Croatian Per Se Corporation

Business + International + Tax
July 1, 2013
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Croatia joins the European Union today. The Croatian dionicko drustvo is being added to the list of entities treated as per se corporations under Section 7701 of the Internal Revenue Code due to Croatia’s admission.

Under check-the-box regulations, an entity not specifically classified as a corporation can elect that federal tax classification under certain circumstances. Section 301.7701-2(b)(8) sets out the per se corporation list for foreign business entities that are always classified as corporations. 

On October 8, 2001 (effective October 8, 2004), the Council of the European Union established the European public limited liability company (Societas Europaea or SE). The SE is properly classified as a per se corporation for the Section 301.7701-2(b)(8) list. The regulations on SE entities generally defer to the laws of the European Economic Area member state in which the SE has its registered office (Norway, Iceland, Liechtenstein, and members of the European Union).

The IRS and the Treasury Department aim to include on the per se corporation list public limited liability companies for every country in which an SE may have its registered office. As of today, July 1, 2013, Croatia is a member of the European Union, and SEs are now eligible to have a registered office there, subject to the public limited liability company laws of Croatia. The dionicko drustvo is the only public limited liability company of Croatia. The IRS and the Treasury Department are thus adding the Croatian dionicko drustvo to the per se corporation list.

This change will generally apply to Croatian SE entities formed on or after this date, July 1, 2013, or to Croatian SE entities in which an interest becomes majority owned by a person(s) who was not an owner as of July 1, 2013. For partnerships, interest means capital or profits, and for corporations, it means equity, as measured by vote or value.

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