MLI enters into force in Croatia

Croatia

MLI or Multilateral Instrument is the multilateral convention that implements tax treaty related measures to prevent base erosion and profit shifting. Croatia deposited its ratification instrument on 18 February 2021, the last step enabling the MLI to enter into force on 1 June 2021.

The MLI ensures the swift implementation of tax treaty measures that allow jurisdictions to tax the profits where the economic activities generating the profits are performed and where the value is created. Until now, out of the 95 countries that signed the MLI, 65 have already ratified, accepted, or approved it. Although Croatia has named all its 65 Tax Treaties as covered by the MLI, the MLI will become part of 54 of them for now. The rest of the countries with which Croatia has signed Tax Treaties have either not yet signed the MLI or have not named their Tax Treaty with Croatia as covered by the MLI.

In Croatia, the MLI will affect taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2022. For all other taxes, the MLI will apply to taxes levied with respect to taxable periods beginning on or after 1 December 2021.

The list of reservations and notifications made by Croatia upon deposit of the instrument of ratification can be found here.