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Australia and Croatia signed a new tax treaty – the Agreement between Australia and the Republic of Croatia for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance.
Once it enters into force, it will be the first tax treaty between the 2 countries.
The Hon Dr Andrew Leigh MP, Assistant Minister for Productivity, Competition, Charities and Treasury, signed the treaty on 24 November 2025, in Canberra, Australia.
A tax treaty with Croatia reduces withholding tax rates on dividends, interest and royalties. This will encourage cross‑border trade and investment. It will also make it cheaper for Australian businesses to access Croatian capital and technology.
The treaty will give Australians who earn income here and in Croatia:
- more certainty
- lower compliance costs.
Main features of the new treaty
Tax certainty
The treaty will allocate taxing rights over income from cross‑border dealings between Australia and Croatia. This benefits businesses looking to expand into Croatia and other Australian taxpayers deriving income from Croatia, by:
- improving tax certainty
- reducing tax barriers
- relieving double taxation.
Lower withholding tax rates on dividends
The treaty will provide a general withholding tax rate of 10 per cent on dividends. Intercorporate dividends on non‑portfolio holdings of at least 10 per cent will get a 5 per cent rate.
Subject to certain integrity requirements, an exemption will be provided for portfolio dividends derived by:
- the government of Australia or Croatia (including government investment funds)
- central banks
- tax‑exempt Croatian recognised pension funds
- Australian superannuation funds
- other Australian residents carrying out complying superannuation activities.
This lowers Australia’s and Croatia’s default withholding tax rates on dividends and will help encourage investment in both countries.
Lower withholding tax rates on interest
The treaty will provide a withholding tax rate of 10 per cent on interest.
Subject to certain integrity requirements, an exemption will be available for interest derived by:
- the government of Australia or Croatia (including government investment funds)
- central banks
- tax‑exempt Croatian pension funds
- Australian superannuation funds
- other Australian residents carrying out complying superannuation activities
- unrelated financial institutions dealing independently with the payer of the interest.
This lowers Croatia’s current rate (15 per cent) by at least 5 per cent to Australians and maintains Australia’s current rate at 10 per cent.
Lower withholding tax rates on royalties
The treaty will provide a rate of 10 per cent on royalties.
This reduces Australia’s default rate (30 per cent) by 20 per cent, and makes it cheaper for Australians to access Croatia’s intellectual property.
It lowers Croatia’s current rate (15 per cent) by 5 per cent. This incentivises Croatia to use more Australian intellectual property.
Protection over natural resources
The treaty maintains Australia’s source country taxing rights over income from natural resources. This includes income from the operation of substantial equipment.
Tax certainty for pensions
The tax treaty provides that only the recipient’s country of residence can tax non‑government periodic pension payments (superannuation). This means Australia can tax non‑government pension payments where a Croatian citizen retires in Australia.
The source (paying) country may tax any pension lump sum payments from:
- certain pension funds
- retirement benefit schemes
- certain life events (for example: retirement, invalidity, injury, disability or death).
This helps prevent tax avoidance. It will also allow Australia to tax eligible termination payments paid by Australian employers and pension funds.
Maintains domestic anti‑avoidance rules
The treaty provides that both countries can still apply their own laws to prevent tax evasion or avoidance. This maintains the integrity of Australia’s tax system.
Prevents multinational tax avoidance
The treaty includes important integrity provisions to prevent tax evasion and avoidance. These provisions align with the outcomes of the Group of 20 (G20) and Organisation for Economic Co‑operation and Development (OECD) Base Erosion and Profit Shifting project .
Non‑discrimination
The treaty includes rules to prevent discriminatory tax treatment of Australian and Croatian nationals. This levels the playing field for Australian and Croatian businesses.
Rules relating to the exchange of taxpayer information
The treaty will make sure rules relating to exchanging taxpayer information align with:
- Australia’s existing policies
- international obligations.
Rules to resolve tax disputes
If taxpayers believe they are or will not be taxed according to the treaty, the treaty will enable them to take a case to the relevant tax authorities. It requires Australia and Croatia to try to resolve the issue by mutual agreement.