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Update on MLI – Impact of ratification on Croatia’s treaty network

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1. Croatia signed the MLI on 07 June 2017 and deposited its instrument of ratification on 18 February 2021, as a result of which, MLI shall enter into force for Croatia on 01 June 2021.

2. At the time of signing of the MLI, Croatia had notified 62 CTAs, whereas, at the time of ratification, the number of notified CTAs has increased to 65. The additional CTAs notified by Croatia at the time of ratification are Kazakhstan, United Arab Emirates, and Viet Nam. The complete list of CTAs notified by Croatia is at Annex 1 of Enclosure. Out of these 65 CTAs, 53 jurisdictions have notified Croatia as a CTA under their respective MLI position at the time of signing/ratification, as the case may be. A complete list of these 53 CTAs is at Annex 2 of Enclosure. Out of the remaining 12 jurisdictions, Norway, Sweden, and Switzerland have not notified Croatia under their respective MLI position, whereas, Azerbaijan, Belarus, Iran, Kosovo, Moldova, Montenegro, Syria, Turkmenistan, and Viet Nam are not signatories to the MLI as of now.

3. Croatia’s other notifications at the time of ratification of the MLI have altered slightly in comparison to those made at the time of signing of the MLI (reservation in Article 3 and Article 11 withdrawn on ratification). Broadly, various treaties of Croatia shall be modified by the following MLI provisions (depending upon the notifications made/to be made by the respective treaty partner at the time of ratification already made/to be made by them):-

- Provisions in regard to transparent entities, as contained in Article 3 to apply;

- The preamble text described in Article 6(1) would be included, being a minimum standard. Croatia has also chosen to include the preamble text referring to a desire to develop economic relationship or to enhance cooperation in tax matter;

- PPT provisions described in Article 7(1) to apply, being a minimum standard;

- Provisions described in Article 9 of MLI in regard to capital gains on alienation of shares or interests of entities deriving their value principally from immovable property, to apply;

- Provisions in respect of saving clause as contained in Article 11 of the MLI to apply;

- Provisions in relation to DAPE and when an agent is to be considered and not to be considered as an independent agent, as contained in Article 12 of the MLI, to apply;

- Option A and anti-fragmentation provisions in relation to artificial avoidance of PE status through the specific activity exemptions, as contained in Article 13 of the MLI, to apply;

- Definition of a person closely related to an enterprise provided in Article 15 of the MLI to apply;

- MAP provisions shall be updated, being a minimum standard;

- Provisions contained in Article 17 of the MLI to apply in certain treaties.

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