DETERMINATION OF RESIDENCY STATUS FOR TAX PURPOSES 

 

 

The process of determination of the residency status for tax purposes is regulated by the provisions of Article 4 of the Croatian Model of Tax Agreement for the avoidance of double taxation, provisions of the Article 43 of the General Tax Act ("Official Gazette" number 115/16) and the provisions of Articles 36 and 37 of the Ordinance for the implementation of the General Tax Act ("Official Gazette" number 30/17).  Questionnaires can be downloaded below:


Questionnaire TI 
 
Questionnaire TU

The Questionnaires provided at above stated links shall be completed in process of determination of the tax residency status of the taxpayer. The Questionnaire TU shell be filled in when determining change of the residency status from non-resident to resident of the Republic of Croatia, while Questionnaire TI shell be filled in when determining change of the  residency status from resident to non-resident of the Republic of Croatia, respectively the Questionnaires shell be filled in all cases in which it is essential to determine the tax residency status of natural persons (registration with/deregistration from the Register of Tax Payers, processing of annual tax return, income tax returns, calculation, suspension and payment of income tax prepayments; certification and in situations where the competent tax authority determines the need for their filling).

The main purpose of the Questionnaires of residency (form attached: questionnaire TU and questionnaire TI) is to simplify the application of the procedure laid down in Article 4, paragraph 2 of the Croatian Model Agreement for the avoidance of double taxation (tie-breaker rules), respectively to uniformly and accurately determine the relationship, the tax residency, of the taxpayer with the Contracting State that will ultimately have the right to tax the taxpayer under the principle of world income (world income principle).

Questions in Questionnaires are divided into groups that are related to: personal information, stay in and out of the Republic of Croatia, the reasons for entering/departing from the Republic of Croatia, ties with the Republic of Croatia and ties with another State, residency for tax purposes, employment and personal relationships. Certain answers to the questions will need to be further documented by the documents listed in the Questionnaire that will be provided by the taxpayer in accordance with the provisions of Article 6 of the General Tax Act, along with the original, also a certified translation into the Croatian language and Latin script will have to be submitted.

The answers in the group of statements that refer to ties with the Republic of Croatia and/or other countries will be crucial in determining the residency status of the taxpayer. For the required accuracy of the given answers and other listed information in the questionnaire, the taxpayer with his signature guarantees their truthfulness, accuracy and completeness.
The Republic of Croatia during the process of negotiations and conclusions of the agreements for avoidance of double taxation uses the Croatian Model Agreement which is based on the OECD (Organization for Economic Cooperation and Development) proposed Model Agreement in which the procedure for determination of the residency status of the taxpayer is stipulated in Article 4 and shall read as follows:

“1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.
 
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
a) he shall be deemed to be a resident only of the State in which he has a permanent residence available to him; if he has a permanent residence available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);
b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent residence available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual residence;
c) if he has an habitual residence in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.”

Territorial connection of the taxpayer within, respectively his ties with the Republic of Croatia, in the case of income from sources abroad, is based on the definition of the concepts of permanent and habitual residence of the taxpayer in and outside of the Republic of Croatia. Article 43 of the General Tax Act stipulates:

„(1) Within the meaning of this Act, it shall be considered that a taxable person has a permanent residence where he owns an apartment or he has one in his possession for at least 183 days in one or two calendar years. The actual stay in the apartment shall not be required. 

(2) If a taxable person in the Republic of Croatia owns or has in his possession more apartments, permanent residence relevant to taxation shall be determined according to the permanent residence of the family, and for a taxable person who is a single person according to the place in which he predominantly reside or from which he predominantly departs to work or to perform certain activity.

(3) If a taxable person has a permanent residence in the Country and abroad, it shall be considered that he has a permanent residence in the Country.

(4) Habitual residence within the meaning of this Act, shall be held by a taxable person in the place in which he stays under circumstances based on which it may be concluded that he does not reside in that place or area only temporarily. Habitual residence within the meaning of this Act shall be considered continuous or time-linked stay for at least 183 days in one or two calendar years. For the determination of habitual residence short interruptions in the stay not exceeding a period of one year shall not be considered important.“ 

Questionnaire Form TU should be filled in by the taxpayer when changing the residency status from non-resident to resident of the Republic of Croatia and submitted to the authorized employee of the competent tax administration office when registering with the Register of Tax Payers, before the issuance of certificates and, if necessary, during processing of an annual tax return, during the income tax returns, calculation, suspension and advance payment of income tax, or in other situations where the competent tax authority determines the need for its filling.

Questionnaire Form TI should be filled in by the taxpayer when changing the residency status from resident to non-resident of the Republic of Croatia and submitted to the authorized employee of the competent tax administration office when deregistering from the Register of Tax Payers, or in other situations where the competent tax authority determines the need for its filling.

The taxpayer is obliged to respond to a greater number of claims from the questionnaire and enclose essentially valid documentation (copies of identity documents, a copy of the registration of permanent residence and/or habitual residence, certificate of the tax residency status of the competent authority of another State, etc.) with which the answers given in the questionnaire is confirmed. For the required accuracy of the given answers and other listed information in the questionnaire, the taxpayer with his signature guarantees their truthfulness, accuracy and completeness under the full material and criminal liability.