxed if financial assets are disposed of in the period of three years or more from the purchase or acquisition of such financial property.
Detailed bylaws are to be adopted by the Minister of Finance.
Impact on investors: Retroactive taxation of cash dividends and shares in profit realised prior to 29 February 2012 has been abolished for non-resident legal entities. Taxation of capital gains for physical persons is coming into force as of 1 January 2016.