Prospera MundiConstruction and installation projects
A construction site or construction or installation project constitutes a permanent establishment only when it lasts for more than six months.
International companies · Corporate income tax
When activity becomes a taxable presence in Croatia
A permanent establishment is created by facts, not by a management label. Once the statutory conditions are met, registration, Croatian books, invoicing and tax attribution follow.
Dependent contracting agent
A dependent agent that habitually concludes contracts can create a permanent establishment.
Independent agent
An independent agent acting in the ordinary course of its business does not create one.
Preparatory or auxiliary activity
Preparatory or auxiliary activities are excluded, subject to the anti-fragmentation rule.
Once a permanent establishment exists
The non-resident registers with the Tax Administration within 30 days after starting the activity. The establishment keeps books and issues invoices under Croatian rules. Profit is attributed as if it were a separate enterprise. Corporate income tax is 10% up to €1 million of revenue and 18% at or above €1 million.
Withholding tax — a cost the parent often misses
Payments from Croatia to a foreign recipient for interest, dividends, profit shares and copyright or similar rights can be subject to withholding tax on the gross amount. Certain interest, including specified bank, bond and leasing interest, is excluded.
Treaty rates are not automatic
A reduced treaty rate requires the prescribed certified claim form or residence certificate for the payment. For recurring payments to the same recipient the evidence is renewed every 12 months. Without it, the domestic rate applies.
The EU parent–subsidiary exemption for dividends requires at least a 10% holding maintained continuously for 24 months.
Where the company is resident
A company is a Croatian tax resident if its registered office or place of effective management is in Croatia. Croatia relieves double taxation through a foreign-tax credit, subject to evidence of tax paid. Binding guidance may be requested from the Tax Administration before a transaction.
Primary basis — permanent establishment and withholding
- General Tax Act — permanent establishment, profit attribution, books and binding guidance.
- Corporate Income Tax Act — residence, taxable base, rates, withholding and EU exemptions.
- Tax Administration — tax treaty list.
Verified as at 2 August 2026.
Transfer pricing
Intra-group prices are not merely an internal convention
Management fees, licences, intercompany loans and other controlled transactions must be supportable on terms that would be agreed between independent parties. The Act defines related persons through participation in management, control or capital and does not set a general ownership percentage below which the relationship disappears.
The arm's-length principle and documentation
The legislation provides five principal methods and allows other methods where appropriate. Classic transaction methods take precedence where they can be reliably applied. A cost charged by a related party is tax-deductible only when the required documentation exists. The PD-IPO schedule submitted with the corporate income tax return makes related-party transactions visible.
An intercompany loan passes three filters
- Interest rate: interest charged or deducted must stay within the published market benchmark or be supported under the arm's-length principle.
- Thin capitalisation: for a shareholder with at least 25% ownership or voting rights, interest on debt above four times that shareholder's equity contribution may be non-deductible; related guarantees and connected loans can also be included.
- Borrowing-cost limitation: exceeding borrowing costs are deductible up to 30% of EBITDA or three million euros where that amount is higher, subject to statutory exceptions.
Advance certainty and group-size obligations
An advance pricing agreement may cover recurring transactions. Country-by-country reporting applies to groups with consolidated revenue of at least €750 million. DAC6 can require reporting of cross-border arrangements by an intermediary or, in specified cases, the taxpayer.
Illustrative situation
A monthly “management fee” invoice is not supported merely because the group uses the same label everywhere. The Croatian entity needs evidence of the service, allocation logic, benefit and price before the cost can be defended.
Primary basis — related-party transactions
- Corporate Income Tax Act — Articles 8, 13, 14, 14.a and 30.a.
- Advance Pricing Agreement Regulation.
- EU Tax Dispute Resolution Mechanisms Act.
- Administrative Cooperation in Tax Matters amendments — CbCR and DAC6.
Verified as at 2 August 2026.
People across borders
The same boundary questions apply to people
When a person becomes Croatian tax resident
Either test can be sufficient. A person has a residence where accommodation is held in Croatia for at least 183 days across one or two calendar years. Habitual abode is established by physical presence for at least 183 days across one or two calendar years. A resident is taxed on worldwide income; a non-resident on Croatian-source income.
Posted workers
A worker posted to Croatia is entitled to the statutory core of Croatian working conditions. For a long-term posting exceeding 12 months, or 18 months following a reasoned notification, the package expands. A prior declaration is filed with the Labour Inspectorate. The posting file includes the A1 certificate concerning applicable social-security legislation. Published statutory fines range from €4,110 to €6,630.
Management-board members
Management-board members and executive directors are mandatorily insured where they are not already insured on another basis. For a foreign director, existing mandatory coverage must therefore be established rather than assumed.
Primary basis — individuals and posted workers
- General Tax Act — residence and habitual-abode tests.
- Personal Income Tax Act — residence, income categories and worldwide income.
- Posted Workers in Croatia Act — minimum rights, long-term postings, prior declaration, A1 and penalties.
Verified as at 2 August 2026. Treaty and EU social-security coordination must be applied to the actual countries and facts.
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