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Tax Minimization in Croatia

Updated on Wednesday 22nd April 2020

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Tax Minimization in CroatiaTax minimization in Croatia is used as a financial planning solution for avoiding certain taxes. Both Croatian companies and foreign ones, doing business in this country, turn to tax minimization when they want to reduce their taxes. Our company formation specialists in Croatia can provide a wide range of solutions for tax minimization to their interested clients. They can also help you register a company in Croatia by handling all the formalities involved with the authorities in charge.


Tax deductions in Croatia


The Croatian taxation system allows a series of deductions which help lower the taxes levied on income. The tax minimization measures render Croatia an attractive country for foreign investments. Several types of income are tax free:
 
  • •    pensions received from abroad;
  • •    interest payments on loans, investments, securities and deposits with financial institutions;
  • •    capital gains from trading securities and financial assets;
  • •    inheritance and gifts are exempt from taxation in the first line of succession.
Other general deductions from income include:
 
  • •   a monthly basic allowance of 2,600 HRK;
  • •   additional allowance, if the taxpayer supports qualifying family members;
  • •   the compulsory social security contributions for the Croatian employees.
Additional deductions are available to those taxpayers who bring proof of donating up to 2% of their previous year income. Our experts in company registration in Croatia can give you more details about the tax deductions and reimbursement methods available to tax payers.
 

Tax minimization for Croatian companies


The Croatian government has recently implemented a set of fiscal measures aimed at reforming the tax system. The incorporation of new companies, start-ups and small entrepreneurship is strongly encouraged through tax incentives. The corporate income tax rate of 12% is applicable under partocular conditions, to companies in Croatia. Other measures of tax minimization for Croatian companies include:
  • •    Representation expenses – 50% of their total amount can be deducted;
  • •    Personal transportation expenses – 30% can be deducted;
  • •    Agreements on interest rates between affiliated companies by using a transfer pricing method or an interest rate prescribed by the Ministry of Finances;
  • •    Treaties for the avoidance of double taxation.
 

Other tax minimization strategies for Croatian companies

 
Before presenting other tax minimization tools that might be beneficial for your business in Croatia, we remind that the general corporate income tax or CIT is set at an 18% rate, one of the lowest in Europe. However, companies with profits not exceeding HRK 7,5 million are subject to even a lower CIT, set at a 12% rate, and representing a great tax advantage. However, there are still plenty of tax minimization tools that can be adopted in a Croatian company in order to cut the amount of taxes. For instance, donations or charities might represent great options for foreign entrepreneurs in Croatia who look for different tax minimization options for their businesses. Another great choice might represent the advanced payment of credit loans because company owners can be exempt from different fees. You can also concentrate on reinvesting the profits in the company and enjoy the tax cuts involved. It is a great idea to create a tax minimization plan, with the support of our company formation agents in Croatia who have experience in this field. We also remind you that our specialists can handle the registration process of companies in Croatia, regardless of the field in which you want to activate.
 

Investing in the company to cut the taxes

 
Another great tax minimization tool accepted and used by company owners in Croatia involves the equipment investment. This means that you can benefit from tax cuts or exemptions if you reinvest a part of the profits in the company. This is often the choice of local and international investors in Croatia who are looking for the proper tax minimization option for their company.  If you would like to know more about this kind of strategy, feel free to talk to one of our company formation agents in Croatia. Our experts are at your disposal if you want to start a business in Croatia and know more about the tax structure in this country.
 

Short facts about the tax regime in Croatia

 
Croatia not only offers a great and appreciated business climate, but also an appealing tax regime. The general VAT rate of 25%, (plus lower VAT rates of 13% and 5% for specific goods and services), the corporate income tax of 18% rate, and other tax advantages should concern entrepreneurs in Croatia before starting a business in this country. In addition, the Croatian government sustains the foreign investments with the help of a series of tax incentives: the reduction or exemption of corporate income tax can be made under certain conditions, the creation of new business places with government funds are not levied, and the real estate property tax is not imposed for new buildings purchased in Croatia. If you believe you need extra information about the available tax minimization tools that can be adopted in your firm, you should request help from our team of company formation agents in Croatia. They can also help you establish a branch or a subsidiary in Croatia by giving you the needed advice and support.
 

Making investments in Croatia

 
Croatia benefits from a great geographic location in the southeastern part of Europe, with sea exits to the Adriatic Sea and numerous business connections with international entrepreneurs of any kind. The business advantages of Croatia are extremely appreciated, and among these, foreigners can benefit from an easy incorporation process of limited liability companies, sole proprietorships, joint-stock companies, partnerships and many more. The relaxed legislation related to foreign investments, the multitude of business choices in sectors like tourism, manufacturing, IT & telecommunication, automotive, pharmaceuticals or food industry represent a few of the important business advantages for domestic and foreign investors in Croatia. With the help of our company formation representatives in Croatia, you can rapidly set up a company in Croatia. Our team can help you create a business plan, register the company with the Croatian authorities and give advice about the tax minimization tools available for your business. You can also analyze the following facts and figures that highlight the business direction of Croatia:
 
  1. The World Bank ranks Croatia 51st out of 190 economies in the world, as stated by the 2020 Doing Business report.
  2. Approximately USD 33,000 million represented the total FDI stock for Croatia in 2018;
  3.  Around 30% of the total foreign investments in Croatia were directed to the financial services sector;
  4. Austria, Italy, the Netherlands, and Germany are the main investors in Croatia.
 
If you want to start a company in this country and need to know more about tax minimization instruments, feel free to contact our agents in company incorporation in Croatia.
 

Meet us in Zagreb

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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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

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