Double Tax Treaty Between Croatia And Kosovo Enters Into Force

Author:Ms Silvia Cancedda and David Jakovljevic
Profession:Eurofast Global Ltd

Croatia and Kosovo have been historically involved in a good economic and political relationship and are continuing to strengthen the commercial exchange. Croatia sees Kosovo as a good opportunity for export and significant investment, in areas such as construction and infrastructure, whereas Kosovo perceives Croatia as one of the most important strategic partners for their entrance into NATO and the EU. The economic cooperation has now become even easier after the Agreement on avoidance of double taxation between the two countries entered into force as of the beginning of 2018.

Discussions regarding the conclusion of the agreement between Croatia and Kosovo on avoidance of double taxation were ongoing for many years, but since 2014 the pace had quickened particularly given the increasing intensity in economic cooperation. A large number of Croatian companies are currently present in Kosovo either directly through their subsidiaries or representative offices, or indirectly through partners and distributors.. Finally, in March 2017, the double tax agreement was signed and in November 2017 legally confirmed in the form of an Act by the Croatian Parliament.

The Agreement introduces numerous tax reliefs in a variety of income types, and it has set the stage for the boost of exchange of goods and services. It additionally contains a clause on the exchange of information with a purpose of fighting fiscal evasion, in light of the OECD's Base Erosion and Profit Shifting (BEPS) project.

The maximum withholding tax rates between the two countries are agreed as follows:

5% on dividends, if the real beneficiary is a company (except for a partnership) that owns at least 25% of the capital of the company paying the dividend; 10% on dividends in all other cases; 5% on interests; 5% on income from royalties. The Agreement defines in detail all relevant terms such as resident, permanent establishment...

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