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Decision on the related party loan interest rate for tax purposes

Tax News, January 2016

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The Croatian Minister of Finance has issued the Decision on the Publication of the Interest Rate on Related Parties’ Loans (“Decision”). The Decision entered into force on 31 December 2015. Until the Decision issue, the practice has always been to apply the Croatian National Bank discount rate as the effective market interest rate on related parties’ loans for tax purposes. As mentioned in our November 2015 Tax Alert, the discount rate of 31 October 2015 had been changed from the previous rate of 7% to 3%.

Following the above, the interest rates on related parties’ loans, to be considered for tax purposes, are:

  • 7% discount rate applies until 31 October 2015
  • 3% discount rate applies from 31 October 2015 to 31 December 2015 
  • 5.14% interest rate applies from 1 January 2016. Under the Decision, this rate is applicable for the whole of 2016.

For further information on the tax implications please also refer to our November 2015 Tax Alert and contact our tax experts who will be happy to assist you with reviewing your group financing and identifying the potential tax implications.

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