Croatia, as an EU member state and a signatory to the OECD’s Base Erosion and Profit Shifting (BEPS) framework, has adopted the Country-by-Country Reporting (CbCR) requirements under BEPS Action 13. These rules are designed to enhance transparency and provide tax authorities with comprehensive information about the operations of multinational enterprises (MNEs). This article offers Chief Financial Officers (CFOs) and financial executives in Croatia an in-depth overview of CbCR obligations, including applicability, reporting procedures, deadlines, and penalties for non-compliance.

Applicability of CbCR in Croatia

Criteria for Reporting:

• CbCR applies to MNE groups with consolidated group revenue equal to or exceeding €750 million in the preceding fiscal year.
• The obligation falls on the ultimate parent entity of an MNE group that is tax resident in Croatia. In cases where the parent entity is based in a jurisdiction that does not require CbCR, a surrogate parent entity located in Croatia may be designated to file the report.
• Entities part of multinational groups headquartered outside Croatia must comply with the CbCR rules applicable in the jurisdiction of the parent company.

Relevant Legislation:

• The CbCR legislation in Croatia is based on Council Directive (EU) 2016/881, which has been implemented in Croatia’s Corporate Income Tax Act and the accompanying regulations.
• More information on the legal framework can be accessed through the Croatian Ministry of Finance.

Reporting Requirements

Information to be Reported:

• The CbC report must include comprehensive financial and tax-related data for the MNE group, covering revenues, profits, income taxes paid and accrued, capital, accumulated earnings, number of employees, and tangible assets.
• The report must also list each constituent entity in the MNE group, providing their jurisdiction of tax residence and detailing the primary business activities of each entity.

Form and Submission:

• The CbC report must be filed electronically using the standard XML format, as specified by the OECD guidelines.
• Filing is conducted through Croatia’s ePorezna platform, which is managed by the Croatian Tax Administration.
  • Detailed submission instructions can be found on the Croatian Tax Administration’s ePorezna portal.

Filing Deadlines

• The CbC report must be submitted within 12 months after the end of the fiscal year. For example, if the fiscal year ends on 31 December 2023, the report is due by 31 December 2024.
• Additionally, Croatian entities that are part of an MNE group but are not the reporting entity must notify the Croatian Tax Administration about which entity will file the CbC report and in which jurisdiction this will occur.

Penalties for Non-Compliance

Penalties:

• Failure to comply with CbCR obligations can result in significant penalties. Croatian tax authorities can impose fines ranging from HRK 5,000 to HRK 500,000 (approximately €660 to €66,000), depending on the nature and severity of the non-compliance.
• Penalties may apply for failing to submit the report, submitting inaccurate or incomplete data, or failing to notify the tax authority about the reporting entity.

Defences:

• Entities may mitigate penalties if they can demonstrate that non-compliance was due to reasonable cause, such as technical issues or unintentional errors in data submission. Croatian tax authorities assess these cases individually.

Confidentiality and Use of Information

Data Protection:

The data is used solely for tax risk assessment purposes and is not publicly disclosed.

Croatia follows the OECD standards on the confidentiality of CbC reports. Information collected through CbCR is shared only with other tax authorities through automatic exchange of information agreements, ensuring strict confidentiality.

Ad