Croatia: local rules

Croatia sets the arm's length rule in article 13 of the Profit Tax Act (Zakon o porezu na dobit). If related persons agree prices or terms that differ from what unrelated persons would agree, the taxpayer must adjust its profit by the difference (art. 13(1)). Related persons are those where one takes part directly or indirectly in the management, supervision or capital of the other, or the same persons do so in both (art. 13(2)). There is no percentage threshold. The rule also covers two Croatian residents if one of them has a preferential tax status or can use a tax loss carry forward (art. 13(5)). The details are in article 40 of the Profit Tax Ordinance (Pravilnik o porezu na dobit), which the Ministry of Finance changed in NN 16/2025 to follow the OECD Guidelines. The OECD Transfer Pricing Guidelines are the stated tool for interpreting the rules (art. 40(12)). Interest on loans between related persons follows art. 14: the Minister of Finance publishes a yearly rate (2.65% for 2026, NN 150/2025), or the taxpayer can prove an arm's length rate under art. 13 for all its contracts.

Every taxpayer with related-party transactions must be able to support its prices. Business relations between related persons are recognised only if the taxpayer holds, and gives the Tax Administration on request, data on the related persons, the methods used, why they were chosen and how the adjustment was made (art. 13(4)). There is no size threshold, no fixed form and no set date for preparing the files. Art. 40(6) of the Ordinance lists the content: group information (a master file type: ownership, business, intangibles, financing, financial reports, advance pricing agreements) and information on the Croatian company (a local file type: description, controlled transactions, contracts, comparability and functional analysis, methods and calculations, financial reports). The taxpayer must also show, before or at the time of the transaction, the reasonable efforts it made to set an arm's length price (art. 40(8)), update earlier years (art. 40(7)), and make a compensating adjustment before it files the tax return if the price turns out not to be arm's length, with a written explanation filed with the return (art. 40(9) and (10)). The files are not filed with the return. Separately, a company that recorded business events with related persons during the year files Form PD-IPO with the profit tax return (Ordinance arts. 46(2) and 47.b). It lists loans, goods and services by related person. There is no threshold in the rule, but loans to one related person at the same rate that total no more than EUR 20,000 in the year can be shown as one line.

Article 13(3) lists five methods: comparable uncontrolled price, resale price, cost plus, transactional profit split and transactional net margin. The first three are called traditional transaction methods and the last two transactional profit methods (Ordinance art. 40(1)). The most appropriate method for the case must be chosen after a functional analysis. If a traditional method and a profit method are equally reliable, the traditional method is preferred, and the comparable uncontrolled price method comes first (art. 40(2)). Other methods are allowed only if the five are not suitable, and the taxpayer must explain why (art. 13(3)(f), Ordinance art. 40(3) and (4)). The law does not require an interquartile range or a set database search.

There is no fine written for a missing transfer pricing file. The consequence is in art. 13(4): the related-party dealings are not recognised, so the tax authority can adjust the profit, and the normal tax assessment and interest rules apply. The General Tax Act can fine a company EUR 660 to EUR 39,810 (EUR 1,060 to EUR 53,080 for a repeat breach) for not giving data or documents the Tax Administration asks for, for filing the return late, or for not attaching the documents the tax rules require (art. 193), and the responsible person EUR 390 to EUR 3,980. The Profit Tax Act adds EUR 260 to EUR 26,540 for not determining or not paying the tax on time (art. 38). Failing to file or filing a wrong country-by-country report or notification, or a late or wrong top-up tax information return, can be fined EUR 260 to EUR 26,540 for the company and EUR 260 to EUR 2,650 for the responsible person (Administrative Cooperation Act art. 66). Pillar Two returns and tax carry a separate fine of EUR 3,000 to EUR 100,000 (Minimum Global Tax Act art. 52).

Croatia has enacted the global minimum tax in the Minimum Global Tax Act (Zakon o minimalnom globalnom porezu na dobit, NN 155/2023, amended by NN 151/2025). It applies to groups with consolidated revenue of EUR 750 million or more in at least two of the four previous years. It has the qualified domestic top-up tax (QDMTT) and the income inclusion rule from fiscal years that began on or after 31 December 2023, and the undertaxed profits rule from fiscal years that began on or after 31 December 2024 (art. 61). The Ordinance on the minimum global tax (NN 53/2026, in force 30 May 2026) sets the forms MGP-DP1 (QDMTT return) and MGP-DP2 (income inclusion and undertaxed profits return). The top-up tax information return (GIR) is due 15 months after the fiscal year end (art. 46(7), repeated in Administrative Cooperation Act art. 35.af), or 18 months for the transition year, which is the first year the group falls under the Act for Croatia (arts. 53 and 58). The QDMTT return MGP-DP1 is filed in the same period and the tax is paid 30 days later (art. 49, Ordinance art. 6(5)). The return MGP-DP2 is due 30 days after the GIR deadline and its tax 30 days after that (art. 48, Ordinance art. 7(5)). The responsible entity of the Croatian subgroup must give the Tax Administration its takeover information by the MGP-DP1 deadline (Ordinance art. 2(4)). Each Croatian entity must also name the entity that files the GIR, and where it is, at least 30 days before the GIR deadline (Administrative Cooperation Act art. 35.af(6)).

Groups with consolidated revenue above EUR 750 million file a country-by-country report with the Tax Administration within 12 months of the end of the tax year if the ultimate parent is a Croatian tax resident or a Croatian constituent entity must step in (Administrative Cooperation Act art. 35(1), Ordinance art. 106). Every Croatian constituent entity must say whether it is the parent, surrogate parent or designated filer, or name the entity that files, no later than four months after the end of its own profit tax period (art. 35(2) and (3), Ordinance art. 107). It does not need to repeat the notice each year unless something changes. The profit tax return (Form PD) is due four months after the tax year end, so 30 April for a calendar year, and the tax is due the same day (Profit Tax Act arts. 32 and 35). Monthly advance payments are due by the end of the following month based on the previous year's tax (art. 34). Advance pricing agreements are available (art. 14.a and the Ordinance on advance pricing agreements), and the Tax Administration runs mutual agreement procedures under the tax treaties.