The Convention on Mutual Administrative Assistance in Tax Matters in force as of 1/6/2014

On 1 June 2014, the Convention on Mutual Administrative Assistance in Tax Matters, amended by the 2010 Protocol (further: „Convention“), entered into force in Croatia. The main goal of the Convention is suppression of tax evasion and simpler determination of the tax liability by cooperation of tax administrations on an international level, as well as assurance of protection of taxpayers’ rights, including protection from discrimination and double taxation, protection of privacy and personal data flows.

Administrative assistance ensured by the Convention include: exchange of information, including simultaneous tax audits and participation in tax audits abroad, assistance in recovery, including security measures and providing documents.

At ratification, Croatia used some of the reserves provided in the Convention, resulting in the limited application of the Convention in Croatia: on personal income tax, corporate profit tax, value added tax and real estate transfer tax. With the reserves, Croatia maintained a right not to provide administrative assistance in relation to other taxes prescribed by the Convention.

Furthermore, Croatia reserved a right not to provide assistance in respect of any tax claim, which existed at the date of entry into force of the Convention in Croatia or, when a tax claim refers to taxes from the reserves, at the date of withdrawal of such a reserve by Croatia.

For tax matters involving intentional conduct subject to prosecution under the criminal laws of the applicant Party, the provisions of this Convention will have effect from the date of entry into force with respect to the Party in relation to earlier taxable periods or tax liabilities. With this respect, Croatia also used a reserve, according to which an obligation of the administrative assistance exists for taxable periods beginning on or after 1 January of the third year preceding the one in which the Convention entered into force in Croatia, or where there is no taxable period, for the administrative assistance related to the tax obligations arising on or after 1 January of the third year preceding the one in which the Convention, entered into force in Croatia.

It has to be noted that there is no obligation of the administration assistance if such assistance is contrary to the law, administrative practice or public policy, when it discriminates a national of the requested State in relation to the national of the applicant State, when the applicant State has not pursued all reasonable measures available under its laws or administrative practice, when the administrative burden related to the collection in tax matters for that State is clearly disproportionate to the benefit to be derived by the applicant State etc.