Australia, Croatia sign first tax treaty between nations

The Albanese government has signed a landmark tax treaty with Croatia, a first between the two nations, in a move to grow a bilateral relationship.

The treaty, 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, would give Australians who earn income here and in Croatia more certainty and lower compliance costs once it entered into force.

The treaty was signed on Monday (24 November) by Andrew Leigh, Assistant Minister for Productivity, Competition, Charities and Treasury, and would reduce withholding tax rates on dividends, interests and royalties.

Leigh said the treaty would enter into force once both countries completed their domestic implementation processes.

“Once in force, the agreement will make it easier for Australia and Croatian businesses to trade, invest and innovate together. It creates a more predictable and transparent tax environment, paving the way for deeper economic cooperation,” he said.

“The treaty lowers certain withholding tax rates, cutting costs for Australians investing in Croatia and opening up new avenues to access Croatian capital and technology. It will also simplify compliance and give businesses and investors greater certainty about their tax obligations.”

In terms of its main features, the treaty was set to allocate taxing rights over income from cross-border dealings between Australia and Croatia, provide a general withholding tax rate of 10 per cent on dividends, a withholding tax rate of 10 per cent on interest, and a rate of 10 per cent on royalties.

The treaty would also maintain Australia’s source country taxing rights over income from natural resources, provide that both countries could still apply their own laws to prevent tax evasion or avoidance, include rules to prevent discriminatory tax treatment of Australian and Croatian nationals, as well as ensure that rules relating to exchanging taxpayer information aligned with Australia’s existing policies and international obligations.

Under the treaty, Leigh said, if taxpayers believed they were or would not be taxed according to the treaty, the treaty would enable them to take a case to the relevant tax authorities, and both Australia and Croatia would try to resolve the issue by mutual agreement.

“Two-way trade between Australia and Croatia reached around $328 million in 2024, with investment totalling about $67 million, particularly in retail and tourism,” Leigh said.

“The new treaty is expected to strengthen those ties and unlock further opportunities across both economies.”

“It also supports the Albanese Government’s commitment to ensure multinationals pay their fair share of tax by strengthening cooperation between our tax authorities and aligning with OECD and G20 best practices to curb profit shifting.”