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Establish a Subsidiary in Croatia

Updated on Sunday 17th February 2019

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Establish a subsidiary in Croatia.jpgCompanies from abroad have two important options for placing the activities in Croatia, as branches or as subsidiaries. The latter one is preferred because of the status of independent legal entity and for several tax advantages. Establishing a subsidiary in Croatia is subject to an easy incorporation with the institutions in charge, and furthermore, the entire procedure can be assisted by our team of company formation specialists in Croatia. Regardless of the type of business you intend to open in Croatia, our advisors can provide you with the necessary information and guidelines in this direction. 

 

How can a subsidiary be opened in Croatia?

 

Opening a subsidiary in Croatia requires the good knowledge of the Commercial Law of this country and a minimum share capital that has to be deposited before starting the business. A subsidiary is a company registered in Croatia but beneficiating from foreign capital, as a separate legal entity. The advantages of owning this type of business are numerous especially from a tax point of view; thanks to the vast network of double tax treaties, a subsidiary registered in Croatia must pay taxes on profits only in the country of origin and beneficiate from abolished or minimized taxes on dividends paid to those countries.
 
A subsidiary opened in Croatia has also the advantage that the shareholders’ liability is limited by their contribution to the capital. There are especially two forms of business adopted by the subsidiaries in Croatia, the private and the public limited liability companies.

 

Types of entities for subsidiaries in Croatia

 

A private limited liability company is formed by at least one founder that must provide a minimum share capital of at least 20,000 HRK, divided into shares. The liability of the stakeholder is limited to the amount of invested capital.
 
A Croatian public limited liability company is formed by at least one member with a minimum capital of 200,000 HRK, divided into shares. Just like in the case of the private limited liability company, the liability of a shareholder is limited by his contribution to the capital. The management of this form of business is assured by a management board (with at least one member) and a supervisory board (formed by at least three members).
 

What information is comprised by the Articles of Association of a subsidiary in Croatia?

 
The Articles of Association are the main documents of a subsidiary in Croatia which comprise complete information about the parent company which intends to set up such entity, the purposes and the activities of the subsidiary, the name of the representative agent, the board of managers, the capital contribution, the responsibilities of each member that forms the entity, and details about business address and the date of incorporation.
 
We remind that your company in Croatia can be represented by our team of company incorporation representatives in Croatia who can act on behalf of your firm, in compliance with the applicable legislation.
 

Who can set up subsidiaries in Croatia?

 
The investment legislation in Croatia is permissive for all foreign corporations which want to set up their operations in this state, under the rules of branches or subsidiaries in this case. All businesses in Croatia must respect the Croatian Company Act and the Commercial Code, two important sets of laws which supervise the activities of companies in this country.

 

How much does it take to register a subsidiary in Croatia?

 

The registration of a subsidiary in Croatia takes around one week and consists in the following steps: first of all, the company must be sure that its name is unique and not similar to one already registered. The articles of association must be notarized and then submitted to the Commercial Court. The registration is made electronically and takes around two days. As a result, the company will receive a certificate of registration.
 
Every company registered in Croatia must have a statistical number so the application for this number is the next step. This is based on the certificate of registration and the application is accepted in one day. The following steps are also part of the registration procedure of a subsidiary in Croatia:
 
  • the company seal must also be obtained in order to be used in the daily subsidiary’s operations;
  • a bank account for the company must be opened and the minimum share capital must be deposited;
  • registration at the tax authority for VAT and employee income tax is the next step;
  • enrolling at the Croatian Pension Insurance Fund is necessary at the time of incorporation.
 

Needed documents for opening a subsidiary in Croatia

 
The Company Act clearly states that foreign enterprises can establish their operations in Croatia as subsidiaries or branches. The founder’s decision of establishing a subsidiary, the memorandum of association, the financial report on the previous year, a proof mentioning the name of the business, the type of entity, the type of activities, and the date of the foundation are a few of the documents which need to be provided to the Croatian Trade Register in order to set up the subsidiary. In this matter, you can rely on our support because our team of company incorporation representatives in Croatia can help you with the preparation of documents, the name verification, employee registration, opening a bank account, registering for VAT purposes and applying for the company seal. You can get in touch with us and solicit more details in this sense and information about a personalized offer.
 
 

The corporate tax for subsidiaries in Croatia

 
Subsidiaries in Croatia are treated just like any kind of company from a taxation point of view. This means that the corporate income tax needs to be observed, and in Croatia, this is set at a 12% rate. Foreign entrepreneurs should know that the dividends in Croatia are not subject to taxation, however, a withholding tax is imposed, except for the dividends which are paid to a resident company. Let us remind you that our team of advisors is at your disposal with complete accounting services and tax management if you decide on opening a subsidiary in Croatia.
 

Types of activities of a subsidiary in Croatia

 
There is no restriction in terms of business activities of subsidiaries in Croatia, as long as it respects the applicable legislation and avoids any state-owned operations or companies. There are many large companies from overseas that decide for Croatia in matters of business, in sectors like banking, retail, manufacturing, tourism, engineering, IT and many more.
 

Do I need a representative for my subsidiary in Croatia?

 
Yes, a subsidiary in Croatia must have a representative which can be a natural person or a company registered in this country. Legal assistance is also recommended at the time the subsidiary is incorporated in Croatia, in order for foreign entrepreneurs to skip any misunderstandings regarding the legal requirements for business. You can also ask for legal advice from our local team of lawyers in Croatia when establishing a subsidiary in Croatia.
 

Who can set up subsidiaries in Croatia?

 
All foreign companies with extensive activities in the home country can decide on Croatia for opening a subsidiary. Such an entity can run under the rules of a limited liability company which can be established private or public, depending on the activities, and the minimum share capital that needs to be submitted at the time of registration. For instance, if you are interested in a private LLC in Croatia, the minimum share capital of HRK 20,000 is needed compared to HRK 200,000 necessary for opening a public LLC in Croatia. All the aspects involved in opening a subsidiary in Croatia can be explained by our team of consultants in Croatia.
 

Why open a subsidiary instead of a branch in Croatia?

 
Subsidiaries in Croatia benefit from a special status of being independent compared to branches. This means that a subsidiary can have its own name as long as it respects and implements the activities imposed by the foreign company. Moreover, a subsidiary can also develop other activities too, if the parent company and the owners agree in this sense. On the other hand, a branch will have to report all the activities in the firm and will have to respect the ones imposed by the company from abroad. It is good to know that branches and subsidiaries are protected by the double taxation treaties signed by Croatia with countries worldwide and can benefit from a series of tax incentives.
 

Making investments in Croatia

 
The strategic geographic location of Croatia represents a great plus in the eyes of foreign investors looking for business formation. In addition, the country provides excellent infrastructure, permissive legislation related to foreign investments, an experienced and multilingual labor force, a great business climate with competitive operational expenses among the countries from EU, and varied tax incentives for foreign and local entrepreneurs. There are many subsidiaries activating in sectors like textile, food industry, pharmaceutics, telecommunication and many more. Choosing Croatia for business as a foreign investor means taking advantage of an appealing business climate among other things.
 
If you want to know more about registering a subsidiary in Croatia, you may contact our company formation agents in Croatia.

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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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