US Company Formation from Croatia (2026): The US–Croatia Treaty Waiting for the Senate, 30% Withholding Until Then, Paušalni Obrt, j.d.o.o. and the US LLC vs C-Corp Choice

Croatia is one of the few EU countries with no income tax treaty in force with the USA. The two countries signed their first treaty in December 2022 and an amending protocol in April 2026. The Croatian Sabor approved ratification in September 2026. The treaty now waits for the US Senate, which has to give its consent by a two-thirds vote, before it can enter into force.

Until it does, a Croatian with a US company is under domestic law on both sides: 30% US withholding on dividends and royalties, and no treaty protection for business profits. That makes the choice between a US LLC and a US C-Corporation, and the timing of any dividends, more important than for most Europeans. This guide covers both the current position and what changes once the treaty takes effect, along with Croatia's own rules for freelancers, j.d.o.o. and d.o.o. owners.

In short: Croatians can own 100% of a US LLC or C-Corporation, formed remotely. The US–Croatia treaty is not yet in force, so dividends and royalties from the USA carry 30% withholding today. Once in force, it will cut that substantially for dividends and royalties and limit US tax on business profits to a US permanent establishment. Croatia taxes dividends at 10%, company profits at 10% (revenue up to €1 million) or 18%, and personal income at rates set by each city within national bands. A single-member US LLC with no US operations avoids US dividend withholding entirely. With UCB, a Wyoming LLC with EIN is $249 and a Delaware corporation with EIN is $358, all-in.

The treaty: where it stands

US treaties often wait years in the Senate, so do not plan on a date. Once the treaty enters into force, its provisions take effect from dates set in the treaty itself, typically the following January for withholding taxes.

Until then

• Dividends from a US corporation to a Croatian resident: 30%.
• Royalties: 30%.
• Interest: most portfolio interest is exempt under US domestic law. Related-party interest: 30%.
• Business profits: US tax applies to income effectively connected with a US trade or business under US domestic law. There is no permanent establishment threshold to rely on.
• Croatian relief: Croatia gives a credit for foreign tax under its own law, generally limited to the Croatian tax on the same income.

After entry into force

The treaty follows the modern US model. It will reduce US withholding on dividends, interest and royalties well below 30%, limit US tax on business profits to a permanent establishment, and include a limitation on benefits article. When it takes effect, owners of US corporations should file new W-8BEN or W-8BEN-E forms claiming the treaty (see W-8BEN-E vs W-8BEN explained).

Practical point: a Croatian owner of a profitable US corporation may choose to delay dividends until the treaty applies, rather than pay 30% now.

How Croatia taxes the owner

Personal income tax

Since the 2024 reform, each city or municipality sets its own income tax rates within national ranges: a lower rate of roughly 15–23% and a higher rate of roughly 25–33% above an annual threshold of €60,000. Zagreb, Split and Rijeka set rates near the top of the ranges. The city surtax (prirez) was abolished at the same time.

Dividends and capital income

Dividends are taxed at 10% (reduced from 12% in 2024). Foreign dividends are declared and taxed in Croatia, with credit for foreign tax up to the Croatian tax.

Companies

Profit tax is 10% for companies with annual revenue up to €1 million, and 18% above that. A j.d.o.o. (simple limited company) is a cheap way to start a company, and a d.o.o. is the standard form.

Paušalni obrt

Many Croatian freelancers use a paušalni obrt, a flat-rate sole trade for those whose annual revenue stays under €60,000, which is also the VAT registration threshold. Tax is a fixed amount set by revenue band, and contributions are on a fixed base. For an IT freelancer billing foreign clients under the limit, the total burden is very low.

How Croatia treats a US company

A US LLC is a legal person under its state law, with limited liability. Croatian practice generally treats it as a foreign company, not as transparent. Distributions to a Croatian individual are dividends taxed at 10%. Because the US does not withhold on a disregarded LLC's distributions, there is no US tax to credit.

A foreign company whose place of effective management is in Croatia is a Croatian tax resident. A single-member LLC run by its owner from Split is managed from Croatia, so the Porezna uprava can treat it as a Croatian company, taxed at 10% or 18% on its profits, with Croatian bookkeeping. Croatia's CFC rules apply to Croatian companies that control low-taxed foreign entities with mainly passive income.

US LLC formation from Croatia

US tax position

The IRS disregards a single-member LLC with a non-resident owner. Without a treaty, US tax depends on whether the income is effectively connected with a US trade or business. If you work from Croatia, with no US office, employees or dependent agents, it is not, and there is no US tax (see effectively connected income explained). Because the LLC's distributions are not dividends, the 30% withholding never applies. The LLC files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).

