The amended EU list of non-cooperative tax jurisdictions entered into force on 26 March 2019, prescribing that Croatian withholding tax is calculated, withheld and remitted at the rate of 20% on all remunerations payable under the Article 31 of the Profit Tax Act (including dividend and interest) to legal entities resident in one of the countries listed on the EU list of non-cooperative tax jurisdictions, if there is no double taxation treaty (DTT) between such countries and Croatia. However, due to different interpretations local market participants have been officially advised by Croatian Tax Administration on the correct approach related to taxation of income paid to legal entities resident in countries from the list Croatia has DTT with.
In line with that, all remunerations paid to legal entities resident in countries from the list which have DTT in place with Croatia will be automatically subject to withholding tax at the rate of 12%.
Currently, only Oman and United Arab Emirates are among the countries from the EU list of non-cooperative tax jurisdictions which have DTT in place with Croatia and are not in scope of higher withholding tax at the rate of 20%.
Impact on investors: Remunerations paid to legal entities resident in Oman and United Arab Emirates will be taxed at the rate of 12%.