GENERAL
1. Why would any company chose Croatia for its investment location?2. Which leading foreign investors are present in Croatia?3. Is Croatia a bureaucratic country and can a company do successful business here? 4. What are the most developed sectors in Croatia?5. What is Croatia’s credit rating?6. Are there any international banks and what is the average loan interest rate?
FOREIGN TRADE
7. Which countries has Croatia signed Cooperation Agreements with? 8. Who are foreign-trade partners of Croatia?9. What are the dominating products of Croatian export and import? 10. How have import customs been regulated?
INFRASTRUCTURE
11. Has the fixed telecommunication network been digitalized and how many providers are there? 12. What is the penetration of mobile telecommunication network? 13. How many Internet users are there in Croatia?14. What are the possibilities of Internet access?15. What is the price of using the Internet ADSL connection?16. What are availability, type and international connections of road infrastructure like? 17. What is the availability and international connectivity of railway infrastructure?18. How many airports are there in Croatia and what are their coections to world destinations? 19. How many sea and river ports are there in Croatia and where?20. What are free zones?21. How many free zones are there in Croatia?22. Are there special benefits for business-making in the free zone? 23. Will the free zones be closed when Croatia has joined the EU?24. What are entrepreneurial zones and how many are there in Croatia?25. What is the gas and electricity price compared to other countries in the region26. What is the price of connections for electricity, water, gas and telephone? 27. What is the price of using public utilities? 28. How high are public utility contributions?29. What is the quality of water in Croatia?
COMPANY INCORPORATION
30. Is there any act or agreement in Croatia protecting foreign investors?31. Where and how to establish a company?32. How long does it take to incorporate a company?33. What are the costs of incorporation?34. What forms of companies are there in Croatia and what is the minimum capital level?35. Is there any act in Croatia regulating acquisitions of companies?36. Which acts regulate electronic business operation and electronic signature? Is there an English/German translation of these acts?37. Which circumstances allow usage of a digital signature?
LAND/PROPERTY
38. Can foreigners gain property in Croatia and under what circumstances?39. What is the property purchase procedure like, when a foreigner incorporates a Croatian company? 40. Which permits are mandatory prior to beginning constructions?41. Which institution is competent for issuing permits?42. What documents must be enclosed to application for obtaining the location permit?43. Documentation necessary for obtaining the building permits. 44. How are concessions granted, who receives them and for how long are they issued? 45. What is the General Urbanistic Plan (GUP)? 46. Are GUPs available to public?47. What does T, T1 and T2 marks indicate in the zoning plans?48. What is the business premises purchase price or rental rate? 49. What is the price of land in Croatia?50. What is the price of construction, rent or purchase of a plant/hall?51. What is e-cadastre?52. Which laws relate to the construction of a golf course and a golf resort?
TAX SYSTEM
53. How high is the profit tax rate?54. How high is the profit tax after deductions, and what is it applied to?55. How high is the income tax rate? 56. How high is the property traffic tax and who must pay it? 57. How high is the VAT rate?58. Has Croatia signed contracts on avoiding double taxation?59. Where are taxes submitted?60. What is ePDV?
INCENTIVES
61. What incentives does Croatia offer to investors?62. Are there customs benefits?63. Are employment incentives granted in Croatia and how high are they? 64. If the investor wants to invest into education of his employees, will his costs be covered?65. What shall be considered eligible training costs?66. Can an investor into high added value sectors realize additional incentives? 67. Are there special incentives for large projects?68. When and how to apply for incentives?69. Has Croatia signed agreements on mutual incentives and protection of investments and with which countries?70. Have incentives granted by Croatia been complied with the EU regulations?
LABOUR FORCE
71. What is the number of employees in Croatia and what is their structure like? 72. What is the quality of and skills of workers in Croatia? 73. What percentage of population speaks foreign languages and which?74. What is the unemployment rate in Croatia and by counties?75. How are work relationships regulated?76. How to employ workers?77. How to terminate employment?78. Can a foreigner get a job in Croatia and under what conditions?79. What is the procedure of issuing working permits?80. Are there any restrictions in issuing working permits?81. Which cases enable application of a business permit?82. Who issues working and business permits and for which period of duration? 83. Are there collective agreements in Croatia and who do they include?84. What are the usual working hours and how long is a business week? 85. Are there overtime restrictions? 86. How long do shortest annual holidays last?87. Which days are non-business days? 88. What is the average net and gross salary?89. How high are social contributions in Croatia compared to other countries in the region?90. What is the calculation of net salary like?
