Croatia's Ministry of Finance has released draft amendments to corporate tax regulations for public feedback, introducing tighter controls on investment fund exemptions, simplified asset transfer procedures, and enhanced tax relief provisions that take effect from the start of 2026.
Croatia’s Ministry of Finance has issued a draft of amendments to the Corporate Income Tax Ordinance, which is open for public consultation until 25 March 2026.
These changes, effective from 1 January 2026, introduce stricter oversight for investment funds, streamline compliance procedures, and expand tax relief options for businesses.
Investment funds face enhanced scrutiny
Investment funds seeking corporate income tax exemption must now meet specific criteria demonstrating genuine economic purpose. Tax authorities will examine factors including fund structure, commercial rationale, size, investor composition, investment strategy, asset management autonomy, and transaction patterns.
Fund management companies must submit comprehensive documentation by the corporate tax filing deadline, detailing asset structure, income sources, and investor relationships. If authorities determine a fund exploits tax advantages rather than serving legitimate economic purposes, they will issue a formal decision revoking exempt status. Funds that lose exemption must comply with standard corporate tax rules and accounting regulations.
Simplified asset transfer and transaction reporting
Companies transferring assets now have more flexible timelines. Required documentation, tax calculations, and supporting data can be submitted by the first corporate tax return deadline following the transfer, rather than beforehand.
Both transferring and receiving companies must report tax consequences in subsequent returns. These streamlined procedures align with EU Merger Directive (90/434) and Amending Directive (2005/19) requirements, applying equally to mergers, acquisitions, and share exchanges.
Domestic related-party transactions between e-invoice users are now exempt from separate reporting in Form PD-IPO, reducing administrative burden for compliant businesses.
Updated tax relief and filing requirements
The amended regulations clarify tax rate reductions under the Investment Promotion Act and Tourism Act.
Qualifying micro-enterprises and investment incentive holders can apply reduced corporate income tax rates of 50%, 75%, or 100% below standard rates, depending on eligibility criteria.
Sponsorship expenses meeting legal requirements now explicitly qualify for tax relief, including sponsorships directed toward entities designated by ministerial decisions. The revised CIT return forms (PD and PD-NN) include new lines for claiming these deductions.
All corporate tax returns must now be filed electronically through the e-Porezna system, removing previous exemptions for small enterprises. The updated forms become mandatory for periods beginning 1 January 2026 onward, though transitional provisions allow earlier filers to use previous forms while reporting new deductions.
The regulations also refine foreign tax credit procedures, requiring certified copies of foreign tax returns, certified translations, and payment proof.
Companies must notify Croatian authorities within 30 days if foreign tax authorities adjust obligations. Total foreign tax credits from multiple countries cannot exceed the domestic tax liability.
