The OECD model convention for the avoidance of double taxation defines the conditions for establishing a business unit. Company law in Croatia regulates the establishment procedure and tax monitoring for companies from non-EU or non-EEA countries when they open a branch office.
Doing business in more than one country through some form of business unit is an increasingly common business model for many foreign companies seeking to expand their markets and, as a result, achieve more profit.
Establishing a Branch Office
The Company Act sets out the procedure for the establishment and registration of a branch office of a foreign company/sole proprietor. Under the provisions of the act, an entity established in a non-EU or non-EEA country may only establish a branch office in Croatia if it has been registered in the country of its registered office for at least two years. The basic act of establishing a branch office includes a notarised decision on the establishment, as well as the application for the registration of a branch office which, among others, defines the company, the registered office of the founder and the subsidiary, subject matter/activity, authorised representatives etc., explain the Ecovis experts.
Kristijan Novak, Head of Accounting, ECOVIS FINUM, Zagreb, CroatiaWe will clarify the individual procedural steps and the tax consequences with you when you set up a branch office in Croatia.
Business Records and Taxation
The obligation to keep business records and to record the resulting business changes is defined in the Accounting Act and the General Tax Law. Together with the accounting standards, these form the basis for determining the business performance in the reporting period and for the preparation of financial statements for public disclosure and income tax declaration. Subsidiaries of foreign companies whose founder is established in the EU/EEA must submit the accounting documentation of the founder in Croatian with a certified translation, while other subsidiaries (whose founder is established in a third country) must submit all the documentation prescribed by law. If their delivery of goods and services exceeds HRK 300,000 (approx. EUR 40,000) in the previous or current calendar year, they are also liable to pay value added tax, notwithstanding the fact that subsidiaries of foreign companies do not have legal personality.
For further information please contact:
Kristijan Novak, Head of Accounting, ECOVIS FINUM, Zagreb, Croatia,