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S.I. No. 574/2002 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Croatia) Order, 2002

S.I. No. 574/2002 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Croatia) Order, 2002 Skip to content Disclaimer Feedback Helpdesk Gaeilge Léim go dtí an t-ábhar Séanadh Ais

Article 7or Article 14, as the case may be, shall apply.

  1. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. Article 11 INTEREST
  2. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.
  3. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures as well as other income assimilated to income from money lent by the laws of the State in which the income arises but does not include any income which is treated as a dividend under Article
  4. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
  5. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

  1. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  2. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. Article 12 ROYALTIES
  3. Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State.
  4. However, such royalties may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10% of the gross amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.
  5. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.
  6. The provisions of paragraph 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contacting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or the fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. Article 13 CAPITAL GAINS 1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State. 2. For the purposes of paragraph 1, gains from the alienation of immovable property situated in the other Contracting State shall include gains from shares (including stock and any security), other than shares quoted on a stock exchange, deriving the greater part of their value directly or indirectly from immovable property situated in that other State. 3. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State. 4. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the alienator is a resident. Article 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base. 2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. Article 15 DEPENDENT PERSONAL SERVICES 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

  1. a)the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar year concerned, and
  2. b)the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
  3. c)the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated. Article 16 DIRECTORS' FEES Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. Article 17 ARTISTES AND SPORTSMEN 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre motion picture, radio or television artiste, or a musician, or as a sportsman from his personal activities as such exercised in the other Contracting State may be taxed in that other State. 2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised. Article 18 PENSIONS AND ANNUITIES 1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment and any annuity paid to such a resident in consideration of past employment shall be taxable only in that State. 2. The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. Article 19 GOVERNMENT SERVICE 1.
  4. a)Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a local authority thereof to an individual in respect of services rendered to that State or local authority shall be taxable only in that State.
  5. b)However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who: (
  6. i)is a national of that State; or (
  7. ii)did not become a resident of that State solely for the purpose of rendering the services. 2.
  8. a)Any pension paid by, or out of funds created by, a Contracting State or a local authority thereof to an individual in respect of services rendered to that State or local authority shall be taxable only in that State.
  9. b)However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State. 3. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries wages and other similar remuneration, and to pensions in respect of services rendered in connection with a business carried on by a Contracting State or a local authority thereof. Article 20 STUDENTS Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State. Article 21 OTHER INCOME 1. Items of income of a resident of a Contracting State, wherever arising not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base.

Article 7or Article 14, as the case may be, shall apply.

Article 22 AVOIDANCE OF DOUBLE TAXATION 1. In Croatia, double taxation shall be avoided as follows: Where a resident of Croatia derives income which, in accordance with the provisions of this Agreement, may be taxed in Ireland, Croatia shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Ireland. Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in Ireland. 2. Subject to the provision of the laws of Ireland regarding the allowance as a credit against Irish tax of tax payable in a territory outside Ireland (which shall not affect the general principle hereof) -

