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Written by: Mladen Ardalić
Friday, 01.12.2021.
Where is Croatia?
The Republic of Croatia is classified as a medium-sized European country. The population amounts to 3.871.833 (2021 population census). The capital city Zagreb is the main cultural, economic, political, scientific, social and business center of Croatia. 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 and has made the Croatian market even more attractive to foreign investors. It created a new way for the free flow of capital, labor force, technologies and the like.
The official currency of the Republic of Croatia is Euro since January 1 st , 2023.
Croatia prides in various natural resources and beauty spots, national parks, the geopolitical position and most importantly of all, the Adriatic Sea with a coastline of 31.067 km2 and with 1244 islands.
Tourism in Croatia marks its beginnings from the 1850’s and has been successfully developing up to date. In recent years this has been proven 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 owe the enormous attractiveness and the arrival of tourists from all over the world to the Dubrovnik tourist destination site, which is 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) favorably 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, and the biggest and busiest Zagreb (Franjo Tuđman Airport).
The country’s biggest seaport is in Rijeka, on the Kvarnerski Bay coast. This port is of great importance for the development of the Croatian economy.
As for the most developed economic sectors in Croatia, the following stand out:
- agriculture
- wood-processing industry
- food processing industry
- metal-working industry
- the textile industry
- the oil industry
- the chemical industry
- building trade
- shipbuilding industry
- shipping trade
- tourism
Therefore, 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, the accounting services with that part of the 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 €400.000,00 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, ,ust 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 the yearly income is less than €40.000,00.
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
- Because of its good geographical position, Croatia is an excellent place for running a business in the European Union. Croatia is connected with the rest of Europe and the world by sea, air and road.
- As the labor 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 kilometers from Croatia.
- The investment in real estate in the Republic of Croatia is 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).
- 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 with the highest growth rates is tourism. The reasons for this are a beautiful coast and an enormous potential for the creation of additional content. The arrival of an increasing number of tourists, organization of festivals and events, as well as infrastructure project will surely result in the continuation of the trend of high growth.
- Surroundings, food and natural wonders. Croatia has a preserved environment, 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 freely at any time of day or night. The rate of robberies is lower than the European average rate.
- The Croatian IT industry keeps pace with world trends. The development of the IT industry is one of the propelling forces of the Croatian economy. If you do business in this branch or you need services 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). You must have a company name prepared. The 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 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 everything previously is validly processed and delivered, the company will be registered. Within 1-3 days, the Decision on Company Registration can already be accessed.
- Bank. The next step is creating a bank account and the mandatory application in the Croatian Health and Pension Insurance. The required documents are: the Decision on Company Registration, OIB (Identification Number) and the Statistical Classification of Economic Activities.
If everything goes well, setting up a company and time spent in Croatia for the founders is 2-4 working days.
Do you need help opening company in Croatia
Vomi Consulting can help you open a company in Croatia or start your business in Croatia.
Please choose the type of company you would like to open in Croatia. Contact us to find out
more business opportunities or if you have any additional question about doing business in
Croatia.
Vomi consulting
za savjetovanje i informacijske tehnologije
Ulica Hrvatske Republike 17b, Osijek
OIB: 54258390599
IBAN: HR4223600001102438758
SWIFT: ZABAHR2X
Tel: 031 202 481
Fax: 031 214 520
Vomi commerce
za proizvodnju, trgovinu i usluge
Ulica Hrvatske Republike 17b, Osijek
OIB: 36946449172
IBAN: HR7325000091102017492
SWIFT: HAABHR22
Tel: 031 202 481
Fax: 031 214 520
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