EDUCATION
91. How many educational institutions are there in Croatia and where are the university centres situated? 92. Is Croatia taking part in the Bologna Process?93. How many students graduate every year?94. What is the labour force educational structure?95. How many patents are approved per year?
Trade and Investment Promotion Agency (APIU)
96. What is the Agency’s scope of activities? 97. What services do you provide?98. Which companies can use your services?99. What is the price of your services?100. What are the advantages of using your services?
OPĆENITO
There is a wide range of reasons and here are only the key ones identified by current investors:
- Excellent geographical location
- Innovative, efficient and multilingual work force.
- State-of-the-art infrastructure
- Access to market for over 650 million consumers
- Quality of life (according to International Living, the Republic of Croatia is one of the countries which offer high quality of life and occupies 18th position)
According to sector investment structure, the most represented are investments into financial mediation sector, telecommunication, pharmaceutical industry, extracting crude oil and earth gas and related services, trade, hotels and restaurants. Some of the foreign companies in the republic of Croatia are:
| Company name | Origin |
|---|
| ALSTOM | France |
| Austria Creditanstalt Group | Austria |
| Banca Commerciale Italiana | Italy |
| BENNETON | Italy |
| BILLA | Austria |
| CALZEDONIA | Italy |
| CARLSBERG | Danmark |
| CISCO SYSTEMS | USA |
| COCA-COLA BEVEREGES | USA |
| Deutsche Telekom | Germany |
| ENVOX | USA |
| EPCOS/SELK | Germany/Croatia |
| ERICSSON NIKOLA TESLA | Sweden |
| Erste und Steiermarkische Bank | Austria |
| GLAXO SMITH KLINE | Great Britain |
| GRUPPO INTESA | Italy |
| HEINEKEN ADRIA | Netherland |
| Hofmann and Pankl Betelligungasse | Austria |
| HP | USA |
| HYPO LEASING KROATIEN | Austria |
| IBM | USA |
| Interbrew | Belgium |
| METRO CASH & CARRY | Germany |
| MICROSOFT | USA |
| MOL | Hungary |
| ORACLE | USA |
| PLIVA (former member of the BARR GROUP) - TEVA Pharmaceutical Industries | Israel |
| Rockwool | Danmark |
| SAP | Germany |
| SIEMENS | Germany |
| Societe Suisse de Cemment Portland | Switzerland |
| Sutivan Investment and Excelsa Anstalt | Lichtenstein |
| UNICREDITO | Italy |
| Unicredito Italiano | Italy |
| VOLEX | Ireland |
| YAZAKI | Japan |
In the last few years, the Croatian Government has made significant efforts in improving investment and business environment by initiating a range of reforms. Services like Hitro.hr, enabling incorporation of a company in only one week, e-VAT enabling annual VAT-application via electronic media, e-pension or e-application enabling electronic submission of starting businesses, all changes in business and registration or revocation of employees. Registration procedure of a new business entity at the commercial courts lasts not longer than 7 days, which meets the highest European standards. Besides, with e-craft&trade service, opening of a craft-shop is possible within a single day. Digitalization of land registries is also under way, and so is the e-cadastre project. About 96% of all land registries is available online, and until end 2007 their verification is expected to have finished. All stated projects contributed to increased attractiveness of the Republic of Croatia as a site for successful and profitable business-making.
In addition adjusting of the Croatian legislation with the EU Acquis has also been under was and in the last two years, 62 complied acts were passed, which contributed to the transparency of the Croatian legal system.
Croatian economy is characterized by a stable economic growth and Croatia is a progressive, industrialized country with sophisticated service and industrial basis – service industry makes for the 55 %, and industry for the 20% of the GDP.
Following research made by the Unicredit Group, the sectors with the best results and the highest potential for further growth include: production of electric and optical equipment, production of other non-metal mineral products, production of cellulose, paper, publishing and printing, production of furniture, construction, transport and telecommunications, tourism, financial and business services.
| Long-term credit rating of Croatia |
| Fitch Ratings |
BBB- |
| Standards & Poor's BBB |
BBB |
| Moody's |
Baa3 |
In the Republic of Croatia, 90.5% banks are owned by foreign owners. The leading ones are:
- ZAGREBAČKA BANKA d.d. – Unicredit Group
- PRIVREDNA BANKA ZAGREB d.d. – Intesa Sanpaolo
- SOCIETE GENERALE – SPLITSKA BANKA d.d.
- ERSTE & STEIERMÄRKISCHE BANK d.d.
