Standard rate of Value Added Tax (VAT) will be reduced to 24% starting from the 1st of January 2020 year, as prescribed in the Value Added Tax Law, published in the National Gazette no. 106/2018.

All taxpayers whose deliveries are subject to the standard VAT rate (currently 25%), from the beginning of 2020 year should on their outgoing invoices calculate and charge VAT at rate of 24%. Pretax from outgoing invoices will be recognised at rate of 24%. It is advisable to timely adapt a bookkeeping software to the application of a new standard VAT rate.

Notification by the Croatian Tax Authority on possible new form for filing the monthly/quarterly VAT returns has still not been issued.


Corporate Profit Tax (CPT) taxpayers being part of a group of related companies, where one company directly or indirectly participates in management, supervision or capital of another company, or the same person participates directly or indirectly in management, supervision or capital of two or more business subjects who are CPT taxpayers, in their mutual transactions apply transfer prices.

Important characteristic of transfer prices is that these must reflect prices that would apply in the same or similar conditions between unrelated parties, i.e. should be similar to prices in a free market.

Transactions requiring properly determined transfer prices are usually those between two or more related parties with head-seats in two or more different countries (tax jurisdictions). However, the Croatian CPT Law expands the application also to related parties when both or all of them are tax residents of Croatia, if one of them pays Corporate Profit Tax at rates lower than standard 12% and 18% or is released from CPT. Transfer prices apply also to transactions between Croatian tax resident  parties when one of them is entitled to recognition of losses brought forward from previous tax periods.

Article 13., par. 4) of the CPT Law says that business relationships between related parties will be recognised only if a taxpayer, upon the Tax Authority’s request, discloses information and records on related parties and business relations with them, methods used for determination of comparable market prices and reasons for selection of certain methods. For all transactions with related companies and other related parties a taxpayer must prepare detailed documentation, as a proof of compliance with tax regulations.

Preparation of transfer pricing documentation is complex in terms of time, methods and quantity of work and for some taxpayers may present a significant expense. For this reason, the Croatian Tax Authority gives a possibility of concluding the Original Agreement on Transfer Pricing (further: the Agreement), in order to reduce cost of preparation of  transfer pricing documentation and facilitate compliance to law provisions, both for a taxpayer and the Tax Authority as a supervisory institution.

Regulations on the Original Agreement on Transfer Pricing (Regulations) has been published in the National Gazette no. 42/2017 and came in force in the end of April 2017.

In the Article 3 of the Regulations is prescribed that the Agreement should be concluded before the transactions start. One must firstly define a suitable criteria, methods, comparatives, appropriate adjustments and critical assumptions connected to future transactions planned to be realised during specific period of time.

According to the Article 1. of the Regulations, the Agreement may be concluded in form of:

  • Unilateral Agreement – between a taxpayer and the Croatian Tax Authority;
  • Bilateral or Multilateral Agreement – between taxpayer and the Croatian Tax Authority and related parties  and state institutions in charge of taxation in other countries where related parties are tax residents.

Process of conclusion consists of five phases:

  1. Taking initiative for conclusion of the Agreement;
  2. Preliminary meeting;
  3. Submission of statement on intention to conclude the Agreement;
  4. Agreement conclusion;
  5. Observation of the implementation.

Advisory body for conclusion of the Agreement engages officers of the Croatian Tax Authority and decides on the Agreement conclusion.

Conclusion procedure is initiated by a taxpayer by submission of a written statement on the intention to conclude the agreement on transfer pricing. The statement may be submitted by a taxpayer, his/her tax advisor or representative. Written statement may be submitted by parties not yet registered as CPT taxpayers or not yet registered as business entities, their tax advisor or a representative. The deadline for filing a statement is six months before the commencement of the transaction.

If the Tax Authority, based on submitted statement, ascertains the possibility and appropriateness of the Agreement, the taxpayer will be invited to the preliminary meeting. Prior to conclusion of the Agreement, the Tax Authority and a taxpayer will define the contents and signature date.

Taxpayer and authorised officers of the Tax Authority will sign the Agreement. In case of bilateral or multilateral agreements, signatories are also related parties and persons authorised for representation by foreign tax institutions. Croatian Tax Authority undertakes not to require adjustments of transfer prices as long as a taxpayer fulfills the conditions stated in the Agreement, or until the conditions change. Taxpayer’s obligation is to comply with stated conditions and filing of the annual report on the Agreement implementation, along with the annual CPT return.

Termination and recall of the Agreement

Croatian Tax Authority may terminate the Agreement in case of:

  • Incorrect disclosure of facts, mistakes and defaults in the documentation not caused by negligence or intentional non-fulfillment of obligations
  • Failing to act in line with the Agreement;
  • Significant deviation from one or more assumptions;
  • Changes in tax regulations, when it is not possible to change the Agreement in a way to comply with the new provisions.

Recall of the Agreement (the Article 14. of the Regulations) is possible when there is:

  • Incorrect disclosure of facts, mistakes and defaults in documentation, caused by negligence or intentional non-fulfilment of obligations;
  • Taxpayer has failed to act in line with the Agreement;
  • Subject of the Agreement is a non-authentic arrangement from the Article 5.a of the CPT Law.

Prior to issuing a recall, Tax Authority will consult a taxpayer. If the recall is issued, it is valid retroactively, from the date of signing the Agreement.


All expenses related to the procedure of  conclusion of the Agreement are charged to a taxpayer, initiator of the process and must be paid in the moment of filing the statement, at the very beginning of the procedure. Prices vary from 15.000,00 HRK for taxpayers with annual revenue up to 3.000.000,00 HRK, to 50.000,00 HRK for taxpayers with annual revenue above 20.000.000,00 HRK. Bilateral agreements increase expenses for 50.000,00 HRK and multilateral agreements for 100.000,00 HRK. In case of prolongation, prices are reduced for 50%, and if a taxpayer withdraws from the procedure after filed statement, entitled is to refund of only 50% of the amount.

Validity period

Taxpayer may file a statement for prolongation of the Agreement at least 6 months before the end of the period stated in the Agreement. Prolongation procedure follows the rules prescribed for the initial Agreement.

Validity period of the Original Agreement on Transfer Prices is five years.


Interest charged on outstanding receivables is regulated by the Civil Obligations Act and  Financial Act. Penalty interest calculation represents the latest average interest rate on long term loans granted to non-financial trading companies increased for certain percentage points.

Penalty interest is different for contracts between traders, public law entities (liable to the Public Procurement Law) and in other cases  which include citizens, receivers  of public  revenues and similar parties.

In second half of the 2019 year, from 01st July to 31st  December, the highest penalty interest allowed in contracts whose parties are traders and public law entities is 8,30%. In other contractual relationships it may amount up to 6,30%.

When contractual penalty interest is defined in a way to cause obvious inequality in rights and obligations between contracting parties, a contractual clause defining such an  inappropriate interest rate will be deemed invalid.


Should you need more information on the subjects mentioned above, please feel free to contact us.

Biljana Stanković, Certified Tax Advisor


Venkomir Horvatić, Country Manager