The Decision on the publication of the interest rate on loans between related parties, which determines the amount of the interest rate on loans between related companies referred to in Article 14 of the Income Tax Act for 2022 was published in December.
According to the said Decision, the interest rate is set at 2.68% and in tax terms it is considered as:
- the minimum interest rate that a company should charge when lending to related parties who are non-residents and
- the highest interest rate charged to the company on the received loan by related parties who are non-residents.
In the first case, if interest was charged at a rate of less than 2.68% or an interest-free loan was approved, then the difference between calculated and prescribed interest rates should increase corporate income tax base when compiling the Income Tax form.
Related to the second case, if interest was calculated at a rate higher than 2.68%, then the difference above the interest calculated according to the prescribed rate should increase the corporate income tax base when compiling the form.
These rules also apply to loans between related parties who are residents, if one of the related parties has:
- preferential tax status, for example pays income tax at rates lower than the prescribed rate or is exempt from paying income tax
- has the right to transfer tax losses from previous tax periods.
For further information, please contact Petra Dzankic, Accountant and Payroll Assistant in our Eurofast office in Zagreb, at email@example.com
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