  1. a)Croatian tax payable under the laws of Croatia and in accordance with this Agreement, whether directly or by deduction, on profits income or gains from sources within Croatia (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Irish tax computed by reference to the same profits, income or gains by reference to which Croatian tax is computed.
  2. b)In the case of a dividend paid by a company which is a resident of Croatia to a company which is a resident of Ireland and which controls directly or indirectly 10 per cent or more of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Croatian tax creditable under the provisions of subparagraph (
  3. a)of this paragraph) Croatian tax payable by the company in respect of the profits out of which such dividend is paid. 3. For the purposes of paragraphs 1 and 2 of this Article profits, income or capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Agreement shall be deemed to be derived from sources in that other Contracting State. 4. Where in accordance with any provision of the Agreement income derived by a resident of a Contracting State is exempt from tax in that State such State may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. Article 23 NON-DISCRIMINATION 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1 also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for tax purposes on account of civil status or family responsibilities which it grants to its own residents. 3. Except where the provisions of paragraph 1 of Article 9, paragraph 5 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. 4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. Article 24 MUTUAL AGREEMENT PROCEDURE 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is resident or, if his case comes under paragraph 1 of Article 23, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. Article 25 EXCHANGE OF INFORMATION 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information so exchanged shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. 2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
  4. a)to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
  5. b)to supply information which is not obtainable under the laws or in the normal course of the administration of that or the other Contracting State;
  6. c)to supply information which would disclose any trade, business industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). Article 26 MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements. Article 27 ENTRY INTO FORCE This Agreement shall enter into force after the date of receipt of the last notification in writing through diplomatic channels by which one Contracting State notifies the other that its internal legal requirements for the entry into force of this Agreement have been fulfilled and shall thereupon have effect:
  7. a)in Croatia: (
  8. i)in respect of taxes withheld at source, on income derived on or after the first day of January in the calendar year next following the year in which the Agreement enters into force; (
  9. ii)in respect of the other taxes on income, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the Agreement enters into force.
  10. b)in Ireland: (
  11. i)as respects income tax and capital gains tax, for any year of assessment beginning on or after the first day of January in the year next following the year in which this Agreement enters into force; (
  12. ii)as respect corporation tax, for any financial year beginning on or after the first day of January in the year next following the year in which this Agreement enters into force. Article 28 DURATION AND TERMINATION This Agreement shall remain in force indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year after the expiration of a period of five years from the date of its entry into force give written notice of denunciation to the other Contracting State through diplomatic channels. In such event this Agreement shall cease to have effect :
  13. a)in Croatia: (
  14. i)in respect of taxes withheld at source, on income derived on or after the first day of January in the calendar year next following the year in which the notice has been given; (
  15. ii)in respect of the other taxes on income, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the notice has been given.
  16. b)in Ireland: (
  17. i)as respects income tax and capital gains tax, for any year of assessment beginning on or after the first day of January in the year next following the year in which the notice has been given; (
  18. ii)as respects corporation tax, for any financial year beginning on or after the first day of January in the year next following the year in which the notice has been given. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement. Done at Zagreb, on 21 June, 2002 in two originals, in the Croatian and English languages, all versions being equally authentic. In case of divergence in interpretation, the English text shall prevail. For the Government of Ireland For the Government of the Republic of Croatia John Lawton Mato Crkvenac PROTOCOL At the moment of signing the Agreement between the Government of Ireland and the Government of the Republic of Croatia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital gains, the undersigned have agreed upon the following provisions which shall form an integral part of the Agreement. 1. Ad Article 22, paragraph 1: It is understood that in the event that the Republic of Croatia should impose any tax on dividends received from companies which are resident in Ireland, the Governments of the Contracting States will enter into negotiations in order to establish new provisions concerning the relief from double taxation on such dividends derived from sources in Ireland. 2. Ad Article 24, paragraph 3: It is understood that the competent authorities may consult for the elimination of double taxation in cases not provided for in the Agreement only with respect to covered taxes. IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Protocol. Done at Zagreb, on 21 June, 2002 in two originals, in the Croatian and English languages, all versions being equally authentic. In case of divergence in interpretation, the English text shall prevail. For the Government of Ireland For the Government of the Republic of Croatia John Lawton Mato Crkvenac Given under the Official Seal of the Government, this 3rd day of December, 2002. BERTIE AHERN, Taoiseach. EXPLANATORY NOTE. (This note is not part of the Instrument and does not purport to be a legal interpretation.) This Order gives force of law in Ireland to the Agreement with the Republic of Croatia which is set out in the Schedule. The principal provisions of the new Agreement are summarised below. This Agreement with the Republic of Croatia, which was signed in Zagreb on 21st June, 2002, is comprehensive in scope and is based on the OECD Model Convention. It provides for the allocation of taxing rights between Ireland and the Republic of Croatia and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of the Republic of Croatia, may be taxed in both countries. In many cases, the Agreement awards the taxation right over items of income and gains to the country of residence of the recipient only, for example, for items such as business profits derived other than through a permanent establishment in the source country, interest income or profits from the operation of ships or aircraft engaged in international traffic. In other cases, such as remuneration in respect of services rendered to the Government of either country, the Agreement awards the sole taxation right to the country of source. Where both countries continue to have taxing rights, for example in the case of dividend and royalty income, business profits arising through a permanent establishment which an enterprise resident in one country has in the other country, or in the case of capital gains arising from the disposal of immovable property, the Agreement provides that the country of residence of the recipient of the income or gain will give credit against its tax on the income or gains for the tax paid in the other country on the same income or gains. The Agreement also provides for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any doubts or difficulties arising as to the interpretation or application of the Agreement and for the exchange of information that is relevant for carrying out the provisions of the Agreement or of the domestic laws of each country in relation to the taxes covered by the Agreement. The Convention will enter into force on the date of the later of the notifications by each country to the other of the completion of its procedures for bringing it into force. It will thereupon have effect in both countries for tax periods beginning in the following year. EXPLANATORY NOTE. (This note is not part of the Instrument and does not purport to be a legal interpretation.) This Order gives force of law in Ireland to the Agreement with the Republic of Croatia which is set out in the Schedule. The principal provisions of the new Agreement are summarised below. This Agreement with the Republic of Croatia, which was signed in Zagreb on 21st June, 2002, is comprehensive in scope and is based on the OECD Model Convention. It provides for the allocation of taxing rights between Ireland and the Republic of Croatia and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of the Republic of Croatia, may be taxed in both countries. In many cases, the Agreement awards the taxation right over items of income and gains to the country of residence of the recipient only, for example, for items such as business profits and gains on movable property, provided such income or gains do not arise through a permanent establishment or fixed base in the country of source, interest income or profits from the operation of ships or aircraft engaged in international traffic. In other cases, such as remuneration in respect of services rendered to the Government of either country, the Agreement awards the sole taxation right to the country of source. Where both countries continue to have taxing rights, for example in the case of dividend and royalty income, business profits arising through a permanent establishment which an enterprise resident in one country has in the other country, or in the case of capital gains arising from the disposal of immovable property or shares linked with immovable property, the Agreement provides that the country of residence of the recipient of the income or gain will give credit against its tax on the income or gains for the tax paid in the other country on the same income or gains. The Agreement also provides for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any doubts or difficulties arising as to the interpretation or application of the Agreement and for the exchange of information that is relevant for carrying out the provisions of the Agreement or of the domestic laws of each country in relation to the taxes covered by the Agreement. The Convention will enter into force on the date of the later of the notifications by each country to the other of the completion of its procedures for bringing it into force. It will thereupon have effect in both countries for tax periods beginning in the following year. 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