Transfer pricing in Croatia

Transfer pricing in Croatia at a glance

Croatian tax law

Rules for transfer pricing in Croatia are based upon:

• Croatian Corporate Income Tax Act article 13
• Croatian Corporate Income Tax Regulations article 40
• General Tax Act article 41 paragraph 2
• Guidelines for auditing transfer pricing for tax inspectors (2009)

OECD

Rules for transfer pricing in Croatia follow the OECD Transfer Pricing Guidelines, even though Croatia is not an OECD member.

Methods

Accepted methods

Accepted methods are:

• the comparable uncontrolled price method;
• the resale price method;
• the cost plus method;
• the profit split method, and
• the transactional net margin method.

Priority of methods

Rules for transfer pricing in Croatia do not suggest any hierarchy in the methods. The taxpayer is fee to use the most appropriate method.

Documentation requirements

Information that should be included in the documentation:

• Information on the corporate group in which it operates and its position in the group, an analysis of related party transactions and other details of the group and the taxpayer;
• The transfer pricing method applied, including a description of the data, methods and analysis performed in the process of determining transfer prices and provide reasons why the particular method was selected;
• Assumptions and evaluations used in the process of determining transfer prices (in line with the principle of unbiased transactions), 
with reference to comparability, functional analysis and risk analysis;
•  All calculations of transfer pricing based on the selected method (such documentation should enable a comparison with the prices applied by other comparable taxpayers);
• Update to transfer pricing documentation from previous years, reflecting adjustments made due to changer in relevant facts and circumstances, and
• Provision of additional documents upon which the transfer pricing analysis was based or to which the documentation refers.

Language

Rules for transfer pricing in Croatia prescribe that all documentation should be prepared in Croatian.

Requirements to prepare documentation annually

All documentation should be updated annually, including an update of the benchmark analysis.

Submission deadline upon request by tax authorities

Rules for transfer pricing in Croatia prescribes that documentation should be provided to the tax authorities directly after a request has been made.

Advanced Pricing Agreements

General 

Rules for transfer pricing in Croatia do not provide for the option to obtain an Advanced Pricing Agreement.

Terms

Not applicable.

Penalties

Penalties for not complying with the transfer pricing documentation requirements may result in a penalty up to EUR 27,000 for the company of up to EUR 2,700 for a responsible individual.