CROATIA: REDUCED RATE OF INTEREST ON RELATED-PARTY LOANS, DEDUCTIBLE INTEREST

Croatia’s National Bank announced a reduction in the bank discount rate, from 7% per annum to 3% per annum, effective 31 October 2015. This rate reduction has tax implications.

Accordingly, for Croatian corporate profit tax law purposes: (1) the maximum amount of deductible interest on loans from a Croatian tax non-resident to a Croatian tax resident related party will also decrease from 7% per annum to 3% per annum; and (2) the minimum acceptable interest rate on loans from a Croatian tax resident made to a Croatian tax non-resident related party for corporate profit tax purposes also decreases from 7% per annum to 3% per annum. These rules further apply to loans between two Croatian tax residents if one of them is in a “favorable” tax position.

Read a November 2015 report [PDF 117 KB] (Croatian and English) prepared by the KPMG member firm in Croatia: Related-party interest rate limit