GUIDE HOW TO START YOUR BUSINESS OR COMPANY IN CROATIA
Where is Croatia?
Croatia, officially: The Republic of Croatia, is classified as a medium-sized European country. The population amounts to 4.298.889 (2011 population census). The main cultural, economic, political, scientific, social and business centre of Croatia is in Zagreb. Zagreb is the capital. The next significant city in the Republic of Croatia is Split.
The country borders Serbia and Bosnia-Herzegovina, to the east, Slovenia and Hungary, to the north and Montenegro, to the south. It has a maritime boundary with Italy, to the west.
In 2013 the Republic of Croatia became the 28th full European Union member state. That was one of the main aims of foreign policy. It is sure that that move has made the Croatian market more attractive to foreign investors. It created a new way for the free flow of capital, labour force, technologies and the like.
The official currency of the Republic of Croatia is the Croatian Kuna. For the future, it is planned to introduce the joint EURO currency.
Croatia can be proud of various natural resources and beauty spots, national parks, the geopolitical position and – most importantly of all – the Adriatic Sea with a coast having a length of 31.067 km2 and with 1244 islands.
The history of tourism started in 1850 and since then tourism has successfully developed. In recent years that has been proved by prestigious awards given to Croatia in the category of the best tourist destination. Croatia is one of the most visited and important tourist destinations in the Mediterranean. We can owe the enormous attractiveness and the arrival of tourist from all over the word to the Dubrovnik top tourist destination; that is surely ranked at the top of the list of the most beautiful historical cities in the world.
A mild Mediterranean climate (warm summers and moderately cold winters) favourably affects the additional development of Croatian tourism.
Croatia has a well-developed traffic network and good road, rail, air and sea connections.
Croatia has seven international airports, the biggest being that of Zagreb (Franjo Tuđman Airport) with the most flights.
The country’s biggest seaport is in Rijeka, on the Kvarnerski Bay coast. This port is of most importance for the development of the Croatian economy.
As for the most developed economic sectors in Croatia, the following stand out:
- wood-processing industry
- food processing industry
- metal-working industry
- the textile industry
- the oil industry
- the chemical industry
- building trade
- shipbuilding industry
- shipping trade
So there are a lot of business opportunities in Croatia.
Business in Croatia
It is very simple to start a business in Croatia as the foundation can usually be completed within a few days and there is a large tendency to reduce administrative requirements. After the foundation of a company in Croatia, it is necessary to keep business books and submit reports to the Tax Administration.
In most cases, the entrepreneurs entrust the external associates i.e. the accounting services with that part of work.
Most of the government-run services have B2G systems which are very easy to use after the acquisition of an appropriate certificate.
We advise every entrepreneur to become acquainted with the basics of the tax system. As the Republic of Croatia is a part of the European Union, the Croatian tax system is very similar to the majority of tax systems of other member EU states.
Tax System in Croatia
The fundamental distribution of taxes is the one that regards personal and corporate taxes.
In the Republic of Croatia, the profit tax rate amounts to 12% for companies with a turnover up to 3.000.000,00 HRK (approximately 400.000,00 EUR) per year and 18% for companies with a turnover exceeding the aforementioned amount.
It is essential to stress that at the moment of the profit payment the tax and surtax from 12% to 14,16%, depending on the city where the owner of the business is registered, shall be paid. As for the payment of profit to foreign owners, Croatia has signed agreements that avoid double taxation with a major part of countries; however, it is necessary to examine the convention for each country.
The general value added tax rate is 25% and some of the products are taxed at reduced rates of 13% and 5%. The entrepreneur has the right to choose to be out of the value added tax system if s/he has a yearly income less than 300.000,00 HRK (40.000,00 EUR).
The taxation of personal income consists of a pension insurance contribution (20%), a health insurance contribution (16,5%) and the income tax (24% to 36%). It is essential to stress that it is allowed to use a tax deduction and consequently, a part of the salary shall not be taxed at an income tax rate.
There are additional taxes affecting certain activities, such as consumption tax (catering industry), tourist community tax etc.
10 reasons for starting a business in the Republic of Croatia
- Croatia enjoys a very good location, represents an excellent place for running a business in the European Union and is in an excellent manner. Croatia is connected with the rest of Europe and the world by sea, air and road.
- As the labour force costs are substantially lower than those in Austria or Germany, the business costs can be far lower than are those in places situated in other European Union member states which are few hundred kilometres from Croatia.
- The investment in real estate in the Republic of Croatia is certainly to be recommended because the prices are still considerably lower than those in other European Union member states.
- The profit tax rate is one of the lower ones in the European Union, especially if you are in a lower class (income up to 400.000,00 EUR).
- There is still no real estate tax. For the future, it is planned to introduce such a tax; however, at lower rates than in the rest of Europe, considering the social situation and habits of local people regarding the ownership of real estate.
- The country grants subsidies. There are subsidies for employment, capital investments and various projects carried out by the Ministry of Economic Affairs. If you have a high-quality project and a high-quality consultant for European Union funds, it is possible to obtain, in a non-repayable manner, up to 80% of the project amount.
- Croatian coast and tourism. One of the activities which enjoys one of the highest growth rates is definitely tourism. The reasons for this are a beautiful coast and an enormous potential for the creation of additional. The arrival of an increasing number of tourists, an organisation of festivals and events, as well as infrastructure project will surely result in the continuation of the trend of high growth.
- Surroundings, food and sites of natural beauty. Croatia has preserved surroundings, a lot of beautiful landscapes, as well as fantastic and various types of food. This alone makes the country an excellent place for life and work.
- In Croatian cities, you can move without problems at any time at day and night. The rate of robberies is lower than the European average rate.
- If we talk about this branch, it is certain that Croatia keeps pace with the word trends. It is certain that the development of the IT industry is one of the propelling forces of the Croatian economy. If you are belonging to that branch or you need a service in that sector, it is easy to find the right partner.
How to set up a company in Croatia in 5 steps?
- FINA (Financial agency). By going to Fina it is necessary to have a chosen name for the business. Availability of the company name will be checked by HITRO.hr.
- Public notary. All founders and directors must be present unless it’s otherwise agreed with a certified power of attorney. The required documentation is prepared and verified in the Notary’s office and then forwarded to the HITRO.hr.
- Court Register and payment. Returning to FINA, the certified documents will be handed over and the registration process in the court register will be started, so the initial payment will be done (share capital and fees).
- OIB (Personal identification number) and the Decision on the establishment. Waiting for the answer from the Commercial Court (usually within 24 hours). If previously everything is validly processed and delivered, the company will be registered. Within 1-3 days, a Company registration can already be accessed.
- Bank. The opportunity for creating a bank account and the mandatory application in the Croatian Health and Pension Insurance is achieved by getting the Company registration, OIB and statistical number.
If everything is going well, the complete Company setting up and the necessary time staying in Croatia for the Founders can be done in 2-4 working days.
Vomi Consulting could help you open company in Croatia or start your business in Croatia.
Please choose the type of company you would like to open in Croatia or contact us to find out more business opportunities in Croatia or any additional question you have about doing business in Croatia.