Business Group Taxation In Croatia and the Implications of the EU Framework Adoption

The related companies’ taxation has been a debatable issue for decades in the EU. Taxation policies in the EU countries have been tried to be reconciled to the advantage of as many member countries as possible in numerous tries. Although there has been a general trend of income tax rates’ reduction in the last three decades, tax bases (and rates) still remain subject to national tax legislations. The greatest advance in direct taxation harmonisation has been achieved regarding the EU-headquartered multinational companies’ activities that are doing business within the EU. Yet, the SME sector makes the majority of business activity in the EU and small- and medium- sized companies’ networking is promulgated as a way of building up the competitiveness in the Single market. As a prospective EU member country, Croatia would have to adapt its taxation regulation according to the EU framework. Starting from the current related companies’ taxation practices, this paper analyses the necessary changes in Croatian legislation and questions what degree of fiscal autonomy could be expected to remain regarding the related companies’ taxation practices in Croatia after the EU joining.