Croatia: New withholding tax rate on dividends

29.02.2012

Effective

1 March 2012

the withholding tax rate on dividends paid from Croatian equities is increased from 0% to 12%.

Background

The Croatian government has adopted amendments to the Law on Profit Tax and the Law on Income Tax containing, among other things, the introduction of a 12% withholding tax on dividends on Croatian equities for all individual investors and non-resident corporate investors.

We remind customers that, for Croatian tax purposes, the entity in whose name the account is opened in Croatia is treated as the beneficial owner of all securities and all securities are registered in its name.

Transactions in Croatian securities are settled via Clearstream Banking's1 depository in Austria, Erste Group AG, and Croatian securities are accordingly registered in the name of Erste Group AG, with all dividends deemed to be paid to a non-resident corporate investor. As a consequence, dividend payments will be subject to 12% withholding tax rate.

No changes occur for interest paid from Croatian debt securities, which will continue to be exempt from tax.

Impact on customers

Currently, no relief at source or standard refund of withholding tax is available on income from Croatian equities held with CBL. Our local depository has filed a request with the Croatian Tax Authorities to obtain clarification of the tax refund possibilities for the final beneficial owner of the securities.

We continue to monitor the market and will provide more information as it becomes available.

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

LuxembourgFrankfurt
Email:tax@clearstream.comtax@clearstream.com
Telephone:+352-243-32835+49-(0) 69-2 11-1 3821
Fax:+352-243-632835+49-(0) 69-2 11-61 3821

or Clearstream Banking Customer Service or your Relationship Officer.

1. Clearstream Banking refers to Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).