Status
The United States and Croatia signed an income tax convention in Washington on December 7, 2022, with a protocol signed at the same time, and an amending protocol that Treasury lists with the date April 28, 2026. Neither has entered into force. Until it does, there is no income tax treaty with Croatia, and payments to Croatian residents are withheld under the Code with no treaty reduction.
What to withhold
- U.S.-source fixed or determinable income (dividends, royalties, rents, interest that is not otherwise exempt, pay for services performed in the United States) is withheld on at 30% of the gross payment.
- The Code's own exemptions still apply: portfolio interest, bank deposit interest, and income effectively connected with a U.S. trade or business documented on Form W-8ECI.
- Pay for services performed entirely outside the United States is foreign-source: no withholding and no Form 1042-S.
- A W-8BEN or W-8BEN-E that claims treaty benefits for Croatia cannot be relied on for the claim, but still documents foreign status. A nonresident working in the U.S. has no treaty exemption to claim on Form 8233.
- Payments are reported on Form 1042-S with the payee's country code, whether or not tax was withheld.
What the signed convention would change
Nothing below applies yet. The convention enters into force when both countries have notified completion of ratification, and its withholding provisions would apply to amounts paid or credited from the first day of the second month after that (Art. 29). The 2026 protocol has to be ratified too and would enter into force with the convention.
| Payment | Under the signed convention | Article |
|---|---|---|
| Dividends to a company holding directly 10% of the vote and value for 12 months | 5% | 10(2)(a) |
| Other dividends | 15%; 0% to pension funds | 10(2)(b), 10(3) |
| Interest | 0%, with exceptions for contingent interest (15%), special tax regimes, expatriated entities and REMIC excess inclusions | 11 |
| Royalties of every kind | 5%; equipment rent is not a royalty | 12 |
| Contractor's fees | Business profits: exempt without a permanent establishment; construction counts after 12 months | 5, 7 |
| Employees | Exempt if 183 days or fewer in any 12 months, non-U.S. employer, not borne by a U.S. permanent establishment | 14(2) |
| Performers and athletes | Taxable above $30,000 of gross receipts in the year | 16 |
| Payments from a pension fund | Up to 10% at source | 17(1) |
| Social Security | Taxable only by the paying country | 17(3) |
| Students and business trainees | Foreign maintenance payments exempt, plus $10,000 a year of service income | 20 |
The text follows the 2016 U.S. model treaty. It has a detailed limitation-on-benefits article with derivative benefits and headquarters tests; a rule that switches off the dividend, interest, royalty and other income articles if either country later cuts its corporate rate below the lesser of 15% or 60% of the other's (Art. 28); special-tax-regime and expatriated-entity carve-outs; and a triangular branch rule (Art. 1(8)). The 2026 protocol does not change any withholding rate: it defines "active conduct of a trade or business" for the limitation-on-benefits article and rewrites the U.S. double tax relief and nondiscrimination paragraphs.
Documents
Questions payers ask
Is there a U.S.-Croatia tax treaty in effect?
No. A convention was signed on December 7, 2022 and amended by a 2026 protocol, but it has not entered into force. Payments to Croatian residents are withheld under the Code, at 30% on U.S.-source dividends, royalties and other fixed income.
Can a Croatian company claim a treaty rate on a W-8BEN-E?
Not yet. A claim under a treaty that is not in force cannot be relied on. The W-8BEN-E still documents the company's foreign status.
What royalty rate would the U.S.-Croatia treaty set?
5% on all royalties, once the convention is in force. Equipment rent would not be a royalty.