- HYPO ALPE-ADRIA-BANK d.d.
- RAIFFEISENBANK AUSTRIA d.d.
- HVB SPLITSKA BANKA d.d.
- OTP BANKA HRVATSKA d.d.
- HRVATSKA POŠTANSKA BANKA d.d.
- SLAVONSKA BANKA d.d. – Hypo Group
- VOLKSBANK d.d.
Source: Croatian National Bank (HNB)
Average active interest rate for loans in 2008 was 7.47%
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FOREIGN TRADE
| Country |
Applied since |
| EU |
|
| 15 original members |
January 2002. |
| 10 new members |
May 2004. |
| Bulgaria and Romania |
January 2007. |
| EFTA |
|
| Switzerland, Liechtenstein |
January 2002. |
| Norway |
April 2002. |
| Iceland |
August 2002. |
| CEFTA |
|
| Albania, Macedonia, Moldova, Montenegro, UNMIK/Kosovo |
July 2007. |
| Serbia |
October 2007. |
| Bosna & Herzegovina |
November 2007. |
| Turkey |
July 2003. |
The structure of Croatian foreign exchange of goods does not show any significant changes and over one half of the exchange is conducted with the EU countries. The most significant foreign-trade partners of Croatia still include Italy, Germany, Austria and Bosnia and Herzegovina.
Export in 2008.
Import in 2008.
Source: National Bureau of Statistics
Structure of Croatian exports 2008.
Structure of Croatian imports 2008.
Source: National Bureau of Statistics
Legal framework of foreign business-making of the Republic of Croatia has been fully complied with the rules of the World Trade Organization (WTO), and harmonization of the EU Acquis is still under way, while a range of acts contributed to a significantly high level of liberalization of trade and facilitation of foreign traffic of goods and service (www.carina.hr/crotarifa.htm)
Pursuant to liabilities Croatia has accepted within the WTO, custom’s protection has been gradually decreasing and duties are charged following the principle of the most privileged nation and according to the rules stated in the signed agreements on free trade. Customs tariff defines the import duty on goods which means that the duty is defined in advance for the period it will be applied in, and the importing conditions are thus known throughout the entire year in advance. As an appendix to the Customs Tariffs there are additional customs quotas listed for every country, and quotas for importing goods from the WTO member countries.
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INFRASTRUCTURE
Croatian fixed telecommunication network is 100% digital.
Source: HAKOM, 2008.
In the area of mobile telephony there are three mobile operators, enabling coverage of the entire country ad high quality of service.
Penetration of mobile telephony
Source: HAKOM, 2008.
The number of Internet users has been growing significantly in the last few years. Particular emphasis has been made on the broadband users via the ADSL Internet access. This access has been offered through services of fixed telephony, cable networks and systems, and the broadband access via the WiMax will additional increase the availability of this service.
Internet users
Source: HAKOM, 2008.
Internet access has been enabled through the dial-up access, ISDN access, ADSL 2+,3+ access and Wimax, and the Internet can also be accessed by cellular phones and laptops via GPRS, UMTS and HDPA.
Price for ADSL service depends on couple of things such as chosen provider, speed and/or amount of data downloaded/uploaded (including flat rate) or service packages of 1, 5, 10 GB etc. Also, price may vary depending on if the ADSL service is offered as a part of a tripleplay service (IPTV, telephone and ADSL).
Price range varies from 2.2 EUR/month for slow 256 kb/s flat rate and 1.8 EUR/month for 1 GB data transfer and up to 20 Mbits/768 Kbits at 61.3 EUR/month for flat rate.
In the last few years, Croatia has made tremendous efforts in construction of new roads of high serviceability (motorways/highways and expressways). Total length of roads is about 28 thousand of which one thousand kilometres include high-serviceability roads, and construction of additional 400 km has been planned. In addition, the Republic of Croatia has over 2 thousand of e-roads and fast traffic availability is one of the key characteristics of the Republic of Croatia .
The existing railway network in the Republic of Croatia is located on international corridors.
Croatia has 7 international airports, several smaller airports and airfields.
The Republic of Croatia has 6 sea-ports open to international traffic in the cities of Rijeka, Zadar, Split, Šibenik, Ploče and Dubrovnik, and 4 river ports in: Vukovar, Osijek, Sisak, Slavonski Brod. The illustration shows the entire traffic infrastructure of the Republic of Croatia.
A free zone is a special, fenced and marked area where economic activities are run under special conditions and privileges and are situated in the areas of ports, along the international road and in any other area providing conditions for operation of such a zone.
