FOREIGN EXCHANGE >> LIGHT ON PROVISION >> CAPITAL TRANSACTION

Capital Transaction

(1) Under the terms of this Act, capital transactions shall mean transactions concluded between residents and non-residents, as well as unilateral transfers of assets for the purpose of transferring capital, other than current payments and transfers referred to in Article 8 of this Act.

(2) Capital transactions referred to in paragraph 1 of this Article shall comprise:

1. direct investments;

2. investments in real estate;

3. securities transactions in the capital markets;

4. securities transactions in the money markets;

5. transactions with stakes in investment funds;

6. credit transactions;

7. deposit transactions;

8. payments related to insurance agreements;

9. unilateral transfers of assets:

a) personal transfers of assets;

b) physical transfers of assets.

(3) Capital transactions shall also comprise transactions involving the alienation of rights acquired through investments, or securities referred to in paragraph 2 of this Article, as well as the repatriation of assets or transfer of the balance of assets in liquidation or of the bankruptcy estate.

Current Transactions and Current Payments

Article 8

(1) Current transactions are transactions concluded between residents and non-residents for a purpose other than a transfer of capital.

(2) Payments and transfers arising from current transactions shall comprise:

1. all payments due in connection with foreign goods and services trade and other current business, including services and short-term banking and credit facilities;

2. payments due as interest on loans and as net income from other investments;

3. payments of moderate amounts for amortization of loans, for depreciation of direct investments and distribution of profits based on ownership stakes;

4. transfers in connection with remittances from workers abroad, pensions, disability allowances, and other social benefits, taxes and dues, interstate cooperation, settlement of insurance claims, lottery gains, compensations for concessions, membership fees and fines (penalties) and moderate remittances for family living expenses.

Direct Investments

Article 9

(1) Direct investments, under the terms of this Act, shall comprise all investments by residents abroad and all investments in the Republic of Croatia by non-residents, made with a purpose of establishing permanent economic relationships and gaining considerable control over the managing of a legal person.

(2) The following situations shall be identified as those whose purpose is to establish permanent economic relationships and to gain considerable control over the managing of a legal person:

1. the establishment of, or an increase in the initial capital of, a company fully owned by the investor, the establishment of a branch office or acquisition of an already existing company into full ownership of an investor or investment for the purpose of performing the activities of an individual undertaking;

2. investment into a new or an existing company, provided the investor acquires a minimum 10% stake in the initial capital of a company, or a minimum 10% voting rights, following fulfillment of conditions referred to in paragraph 1 of this Article;

3. loans with a minimum maturity of five years, granted for the purpose of establishing permanent economic relationships, provided such loans can be classified as subordinate or hybrid claims.

(3) Following the establishment of a direct ownership relationship between residents and non-residents in terms of paragraphs 1 and 2 of this Article, direct investment transactions shall also comprise:

1. reinvested profit or any direct investor’s share in the profits of a company which is not distributed in the form of dividends or other forms of profit distribution;

2. debt transactions between any direct investor and a company into which direct investment has already been made. This shall comprise debt securities, commercial loans, financial loans and other debtor-creditor relations. Investments by financial institutions involving debt transactions related to current operations shall not be considered direct investments; only those transactions, which are motivated by permanent interest in ownership status shall be considered direct investments.

(4) The following shall not be considered direct investments: investments by investment funds, brokerage firms, pension funds, insurance companies, banks and other persons granted by the Croatian Securities Exchange Commission a status of an institutional investor, in accordance with a special law, and investments in financial assets made for the purpose of issuing depository bills.

(5) The following shall exceptionally be considered direct investments: investment by a bank into another bank or other financial institution whose main activity is the provision of financial services and investment of an insurance company into another insurance company, provided such investments fulfil the conditions referred to in paragraph 2 of this Article.

Securities Transactions

Article 10

(1) Securities transactions, under the terms of this Act, shall comprise securities transactions in the capital and money markets and transactions with stakes in investment funds, which are not investment transactions in terms of Article 9 of this Act.

(2) Securities transactions referred to in paragraph 1 of this Article shall comprise:

1. issuance, listing, and the sale of domestic securities abroad;

2. issuance, listing, and the sale of foreign securities in the Republic of Croatia;

3. investments by residents into securities abroad;

4. investments by non-residents into securities in the Republic of Croatia.

(3) The listing of securities referred to in paragraph 2 of this Article means the beginning of trading in foreign securities in the Republic of Croatia or in domestic securities abroad in stock exchanges or regulated public markets.

Credit Transactions

Article 11
(1) Credit transactions, under the terms of this Act, shall comprise commercial and financial loans. Under the terms of this Act, credit transactions shall also include sureties and guarantees.

(2) Commercial loans, under the terms of this Act, shall imply deferred payments, or advance payments for goods and services. Commercial loans shall also include bank funding for deferred and advance payments and transactions involving purchases of claims (factoring and forfaiting), provided the underlying transaction from which the claims arise can be characterized as a commercial loan..

(3) Financial loans, under the terms of this Act, shall imply all loans except loans referred to in Article 9, paragraph 2, item 3 and paragraph 2 of this Article. Financial loans shall not comprise sureties and guarantees.

(4) Credit transactions referred to in Article 9, paragraph 2, item 3 of this Act and all credit transactions referred to in this Article, except deferred and advance payments up to 12 months, based on a commercial transaction, shall be concluded in a written form. Bank loan agreements shall always be concluded in a written form.