Pillar 2 Dashboard: Croatia

On September 18, 2025, Croatia opened a consultation on a Draft Bill to amend its Minimum Tax Act. The amendments are primarily to amend the QDMTT accounting standard so that the Croatian QDMTT qualifies for the QDMTT Safe Harbour and to provide for the notification deadline for appointing a designated filing entity.

On December 22, 2023, Law No 155/23, to implement the EU Minimum Tax Directive, was published in the Official Gazette.

On November 30, 2023, the Croatian government sent a draft bill to implement the Pillar Two GloBE rules to Parliament.

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation. As provided in the EU Minimum Tax Directive, the GloBE rules also apply to wholly domestic groups.

Whilst the Law is to implement the EU Minimum Tax Directive into domestic law, it does not currently reflect most aspects of the OECD Administrative Guidance (either the February 2023, July 2023 or December 2023 guidance issued).

Similarly, only the Transitional CbCR Safe Harbour from the OECD Safe Harbours and Penalty Relief Guidance is specifically included in the Law. Other Safe Harbours from the Second Set of OECD Administrative Guidance (the QDMTT Safe Harbour and the Transitional UTPR Safe Harbour) are not included.

The Law includes administrative provisions for the application of the law, including filing and payment deadlines. Article 62 of the Law provides that the Minister of Finance will issue an Ordinance to provide further details on the calculation of the QDMTT, as well as the content of the GloBE Information Return, Top-Up Tax Return and QDMTT Return by December 31, 2025.

The Ministry of Finance will publish a list of jurisdictions that have implemented a qualifying income inclusion rule on its website.

Administrative Guidance

Whilst the Law closely follows the EU Minimum Tax Directive and the OECD Model Rules, it does not include aspects of the OECD Administrative Guidance. 

The following are not included:

-Currency conversion rules (Article 1.1)

-Deemed consolidation test (Article 1.2)

-Consolidated deferred tax amounts (Article 1.3)

-Sovereign wealth funds and the definition of Ultimate Parent Entity (Article 1.4)

-Clarifying the definition of ‘Excluded Entity’ (Article 1.5)

-Meaning of “ancillary” for Non-Profit Organisations (Article 1.6);

-Forex hedge election (Article 2.2)

-Excluded dividends – Asymmetric treatment of dividends and distributions (Article 2.3)

-Debt release election (Article 2.4)

-Accrued pension expenses (Article 2.5)

-Covered taxes on deemed distributions (Article 2.6)

-Excess negative tax carry-forward guidance (Article 2.7)

-Substitute loss-carry forwards (Article 2.8)

-Equity gain or loss inclusion election (Article 2.9)

-Allocation of taxes arising under a Blended CFC Tax Regimes (Article 2.10)

-The extension of the taxable distribution method election to insurance investment entities (Article 3.1)

-Exclusion of insurance investment entities from the definition of Intermediate Parent Entity and Partially-Owned Parent Entity (Article 3.2)

-The extension of Additional Capital to include Restricted Tier One Capital (Article 3.3)

-Liabilities related to Excluded Dividends and Excluded Equity Gain or Loss from securities held on behalf of policyholders (Article 3.4)

-Simplification for Short-term Portfolio Shareholdings (Article 3.5)

-Application of Tax transparency election to mutual insurance companies (Article 3.6)

-Tax Credits Guidance (MTTCs) (Article 2 Second Set of OECD Administrative Guidance)

-SBIE Rules: Foreign rules (Article 3 Second Set of OECD Administrative Guidance)

Safe Harbour and Penalty Relief Guidance

Article 34 of the Law includes a general provision that deems the top-up tax to be zero if the requirements of a Qualified International Safe Harbour Agreement are met.

Article 57 of the Law specifically includes the Transitional CbCR Safe Harbour which ties into the OECD rules as provided in the Safe Harbours & Penalty Relief Guidance (at a high-level) . The specific rules for joint ventures and treatment of Net Unrealised Fair Value Losses, for instance, are not included. Similarly, relevant provisions from the December 2023 OECD Administrative Guidance that impact on the safe harbour (eg MNEs not required to file CbC Reports and no push-down of taxes on income of PEs, CFCs, and hybrid entities) are also not included.

Article 57 also mentions the UTPR and QDMTT Safe Harbours. 

Under Article 60 of the Law, further Safe Harbours, as determined under Qualified International Safe Harbour Agreements are to be published by the Minister of Finance on their website.

Elections in the OECD Model Rules

The Law therefore includes all of the key elections as provided in the EU Minimum Tax Directive, including:

• Excluded Entity Election (Article 5(4) of the Law)
• Election to use the Realization Method (Article 18(6) of the Law)
• Stock-Based Compensation Election (Article 18(3) of the Law)
• Election to Spread Capital Gains (Article 18(11) the Law)
• Consolidation Election (Article 18(8) of the Law)
• GloBE Loss Election (Article 25 of the Law)
• Tax Transparency Election (Article 44 of the Law)
• Taxable distribution Election (Article 45 of the Law)
• Unclaimed Accrual Election (Article 24(1)(b) of the Law)
• Distribution Tax Regime Election (Article 42 of the Law)
• Substance-Based Income Exclusion Election (Article 30(2) of the Law)
• Prior Year Adjustment Election (Article 27 of the Law)
• De minimis Election (Article 32 of the Law)
• CbCR Safe Harbour (Article 57 of the Law)

Elections in the Administrative Guidance

None of the elections in the OECD Administrative Guidance are included in the Law. Therefore, the following are not included:

• Foreign Exchange Hedge Election;
• Excess Negative Tax Carry-Forward Election;
• Portfolio Shareholding Election;
• Equity Investment Inclusion Election; and
• Debt Release Election

Differences to Model Rules

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.

