Starting in 2024, Croatia has introduced the Global Minimum Tax Law, aligned with EU Directive 2022/2523 and the OECD Global Anti-Base Erosion (GloBE) Framework under Pillar 2.
This regulation marks a significant shift in the international tax system, aiming to ensure that multinational enterprises (MNEs) pay a minimum effective tax rate of 15% in every jurisdiction where they operate. More than 140 countries have endorsed this initiative to address the challenges of globalization and digitalization in the global economy.
Scope and Key Provisions of the Law
The Law applies to constituent entities that are members of a multinational enterprise (MNE) group or a large domestic group whose annual consolidated revenue of the ultimate parent entity amounts to EUR 750 million or more in at least two of the four fiscal years immediately preceding the fiscal year in question, including revenue from excluded entities.
The minimum effective tax rate is ensured through the application of top-up tax rules established by the Law, including:
- Income Inclusion Rule (IIR) – Parent entities must pay additional tax if their subsidiaries are taxed below the minimum rate.
- Undertaxed Profits Rule (UTPR) – Ensures that income insufficiently taxed in one jurisdiction is subject to top-up taxation in another.
- Qualified Domestic Minimum Top-up Tax (QDMTT) – Allows jurisdictions to collect the top-up tax locally, thereby retaining tax revenues.
By applying these rules, the amount of the top-up tax is determined to ensure that the effective tax rate (ETR) reaches at least 15%.
The QDMTT takes precedence over other rules when applied.
Safe Harbour Rules in the Transitional Period
To avoid complex Pillar 2 calculations and reduce the administrative burden, transitional safe harbour rules have been introduced as a temporary measure. The purpose of this transitional period is to ease MNE groups into compliance with the GloBE requirements during the first years of implementation.
A group can rely on safe harbour rules to avoid detailed GloBE computations in a particular jurisdiction if it meets at least one of the following tests:
- De minimis test – The MNE group’s total revenues under the CbCR report are below EUR 10 million, and profit (or loss) before income tax is less than EUR 1 million (including losses); or
- Simplified Effective Tax Rate (ETR) test – The MNE group’s effective tax rate equals or exceeds the transitional rate (15% or higher) defined for that fiscal year; or
- Routine profits test – Profit or loss before income tax in the tested jurisdiction is equal to or less than the Substance-Based Income Exclusion (SBIE) amount for constituent entities located in that jurisdiction, according to the CbCR report and GloBE rules.
If an MNE group fails to meet any of the above safe harbour tests in a given jurisdiction, it must perform a detailed top-up tax calculation for that jurisdiction.
The safe harbour rules will apply only during the transitional period, i.e. for fiscal years beginning no later than 31 December 2026, but not covering fiscal years ending after 30 June 2028. After the transitional period ends, these rules will cease to apply.
Reporting Deadlines
By June 2026, taxpayers are required to submit their first Information Returns related to the top-up tax for the 2024 fiscal year.
From 2025 onwards, the Information Return must be filed within 15 months after the end of the fiscal year.
The Top-up Tax Return must then be submitted within 30 days after the deadline for the Information Return.
A bylaw, expected by the end of 2025, will further define the forms and templates prescribed under Croatian legislation.
Impact on Financial Reporting
Companies subject to the Global Minimum Tax Law will need to:
- Disclose the impact of Pillar 2 on their financial results;
- Calculate effective tax rates under the new rules, which differ from standard tax computations;
- Document compliance measures and potential additional tax obligations.
How CONEO Croatia Can Help
With the expert support of CONEO Croatia, you can ensure a clear understanding of the legal framework related to the Global Minimum Tax Law.
For any questions regarding Pillar 2 impact assessment or administrative compliance analysis, our team of tax advisors is at your disposal to guide you through the transition.
