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Croatian Legislation Related to Foreign Investments

Updated on Sunday 15th March 2020

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Croatian Legislation Related to Foreign InvestmentsAttracting foreign investors is one of the priorities of the local government in Croatia. The Strategic Investment Act contains the main provisions of the Croatian legislation related to foreign investments. Equal treatment is granted by law to all investors, both foreign and domestic. The legislation related to foreign investments stipulates the establishment of business zones in Croatia, which offer numerous advantages to potential investors. Our experts in company formation in Croatia can give you more details about the regulations regarding foreign investments.


Investment incentives in Croatia


Several laws regulate the investment environment in Croatia. These include the following: the Croatian Companies Act, the Act on Investment Promotion and the Act on Strategic Investment Projects of the Republic of Croatia. Under the provisions of this legislation, foreign investors have the same rights, obligations and legal status within a company as any domestic investor. Specific incentives are provided to foreign investors. Among these we mention the following:
 
  • •    the repatriation of profits and capital upon termination of investment;
  • •    incentives for micro entrepreneurs;
  • •    tax incentives – the reduction of the corporate income tax rate;
  • •    state support for development-innovation activities;
  • •    non-refundable aid for the creation of new work places;
  • •    non-refundable grants for the purchase of equipment and machinery in the amount of 20% of the eligible costs;
  • •    labor incentives.
 
If you want to invest in Croatia and start a company, our specialists in company formation in Croatia can assist you throughout the entire process. They can also help you register for VAT in Croatia.


Tax measures in the investment legislation


According to the Act on Investment Promotion and Enhancement of the Investment Environment, several tax incentives are granted to foreign investors. The most important tax measures stipulated within the Croatian legislation related to foreign investments include:
 
  • •    A reduction of the corporate income tax rate to 0% if certain conditions are met;
  • •    The enforcement of several treaties for the avoidance of double taxation;
  • •    The real estate transfer tax is not paid when a property is bought by a Croatian company or corporation;
  • •    Tax exemption for the reinvested profit;
  • •   Foreign recipients of dividends from the EU are not paying withholding tax on dividends and shares in profit at the 12% rate if they own at least 10% of the capital for a continuous period of 24 months;
  • •    State aid for research and development projects.
 

Is it hard to open a company in Croatia?

 
No, there are no harsh formalities for opening a company in Croatia. The limited liability company or the DOO is the most common business structure in Croatia that can be established by any kind of entrepreneur who respects the conditions involved. For example, the minimum share capital of EUR 2,500 needs to be deposited in a local bank account. The Articles of Association are the most important documents of a DOO in Croatia. These comprise information about the owners, their nationality, the business activities, the business address, regulations, the date of incorporation and many more. The Croatian Trade Register is the institution in charge of company incorporation in Croatia. We mention that a DOO in Croatia must have an appointed representative and a board of managers. If you would like to know more about how to register a DOO in Croatia as a foreign investor, feel free to talk to one of our company formation specialists in Croatia.
 

Other business structures for foreign entrepreneurs in Croatia

 
International entrepreneurs who want to do business in Croatia have varied options. Large companies from overseas can have branches and subsidiaries in Croatia, respecting the Company Act in Croatia. For instance, both branches and subsidiaries can run under the rules of limited liability companies, mentioning that these structures present different attributes, depending on the business needs of the investors. A branch is not considered a legal entity because the parent company controls this structure. The registration of a branch in Croatia is not a complicated procedure, but a guarantee that the branch is opened under the same conditions as the parent company needs to be offered. In the case of subsidiaries, these are independent legal entities that benefit from the capital of the foreign company. Subsidiaries can run under the rules of public limited liability companies if a minimum share capital of HRK 200,000 is deposited in a local bank account. If you would like to establish a branch or a subsidiary in Croatia, feel free to talk to one of our company formation representatives in Croatia.
 

Can I open a sole proprietorship as a foreign entrepreneur in Croatia?

 
Yes, foreign entrepreneurs in Croatia can act as sole traders in this country, respecting the Company Act and the Handicraft Act in Croatia. This is the simplest business form available in Croatia, without complicated formalities for registration and with a series of advantages, like being liable for the business’s profits and losses. The Croatian Trade Register issues the Certificate of Incorporation for sole proprietorships in Croatia. Foreign investors in Croatia benefit from the support and protection provided by the legislation related to foreign investments, letting them enjoy the same business conditions as the local entrepreneurs.
 

Making investments in Croatia

 
Croatia benefits from a great geographic location that sustains the business collaboration with numerous countries worldwide. The stable economy and the multitude of business possibilities make Croatia a solid business candidate and destination for international entrepreneurs. The tax incentives provided by the Croatian government represent a plus of the business environment in this country in front of foreign investors. The food industry, the tourism sector, engineering, textile industry, manufacturing, automotive, ICT and the pharmaceutical sector are well-developed sectors where most of the foreign investments are directed. The low costs for hiring local staff are also on the list of overseas entrepreneurs who can also benefit from the highly skilled and multilingual workforce available in Croatia. The following facts and information highlight the business direction and the economy in Croatia, analyzed by experts and specialists:
 
  1. Around 20% of the total FDI between 1993 and 2017 in Croatia came from the Netherlands.
  2. Around 32,884 million was the total FDI stock for Croatia in 2018.
  3. Approximately 30% of the total FDI was directed to the financial services in Croatia.
  4. Austria, Italy, the Netherlands, and Germany are among the most important investors in Croatia.
  5. According to the 2020 World Doing Business report, Croatia ranks 51st out of 190 worldwide economies. 
 
No matter the type of business you want to develop in Croatia as a foreign investor, it is recommended to have the support of a specialist in company formation who can guide you throughout the entire registration process.
 
 
Please contact our agents in company formation in Croatia for extensive details about the tax incentives provided within the legislation related to foreign investments.

 

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Call us now at +385 95 9981 628 to set up an appointment with our consultants in Zagreb, Croatia. Alternatively you can incorporate your company without traveling to Croatia.

As a Law Firm Ivan Župan client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Croatia.

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