On May 13th, 2016, the Croatian Parliament implemented the EU Directive and amended the Croatian Corporate Income Tax Act which was published in the Official Gazette no. 50/2016 and entered into force on June 9th, 2016.
The amendment essentially introduces an article by which all tax exemptions, tax reductions, tax reliefs and other benefits provided for by Corporate Income Tax Act cannot be granted if the tax authority determines that such benefits are a result of arrangements or business activities which, having all the facts and circumstances into consideration, are not genuine and authentic, thereby effectively resulting in tax evasion.
The phrase “non-genuine arrangements or business activities” in the amended CIT Act refers to any business transaction, activity, scheme, agreement, obligation or event, consisting of one or more parts, which are not made for valid commercial purposes or do not reflect the economic reality. According to the law, such activities are now being tracked as of June 1st, 2016.
Tax and legal advisor