The Republic of Croatia has 13 operational zones providing full infrastructural facilitation and special incentives for investors.
The free zone users pay 50% of the regular profit rate. Users who invest over 1 mil Croatian Kuna (approx. 135,000 €) into the free zone do not pay any profit tax in the investment year and in the next 5 years. Free zone users in the Vukovar and Srijem County shall not pay any profit tax in the period from 2005 to 2014. Furthermore, all foods located, used or spent in the free zone shall not be charged any customs duties or the VAT, and no other economic policy measures shall apply.
| Tax Payer |
Profit Tax Rate |
Year of Incentive |
| Free zone user |
10% |
5 |
| Free zone user who, inside the zone, builds or participates in building of a structure with an investment higher than 1 mil Croatian Kuna (approx. 135,000 €) |
0% |
5 |
| Free zone user in the territory of the Vukovar and Srijem County |
0% |
2005 - 2014 |
The survival of free zones does not depend on the issue of Croatia joining the EU. They do have a future, they are necessary and can easily be transformed into industrial zones to comply with the European conditions. The only responsibility that the Republic of Croatia has accepted is not to incorporate new free zones under the “old” criteria, which means that the zones will have the same facilities as they do now, but the grants must be lower and complied with the EU regulations. Even some member countries have free zones, e.g. Ireland and Spain, and new member countries, e.g. Hungary and Czech Republic have been granted a privileged status for their free zones for at least 10 years following the full membership in the EU.
Entrepreneurial zones provide a range of benefits for investors, such as:
- Fully infrastructured land
- Favourable price of land
- Facilitated process of constructing the business premises
Currently there are 106 entrepreneurial zones, organized and functioning in the Republic of Croatia. /p>
Compared to the new EU member countries, the gas and electricity prices in the Republic of Croatia are among the lowest.
Gas prices, EUR/Gigajoule, 2008.
Electricity prices, EUR/kWh, 2008.
Source: Eurostat
The fee of connecting to the power network in the area outside Zagreb has been set to HRK 1,350 + VAT per MW, and for the City of Zagreb to HRK 1,700 per MW+ VAT.
Water contribution for production plants is from HRK 2.5 to HRK 12.50 per cubic meter, for business premises from HRK 21.00 to HRK 70.00 per cubic meter, for traffic ways inside the plant HRK 0.70 to HRK 4.90 per cubic meter, for business premises from HRK 21.00 to HRK 70.00 per cubic meter.
Fixed telephony connecting fee is from HRK 700.00 to HRK 800.00 depending on the type of connection.
Connection to the gas network is HRK 3,930.00.
Public utility rates for the supply of drinking water, drainage and filtering are considerably different from one city to another, for example:
- average rate for drinking water is 7.26 HRK/m3, ranging from the lowest 3.14 HRK/m3 in Makarska to the highest 14.47 HRK/m3 in Opatija;
- average rate of drainage and waste water filtering is 2.06 HRK/m3 and ranges from the lowest of 0.32 HRK/m3 in Korčula to the highest 4.13 HRK/m3 in Osijek;
Information on rates of the public utility services in different cities is available at www.mzopu.hr
Public utility contribution is calculated according to the volume, i.e. per cubic metre of the structure built on the building lot. The contribution also depends on the zone the building lot is situated on. Public utility contribution for housing and business premises in Zone 1 is from 20.00 HRK/m3 in Gospić to 180.00 HRK/m3 in Zagreb and Split.
Information on public utility contribution rates is available at www.mzopu.hr
8,700 m3 of natural drinking water a year per capita indicate that Croatia holds the very top position in Europe considering the quality of water. Apart from its considerable “stocks” of drinking water, Croatia also has significant potentials for the development of environment-friendly uses of energy like the wind and the waves. Information on the quality of water in Croatia is available on the Hrvatske vode (Croatian Waters) Internet sites, www.voda.hr
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COMPANY INCORPORATION
Pursuant to the Company Act, in Croatia there is no difference between domestic and foreign investments. Furthermore, a foreign investor has the right to additional guarantees and the Croatian Constitution warranties free repatriation of profit and invested capital.
To accelerate and simplify the procedure of companies incorporation a government service has been established, the HITRO.HR, with about 20 offices covering the entire Croatia.
Using the HITRO.HR service today it takes about ten days.
Total costs of the company incorporation are about HRK 11,000 in average, this including the lawyer’s and the notary public fees, the company stamp, duties on checking up the company name, costs of registration into the Court Registry, duties to the Tax Office, the National Bureau of Statistics, the Croatian Health Insurance and the costs of opening a bank account.
