With a strategic position in Southeastern Europe and good quality infrastructure, Croatia is a favorite destination for investors. The structural reforms and the tax incentives promoted by the local government are the main reasons why Croatia is an attractive country for investors. According to the Company Act in Croatia, an equal treatment is provided to both local and foreign investors. Our specialists in company formation in Croatia can further advise you on the matter of investments.
What are the advantages of investing in Croatia?
There are some pluses that the Croatian economic environment has to offer to foreign investors. We provide you with a description of the main advantages to take into consideration when looking to start a business in Croatia. Some of the strong points of the country are:
•A comprehensive set of business measures and legislative amendments implemented by the local government for attracting foreign investments;
•Direct support for creating new jobs;
•Financial support for capital expenditures;
•Multiple grants for research and development activities;
•Return on investments – over 15,000 foreign companies have chosen Croatia for doing business;
•Competitive operational costs in the European marketplace;
•Attractive tax incentives, 0% customs within the EU and numerous double taxation avoidance agreements with different countries;
•Highly skilled, multilingual workforce.
If you want to open a company in this country and invest in the local economy, you can rely on the professional expertise of our agents in company registration in Croatia. They can also help you register for VAT in Croatia. Here is a video presentation we have prepared:
Main sectors for investing in Croatia
Croatia is open to foreign investments and the local authorities are committed to implement specific measures to improve the investment climate of the country. A set of tax deductions and employment measures was developed by the government in order to attract investments to the economy`s key sectors. If you want to open a company in Croatia, these are the sectors with opportunity for growth and investments:
• ICT industry;
• pharmaceutical industry;
• automotive industry;
• food industry;
• precision engineering;
• textile industry.
Here is an infographic with extra details about the investments in Croatia:
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 branchesand 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:
Around 20% of the total FDI between 1993 and 2017 in Croatia came from the Netherlands.
Around 32,884 million was the total FDI stock for Croatia in 2018.
Approximately 30% of the total FDI was directed to the financial services in Croatia.
Austria, Italy, the Netherlands, and Germany are among the most important investors in Croatia.
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.
Details about the investment law in Croatia
The Act on Strategic Investment Projects of the Republic of Croatia, the Act on Investment Promotion,and the Companies Act are three main laws which supervise the activities of nationals and foreigners in the investment field. However, even if there are the same rights and obligations for investors regardless of their nationality, the Croatian government imposes several restrictions linked to the ownership in the transportation field: maritime, air, rail. On the other hand, the following incentives aim the proper management of the investment field in Croatia:
• the profits can be repatriated;
• foreigners who choose the local workforce benefit from low taxes;
• the corporate income tax is reduced;
• the acquisition of equipment is subject to non-refundable grants.
Small investments in form of micro companies in Croatia are also subject to varied encouragements offered by the government. It is suggested to ask for legal support as a foreigner who wants to set up the activities in Croatia, therefore, you may talk to one of our Croatian attorneys in this sense.
Other benefits for foreign investors in Croatia
Besides the above-mentioned incentives which sustain the foreign directinvestments in Croatia, foreign entrepreneurs can benefit from zero taxation if they reinvest the profits in this country. Additionally, they can receive national financial support for sustaining the projects in the research and development area in Croatia. At the moment, Croatia is found on the 95th place among 190 countries worldwide for the ease of doing business, and 90% of the financial companies in Croatia are foreign-owned, due to the attractive and favorable tax structure offered by the government.
Business start-up costs in Croatia
Another reason why Croatia is attractive to foreign investors is related to the start-up costs at the time of company formation, which is considered convenient from a business point of view:
• HRK 20,000 for a limited liability company and the related registration fees;
• a minimum share capital of HRK 200,000 for joint stock companies in Croatia;
• no minimum share capital for limited and general partnerships in Croatia;
• low registration fees linked to the documents preparation and notary services.
Croatia in numbers
Besides the fact that Croatia has a generous offer for both local and foreign investors in the business climate, the country has numbers to show, in order to convince that it is ready for business:
• there are more than 20,000 foreign companies registered in Croatia;
• more than EUR 700 million have been invested in the tourism sector in 2017;
• around 15 million tourists visit Croatia each year and consider the country a great holiday destination.
Low company administrative fees and laws protecting intellectual property add to the reasons why Croatia is an attractive country for foreign investors. Feel free to get in touch with our Croatian company registration experts if you need help in setting up a business in this country.
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.
The team from CompanyFormationCroatia.com is very qualified and benefits from extensive expertise in this area. I would definitely recommend them to any entrepreneur decided to start his own business here.
Mihai Cuc, Partner of Enescu&Cuc; Law Firm www.romanianlawoffice.com