Harmful Tax Practices – 2018 Peer Review Reports on the Exchange of Information on Tax Rulings

Croatia

Croatia has met all aspects of the terms of reference (OECD, 2017[3]) (ToR) for the calendar year 2018 (year in review) and no recommendations are made.

In the prior year report, Croatia did not receive any recommendations.

Croatia can legally issue four types of rulings within the scope of the transparency framework. In practice, Croatia issued rulings within the scope of the transparency framework as follows:

• No past rulings;

• For the period 1 April 2017 - 31 December 2017: no future rulings; and

• For the year in review: one future ruling.

As no exchanges took place during the year in review, no peer input was received in respect of the exchanges of information on rulings received from Croatia.

Introduction

This peer review covers Croatia’s implementation of the BEPS Action 5 transparency framework for the year 2018. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

Croatia can legally issue the following four types of rulings within the scope of the transparency framework: (i) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (ii) rulings providing for unilateral downward adjustments; (iii) permanent establishment rulings; and (iv) related party conduit rulings.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

For Croatia, past rulings are any tax rulings within scope that are issued either (i) on or after 1 January 2015 but before 1 April 2017; and (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.

In the prior year peer review report, it was determined that Croatia’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. Croatia’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

For Croatia, future rulings are any tax rulings within scope that are issued on or after 1 April 2017.

In the prior year peer review report, it was determined that Croatia’s implementation of a new system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. Croatia’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision (ToR I.4.3)

In the prior year peer review report, it was determined that Croatia’s review and supervision mechanism was sufficient to meet the minimum standard. Croatia’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

Croatia has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

Croatia has the necessary domestic legal basis to exchange information spontaneously. Croatia notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

Croatia has international agreements permitting spontaneous exchange of information, including being a party to the (i) Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[4]) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 63 jurisdictions.1

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

In the prior year peer review report, it was determined that Croatia’s process for the completion and exchange of templates were sufficient to meet the minimum standard. Croatia’s implementation in this regard remains unchanged and therefore continues to meet the minimum standard.

For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2018	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2018	Reasons for the delays	Any other comments
0	0	N/A	N/A
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
0	1	Application of the EU DAC 3 deadlines.	The exchange took place in April 2019 and thus this will be taken into account in next year’s peer review.
Total	0	1

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
0	N/A	N/A

Croatia issued one ruling in November 2018 (which is towards the end of the year in review), which was exchanged later than three months after becoming available to the competent authority, because Croatia used the EU DAC3 timelines. After discussion with the Secretariat, Croatia exchanged information on the ruling as soon as possible, in April 2019, and changed the timelines for rulings in scope of the transparency framework going forward in order to meet the expectations under the BEPS Action 5 transparency framework. The information on these rulings will now be exchanged within three months after becoming available to the Competent Authority. As the information on the ruling is exchanged with a relatively short delay of five months after issue, and this is not a recurring issue, no recommendation is made.

Conclusion on section B

Croatia has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges. Croatia has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

As there was no information on rulings exchanged by Croatia for the year in review, no statistics can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

Croatia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015[5]) were imposed.

Summary of recommendations on implementation of the transparency framework

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Croatia experienced some delays in exchanging information on one future ruling.	No recommendation is made because Croatia has since completed exchanges on the delayed future ruling quickly after the issues were identified and resolved, and this is not a recurring issue.

Note

← 1.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Croatia also has bilateral agreements with Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China (People’s Republic of), Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jordan, Korea, Kosovo, Kuwait, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Morocco, Moldova, Montenegro, Netherlands, North Macedonia, Norway, Oman, Poland, Portugal, Qatar, Romania, Russia, San Marino, Serbia, Slovak Republic, Slovenia, South Africa, Spain, Syrian Arab Republic, Sweden, Switzerland, Turkey, Turkmenistan, Ukraine, United Arab Emirates and United Kingdom.