Example: a designer in Split

These are illustrative figures, not a client case, at €0.92 to the dollar.

Marko is a product designer in Split who earns US$58,000 (about €53,000) a year from US clients.

• As a paušalni obrt, he stays under the €60,000 limit and pays a fixed tax and contributions. He issues invoices in euros or dollars.
• Through a US LLC run from Split, the LLC is likely a Croatian-resident company. He would lose the paušalni regime and pay profit tax, then 10% on dividends, plus US compliance costs.

He keeps the paušalni obrt. His largest client wants a US vendor, so he forms a small Wyoming LLC that contracts with the client and pays his obrt for his work. His revenue in Croatia stays the same, and the US side owes no tax.

US C-Corp formation from Croatia

US tax position

A US corporation pays 21% federal tax on its profits plus state tax, and files Form 1120 and Form 5472 every year (see the 21% corporate tax explained and the C-Corp guide for non-residents). Until the treaty is in force, its dividends to Croatia are withheld at 30%.

When it fits now

• Start-ups raising US money. Croatian start-ups, building on the success of companies such as those in Zagreb's electric vehicle and software scene, often need a Delaware C-Corporation at the top for investors. Dividends are rarely paid in a growing start-up, so the missing treaty matters less. See raising US investment as a foreign founder.
• A d.o.o. with real US operations, such as a US sales team. The US subsidiary pays US tax on its profit and should reinvest rather than pay dividends until the treaty applies. See US subsidiary for a foreign company.
• Tourism and hospitality groups with US sales offices selling to American travellers.

Example: a Zagreb software company waiting for the treaty

Take an illustrative case: a Zagreb d.o.o. with a Delaware subsidiary that employs four US sales staff. The subsidiary is profitable. Paying a dividend now would cost 30% in US withholding. The d.o.o. instead leaves the profit in the subsidiary to fund more US hires, and plans to review dividends after the treaty enters into force. Any royalties for software the d.o.o. licenses to the subsidiary would also carry 30% now, so the subsidiary pays the d.o.o. for development services instead, which carry no US withholding.

Which state

• Wyoming or New Mexico for a small LLC run from Croatia.
• Delaware for a start-up or subsidiary.

See best state for non-residents and the state selector.

What it costs

UCB's prices include state fees and the first year of registered agent service:

• Wyoming LLC with EIN: $249, or $348 with a US bank account application.
• Delaware corporation with EIN: $358.

A Wyoming LLC costs $121 a year to keep active, or $421 with the annual federal return. A Delaware corporation costs $578 a year. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.

Documents and banking

For an individual, a Croatian passport or ID card and proof of address. For a d.o.o. or j.d.o.o., an extract from the court register (sudski registar), translated into English, and the members' decision approving the US company. US fintech banks accept Croatian owners readily. Until the treaty is in force, leave the treaty section of W-8BEN forms blank. See US business bank accounts for non-residents.

Mistakes to avoid

• Claiming US treaty rates before the treaty enters into force.
• Paying US corporate dividends to Croatia now at 30% when you could wait.
• Giving up a paušalni obrt for a US LLC that costs more in tax.
• Running a US LLC from Croatia and forgetting it may be Croatian-resident.
• Missing Form 5472 in a year when no US tax was due.

Frequently asked questions

Is there a US–Croatia tax treaty? It has been signed (2022), amended (2026) and ratified by Croatia, but the US Senate has not yet approved it, so it is not in force. US withholding on dividends and royalties to Croatia is 30% for now.

What will change when it enters into force? Lower US withholding on dividends, interest and royalties, and US tax on business profits only through a US permanent establishment.

How does Croatia treat a US LLC? Generally as a foreign company. Distributions are dividends taxed at 10%, and an LLC managed from Croatia can be a Croatian tax resident.

Is an LLC or a C-Corp better for a Croatian right now? For a business run from Croatia, usually an LLC. For investors or a real US operation, a C-Corporation that reinvests its profits until the treaty applies.

Does my US LLC pay US tax? Not if it has no US office, staff or agents. It files Form 5472 and a pro forma 1120 every year.

How UCB can help

We form US companies for Croatian owners and companies remotely: the state filing, EIN, registered agent, US business address and bank application. When the treaty enters into force, we will help you file updated W-8 forms. Each year we file the US returns through our US tax filing service. See our formation, EIN and bank account package and the Slovenia guide for a treaty country next door.

Setting up a US company from Croatia? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.