With a total of 15 action points, the OECD’s Base Erosion and Profit Shifting (BEPS) project aims at fighting the artificial shift of profits from jurisdictions with high taxes to tax havens, often as a part of an entirely legal strategy used by MNEs.
The BEPS Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting) imposes to multinationals the so-called Country-by-Country (CbC) Report by which MNEs must annually report certain information about their business. The CbC is filed in every tax jurisdiction in which a given MNE operates.
Action 13 has now been fully implemented in Croatia, with the full legal framework in place. The Act on Administrative Cooperation in the Field of Taxation, in force as of January 1, 2017, as a separate section of the old General Tax Act, adopts and implements various EU Directives in the area of administrative support and automatic exchange of information between EU member states. Based on this Act, the Ordinance on Automatic Exchange of Information in the Field of Taxation was issued and entered into force on March 9, 2017.
In late march 2017, the Croatian Tax Office also published the CbC reporting requirements which are applicable to constituent entities of Croatian-resident MNE groups with consolidated revenue exceeding EUR 750 million as of January 1, 2015.
The first automatic exchange of information for Croatia shall be conducted for the fiscal year 2016, with the first notification deadline set at April 30, 2017. What follows is a discussion of the details of the notifications and reports required.
- • Each Constituent Entity of an MNE resident in Croatia shall inform the Croatian Tax Office whether the Ultimate Parent Entity, a Surrogate Parent Entity or a Constituent Entity (as defined in the Ordinance), has the obligation to file the CbC Report on behalf of the MNE in question. The deadline for delivery of such notification is four months after the fiscal year end. Thus, for the fiscal year which ended on December 31, 2016, the deadline is April 30, 2017.
- • Each Constituent Entity of an MNE resident in Croatia which is neither the Ultimate Parent Entity, a Surrogate Parent Entity or a Constituent Entity, has the obligation to inform the Croatian Tax Office on the identity and tax residency (name of the country) of the entity which will file the CbC Report on behalf of the MNE in question. The deadline is the same as above.
- • The Ultimate Parent Entity of an MNE or its Surrogate Parent Entity has the obligation to file to the Croatian Tax Office the first CbC Report for the fiscal year that started on January 1, 2016 or any time after this date, within 12 months from the fiscal year end. Thus, for the fiscal year ended on December 31, 2016, the deadline is December 31, 2017. By virtue of exception, a Constituent Entity meeting the conditions set out in article 102 of the Ordinance shall file its first CbC Report for the fiscal year that started on January 1, 2017 or any time after this date, within 12 months from the fiscal year end.
Affected MNEs should note that the notifications discussed above are to be filed to the Tax Administration’s Central Office, specifically to the Department for Normative Affairs and International Cooperation. The CbC reports due at the end of the year will be submitted electronically, with detailed instructions pending publication by the tax authorities.
Silvia Cancedda, Client Relationship Advisor
David Jakovljevic, Tax and Legal Advisor
T: +385 1 7980 646