Restrictions on Corporate Financial Assistance for Acquisitions
In Croatia, there are specific rules governing a company’s ability to provide financial assistance for share acquisitions. Here are some key points to consider:
Restrictions on Providing Financial Assistance
According to Croatian law, an agreement under which a company grants financial assistance to third parties for the acquisition of its own shares is invalid. However, this provision does not apply to:
- Credit and financial institutions
- Financial assistance for share acquisitions by employees of the company
For limited liability companies, there is no specific provision governing financial assistance for share acquisitions.
Tax Incentives and Withholding Taxes
Interest Paid to Foreign Lenders
Interest paid to foreign lenders (non-natural persons) in Croatia is subject to withholding tax, unless:
- There is a bilateral treaty regulating the avoidance of double taxation
- The treaty reduces or exempts withholding tax
There are no specific conditions mandated for the deduction or withholding of tax from funds received through guarantee claims or from the proceeds of enforcing security.
Tax Incentives for Foreign Lenders
No particular taxes or other incentives are provided preferentially to foreign lenders in Croatia. Income earned by a foreign lender would not become taxable in Croatia solely because of a loan, guarantee, or grant of security from a company in Croatia.
Judicial Enforcement
Recognition of Foreign Governing Law and Enforceability
Croatian courts recognize a foreign governing law in a contract and may enforce a contract with a foreign governing law, subject to certain exceptions related to public interests. The Private International Law Act determines the rules applicable to contractual obligations, including those involving foreign parties.
Enforcement of Foreign Judgments
Croatian courts will recognize and enforce a judgment given against a company in New York or English courts without re-examination of the merits, subject to certain procedural requirements. This demonstrates Croatia’s commitment to upholding international judicial cooperation and enforcing foreign judgments in its territory.