The main options relate to the design of the QDMTT.

The key differences are with the OECD model rules, including the extension to include large scale, purely domestic groups,

The OECD Model Rules allow flexibility as to how to apply the UTPR. Croatia’s approach is to apply a UTPR top-up tax rather than a denial of deduction.

As such the carry forward provisions in Article 2.4.2 of the Model Rules for UTPR amounts not sufficient to provide for the additional cash tax expense are not relevant and these rules are not included in the Law.

Qualifying Domestic Minimum Top-Up Tax

Article 13 of the Law provides that Croatia will apply a domestic minimum top-up tax (intended to be a QDMTT) for financial years beginning on or after December 31, 2023.

QDMTT Design Features

The Law provides that the standard GloBE calculation rules apply for determining the top-up tax. As such it refers to the general GloBE calculation in Article 13(3) for the determination of adjusted taxes and allowable net profits (to determine the QDMTT ETR). This also ensures that the special rules on corporate restructuring, holding structures, and for investment entities also apply for the application of the QDMTT.

Article 13(4) provides that a local accounting standard (as opposed to the accounting standard used by the UPE for the consolidated accounts) can be used for calculating income for QDMTT purposes, where the Croatian entity uses a local accounting standard for its financial accounting (and it has been adjusted to avoid significant distortion of competition, if any).

The September 2025 Draft Bill proposes to amend Article 13(4) so that the accounting standard for QDMTT purposes will the one used in the default GloBE rules.

As such, the profit or loss of the constituent entity for QDMTT purposes will be the accounting standard used in the preparation of consolidated financial accounts of the UPE. However, if this is not reasonably practicable, it can be determined by applying another approved or authorised accounting standard (ie a local standard, which in Croatia is the application of Croatian Financial Reporting Standards or International Financial Reporting Standards).

Any QDMTT that has not been paid within four years is usually taken into account for top-up tax purposes in the fifth year. This does not apply for the QDMTT calculation (just for tax under an IIR or UTPR). This is required to avoid circularity and ensure the QDMTT is not taken into account for the domestic minimum tax calculation.

Note that the provisions of the OECD Administrative Guidance relating to the design of QDMTTs (including the restriction on the pushdown of taxes to CFCs, Hybrids and PEs) are not included in the Law.

Further details are to be provided by the Ministry of Finance. Article 62 of the Law provides that an Ordinance providing detailed rules of calculation and collection is to be published before December 31, 2025.  

Filing

The relevant aspects of the submission of a GloBE Information Return (GIR) are included, as provided in the EU Directive.

Every Constituent Entity located in Croatia will have an obligation to file a GIR in Croatia. However, this obligation can be discharged if the GIR is filed by:

• The Ultimate Parent Entity, or
• The Designated Filing Entity.

Where the GIR is being filed by either the Ultimate Parent Entity or the Designated Filing Entity, the Constituent Entity, must file a notification with the Revenue.

The notification must contain:

• Details of the entity that is filing the GIR, and
• The jurisdiction in which such an entity is located.

Where the GIR is filed by the Designated Local Entity it needs to outline the Constituent Entities that it is filing on behalf of.

Both the GIR and associated notifications must be filed no later than 15 months after the end of the fiscal year (with an 18-month deadline for the Transition Year).

Article 48(1) of the Law provides that an entity subject to the IIR or UTPR is required to file a top-up tax return within 30 days from the GIR filing deadline.

Entities subject to the QDMTT are required to submit a QDMTT return by the GIR filing deadline, under Article 49 of the Law.

Article 46(8) of the Law provides that if two or more constituent entities of the same MNE or a large domestic group that are subject to GloBE rules, are located in Croatia, they are required to appoint one of them who will be considered responsible for all tax rights and obligations (ie filing and payment).

The September 2025 Draft Bill amends this provision to provide that the appointment of the designated filing entity must be made by the deadline for filing the GloBE tax returns in Articles 48 and 49 of the Minimum Tax Act.

Payment

Article 48(4) of the Law provides that top-up tax arising under the IIR or UTPR must be paid within 30 days from the deadline for filing the top-up tax return.

Top-up tax arising under the QDMTT is due for payment within 30 days of the deadline for filing the QDMTT return, under Article 49(4) of the Law.

Penalties

Article 52 of the Law provides for a late filing penalty of between EUR 3,000 to EUR 50,000 for delays in filing the GIR. A penalty of between EUR 3,000 to EUR 100,000 applies for filing the top-up tax or QDMTT return after the filing deadline.

No returns issued yet.

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