Transfer pricing
The modern business environment is characterised by globalization and the grouping of business entities into multinational companies of associated entities. As a result, transfer pricing plays a crucial role in all segments of the business chain - from management, research and development, production and marketing, to distribution and after-sales services. Multinational companies often face challenges due to complex and rapidly evolving transfer pricing regulations.
As part of the global PwC network, PwC Croatia provides comprehensive support to ensure your business complies with both local and international transfer pricing regulations. This support helps mitigate the risk of tax base adjustments and enhances your business's transparency and legal compliance.
Our services
- Transfer pricing documentation
- Financial transactions
- Consulting and supervision
- Public country-by-country reporting
Transfer pricing documentation
In Croatia, transfer pricing regulations require that transactions with related parties be conducted at arm's length, reflecting the conditions that would apply between independent entities. This requires the preparation of transfer pricing documentation that complies with local regulations and OECD Guidelines. Such documentation should include an analysis of cross-border and certain domestic intra-group transactions, supported by detailed functional and economic analyses, including, where necessary, a comparability (benchmarking) analysis.
PwC's specialised team of tax professionals offers expert support in preparing and reviewing documentation for all types of transactions between related parties in accordance with relevant regulations. This service includes the preparation of Master File reports and local transfer pricing reports. Our experts conduct benchmarking analyses to ensure that the fees charged in related party transactions align with market arm’s length standards.
We also provide assistance in the preparation and submission of Country-by-Country Reports (CbCR) or CbCR Notifications, ensuring your company fulfils all regulatory requirements and maintains transparency in its global operations.
Financial transactions
For many years, Croatian taxpayers have predominantly relied on the “safe harbour” market interest rate prescribed by the Minister of Finance for setting interest rates on loans with related companies, despite regulations allowing alternative methods for determining market interest rates. The prescribed interest rate, determined by the Minister of Finance, is considered the maximum rate acceptable for tax purposes when the taxpayer is the recipient of the loan, or the minimum interest rate when the taxpayer is the lender. Any deviations from this rule can increase the corporate tax base and, consequently, the tax liability. Given the market's volatility and discrepancies in interest rates, taxpayers are seeking new solutions to reduce additional tax liabilities.
Our financial transaction experts advise on various aspects of financial arrangements between related parties, including loans and cash pool arrangements. We perform comparability analyses to determine market interest rates and ensure regulatory compliance. We also assist with calculations related to the thin cap rule and the interest limitation rule (ATAD).
Consulting and supervision
To meet regulatory requirements and mitigate the risk of tax base adjustments, companies must develop comprehensive transfer pricing policies. This requires a thorough understanding of both local regulations and international standards, adept navigation of the delicate transfer pricing matters, alignment of strategies with regulatory expectations, and optimisation of tax positions.
PwC Croatia offers transfer pricing advisory services, including the preparation of transfer pricing policies and defence files for services received. We also provide support in the reorganisation of company functions and assistance during tax audits including preparation of appeals or lawsuits in the event of an unfavourable tax audit outcome.
Public country-by-country reporting
Amendments to the Accounting Act have mandated the implementation of Directive 2013/34/EU, focusing on the obligation to submit public Country-by-Country Report under the public Country-by-Country Reporting Directive (pCbCR). This directive aims to enhance the tax transparency of companies and ensure consistent income tax information across the European Union (EU). It is crucial to promptly determine whether a particular company is subject to this reporting requirement and, if so, what specific information needs to be included in the report.
PwC's specialised team of tax experts offers support in determining your company's reporting obligations and assists in the preparation and submission of the public Country-by-Country Report. We ensure full compliance with both public and regulatory requirements.
PwC Croatia is your trusted partner in navigating the complex area of transfer pricing, empowering your business with insights and strategies for achieving transparency and tax optimisation.
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