Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Croatia

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

Croatia can legally issue four types of rulings within the scope of the transparency framework.

In practice, Croatia issued no rulings within the scope of the transparency framework. For the year in review, there was one APA request which was under negotiation.

As there were no rulings issued, no exchange of information was required. Therefore no peer input was received in respect of the exchanges of information on rulings received from Croatia.

Introduction

295.  This peer review covers Croatia’s implementation of the BEPS Action 5 transparency framework for the year 2017. 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

296.  Croatia can legally issue the four following type of rulings within the scope of the transparency framework: (i) cross-border unilateral advance pricing arrangements (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) unilateral downward adjustments; (iii) permanent establishment rulings; and (iv) conduit rulings. The tax administration is responsible for issuing rulings.

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

297.  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; or (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.

298.  Croatia can only issue advance tax rulings since 1 January 2016 and APAs since 1 January 2017. Before that date, Croatia did not have the relevant domestic legal framework in place which would authorise the issuance of any taxpayer specific rulings.

299.  Croatia does not have a separate unit responsible for the rulings but forms a different expert team with officers from the Tax Administration, Head Office, Regional Offices and the Office for Large Taxpayers each time a taxpayer requests a ruling. The team usually consists of a profit tax advisor, an audit advisor and a legal advisor.

300.  The expert teams were responsible for identifying past rulings. After a ruling is issued, it is electronically stored on the “share portal” and is made available to the members of the expert teams that have participated in the issuing of the ruling, the management and with the particular team working on the risk analysis for audit purposes. The expert teams reviewed the share portal and identified rulings within the scope of the transparency framework that fell into the period of validity for past rulings.

301.  In order to identify potential exchange jurisdictions with respect to the past rulings, the expert team checked the available data in the taxpayer’s internal file and the data from the tax administration information system. When a taxpayer requests a ruling, the request has to include all information on relevant exchange jurisdictions, which would cover all potential exchange jurisdictions for the purposes of the transparency framework. This information was gathered by the expert team.

302.  If necessary, the taxpayer is required to submit additional information. In addition, a preliminary interview is held with the taxpayer upon starting the ruling process. However, as in practice, Croatia did not issue any past rulings, it was not relevant to identify the potential exchange jurisdictions.

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

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

304.  The information gathering process for future rulings is identical to the process for past rulings.

Review and supervision mechanism (ToR I.4.3)

305.  The accuracy of the information-gathering process is ensured by the Competent Authority that supervises the process for all of the issued rulings.

Conclusion on section A

306.  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)

307.  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.

308.  Croatia is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 62 jurisdictions.1

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

309.  The expert teams that are responsible for issuing the tax rulings are obliged to complete the template contained in Annex C of the Action 5 Report (OECD, 2015) and to send this template to the Competent Authority within one month after the date of issuing. When completing the summary section of the template, the expert teams use the internal FHTP suggested guidance. Croatia has indicated that if a relevant ruling were issued in the future, it would be exchanged within three months with the relevant exchange jurisdictions after it is received by the Competent Authority.

310.  As no rulings within the scope of the transparency framework have been issued in practice, Croatia was not required to complete any exchanges of information and there is no data to report on the timeliness of exchanges.

Conclusion on section B

311.  Croatia has the necessary legal basis for spontaneous exchange of information, and a process for completing the templates in a timely way. As no rulings in the scope of the transparency framework have been issued, no exchanges were required for the year in review. Croatia has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

312.  As there were no rulings required to be exchanged by Croatia in the year of review, no statistics can be reported.

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

313.  Croatia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) 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
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

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 in force with Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China (People’s Republic of), Czech Republic, Denmark, Estonia, Finland, Former Yugoslav Republic of Macedonia, 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, Norway, Oman, Poland, Portugal, Qatar, Romania, Russia, San Marino, Serbia, Slovak Republic, Slovenia, South Africa, Spain, Syrian Arab Republic, Sweden, Switzerland, Turkey, Turkmenistan, Ukraine and United Kingdom.