Permanent Establishment Definition in Croatia

As in most other countries, a permanent establishment is not a legal form according to Croatian law, yet it provides the possibility of organising its undertaking in Croatia.

The term permanent establishment and the taxation of the Croatian permanent establishment of a foreign company are regulated in Articles 4 and 15 of the profit tax law (‚ÄĚZakon o porezu na dobit‚ÄĚ, in the following ‚ÄúPTL‚ÄĚ). Article 4 of the profit tax law stipulates that the term ‚Äúpermanent establishment‚ÄĚ means an establishment through which the activities of a foreign company are carried out full-time or part-time.

As examples of a permanent establishment are listed

  • a place of administration,
  • a subsidiary,
  • a branch,
  • a manufacturing site,
  • a workshop and
  • a mine, oil or gas deposits, a stone quarry or other exploitation of natural resources.

The tax base for a permanent establishment is only the profit that can be attributed to the Croatian establishment Art.15, (1), PTL. Corresponding to the arms-length principle of a permanent establishment, Article 15, (2), PTL stipulates that, had it done the same or similar work, under the same or similar conditions as an independent company, and in dealing with the company whose subsidiary it is, the profit it could have made, if it would have been a totally independent entity, can be attributed to the permanent establishment.


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