Page 21 - Central and Eastern European Transfer Pricing Review

Croatia | 21

To satisfy the requirement and/or method can be applied in an equally CTA can adjust taxable income, where
obtain the benefts, are there any reliable manner, the CUP method is any increase of taxable income can
requirements on when the transfer preferred. result in an additional CPT liability, along
pricing study must be prepared and with penalty interest. In addition, the
submitted? Transfer pricing audit and CTA may impose fxed penalties. Tax
There are no specifc provisions penalties audits are regularly performed by the
indicating when the transfer pricing study CTA. Domestic transactions in certain
should be prepared. However, generally When the tax authority requests circumstances are also focused on with
speaking the expectation is that it will a taxpayer s transfer pricing similar implications.
be ready at the same time the annual documentation, how long does
corporate proft tax return is submitted the taxpayer have to submit its What defenses are available with
(i.e. 4 months after the year-end). documentation? respect to penalties?
Timely prepared transfer pricing
Documentation should be made available
When a transfer pricing study is immediately upon request. documentation.
prepared, should its content follow
Chapter V of the OECD Guidelines? If an adjustment is proposed by the What trends are being observed
Yes. Croatian CPT legislation includes tax authority, are dispute resolution currently?
mandatory elements for a transfer pricing options available to the taxpayer As in previous years, the CTA has
study and generally follows Chapter V of outside of competent authority? shown increasing interest in related
the OECD Guidelines. An adjustment is proposed following party transactions and transfer pricing
a tax audit on the basis of a tax documentation. Transfer pricing audits
Does the tax authority require an assessment issued by the CTA. The are regularly performed. Audit triggers,
advisor/tax practitioner to have taxpayer can appeal against the tax apart from company size, include a sharp
specifc designation in order assessment to an independent second fall in proft, continuing losses and those
to prepare or submit a transfer degree body within the Ministry of companies that are part of multinational
pricing study? groups.
Finance.
No. Further, the CTA requested a number of
After paying the corporate profts tax
assessed, penalty interest and any big taxpayers to submit transfer pricing
Transfer pricing methods fxed penalties, if the taxpayer receives studies with their annual CPT returns for

Are transfer pricing methods a negative ruling from the independent 2011 (which were due 4 months after the
end of the 2011 fnancial year). This trend
outlined in Chapter II of the second degree body they can then is likely to continue.
OECD Guidelines acceptable? appeal to the Administrative Court.
Yes.
If an adjustment is sustained, can Special considerations
penalties be assessed? If so, what
Is there a priority among the Are secret comparables used by tax
acceptable methods? rates are applied and under what authorities?
conditions?
No. There are no specifc rules in the transfer
Yes. The CPT Law prescribes fxed
If there is no priority of methods, penalties between 2,000 and pricing provisions; however, they are
often used by the CTA in practice.
is there a best method rule? 200,000 Croatian kunas (HRK).
Additional taxable income assessed
Yes. The CPT Regulations stipulate that is subject to the standard CPT rate Is there a preference, or
the selection of the transfer pricing of 20 percent increased by a penalty requirement, by the tax authorities
method aims at fnding the most interest of 14 percent per annum, for local comparables in a
appropriate method for a particular case, which has decreased to 12 percent benchmarking set?
which is in line with Chapter II of the per annum as of 1 July 2011. No. There is no requirement to include
OECD Guidelines. local comparables in the benchmarking

If a traditional transactional method and To what extent are transfer pricing set. However, it is recommended to
a transactional proft based method can penalties enforced? include them as local comparable entities
be applied in an equally reliable manner, Transactions with foreign related parties are affected by the same developments,
the traditional transactional method is are often scrutinized by the CTA and in such as industry and economic trends.
preferred. For example, when the CUP the case of any non-compliance with
method and another transfer pricing the provisions of the tax legislation the

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