Incorporation costs in HRK
The following table shows companies that may be established in the Republic of Croatia.
| Company and Incorporation |
Brief Description |
| Društvo s ograničenom odgovornošću (d.o.o.)Limited Liability Company (Ltd) |
Minimal equity of about 2,700 EUR (20,000 HRK) of which at least 1,350 EUR (10,000 HRK) must be paid before registration into the Court Registry. |
| Dioničko društvo (d.d.)Joint-Stock Company |
Minimal equity of about 27,000 EUR (200,000 HRK), with the lowest nominal value of the stock of about 1.35 EUR (10 HRK). |
| Javno trgovačko društvo (j.t.d.)Partnership |
Association of two or more individual or legal entities, responsible for the company liabilities on the principle of solidarity, and with their entire property. |
| Komanditno društvo (k.d.)Limited Partnership |
At least one member of the company is, on solidarity bases, responsible with his/her entire property for all liabilities of the company, and at least one member is liable to the amount of his/her share in the company. |
Acquisitions of companies have been regulated by the Act on Joint-Stock Company Acquisition (National Gazette Nos. 84/02, 87/02, 120/02) defining conditions for tendering in acquisition of joint-stock companies – the Issuing Party, acquisition procedure, rights and liabilities of the parties participating in acquisition. The stated act regulates that the acquisition tender refers only to public joint-stock companies.
General acts regulating electronic business operation and use of electronic data are the following: Electronic Signature Act (OG 10/2002), Electronic Commerce Act (OG 173/2003) and Electronic Document Act (OG 150/2005). English translation of the stated acts is available on the Central State Administrative Office for e-Croatia (www.e-croatia.hr).
Advanced electronic signature has the same legal power and replaces the signature in hand and the stamp. A document may not be refused just because it has been composed and issued in electronic form with electronic signature. Exceptionally, this does not apply to:
- Legal affairs of transferring property ownership or establishing other real property rights,
- Testamentary affairs,,
- Property pre-nuptial or pre-nuptial agreements,
- Burden or sale of property, which need approval of the Social Centre,
- Agreements on handover and disposition of property during lifetime,
- Whole life allowance contracts and agreements regulating succession,
- Deed of donations,
- Other legal affairs, regulated by a special act to be composed as a Notary Public act,
- Other legal affairs or acts, strictly defined by a special act to apply signatures in hand.
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LAND/PROPERTY
Foreign individual and legal entities can, following the principle of mutuality, gain ownership on property in the territory of the Republic of Croatia, provided they have obtained the approval of the Ministry of Justice of the Republic of Croatia in advance. However, after incorporating a Croatian legal entity a foreign investor is fully equal to domestic investors and can gain property with no further restrictions.
An exception to gaining property is agricultural land. Pursuant to the Agricultural Land Act (OG 66/01, 87/02, 48/05, 90/05) the ownership holders cannot be foreign physical and individual entities, unless otherwise specified in an international agreement.
The procedure starts with incorporating a domestic legal entity, investigating property in land registries (ownership on that lot) and in the cadastre (possession of the property and space planning). When the buyer has been registered in the land registry the procedure can be considered completed.
To start construction the investor shall obtain location, building and use permit.
Location permits are issued by the county office, or the office of the City of Zagreb, in charge of special planning affairs, for the area the action in space is to be taken in, unless otherwise defined by the Zoning Plan. The Ministry of Environment and Spatial Planning (Zoning) issues location permits for structures of national interest for the state and for all actions in space covering area of two or more counties.
The building permit is issued by the state administration office in the county, or the City of Zagreb, in charge of the issues of civil construction in the area the structure is erected and the Ministry of Environment and Spatial Planning shall issue building permits for the following structures: traffic and connection structures, energy structures, water structures, industrial structures, waste management structures and special purposes structures.
Application for issuing the use permit shall be submitted to the component body that issued the building permit.
All information relating to construction are available at www.mzopu.hr.
The application should be enclosed with:
- Excerpt from the cadastre plan,
- Description and concept design of the intended action in space
In case of structures for which no building permit is obligatory, the application should be enclosed with:
- Concept design considering the special regulation,,
- Evidence that the investor has the right to build (Article 89 Building Act, 175/03, 100/04).
Applications for obtaining the building permits shall be enclosed with:
- Location permit or the excerpt from the detailed facilitation plan,
- Three copies of main design,
- Written report on the main design control, if such control is necessary
- Written report and a certificate of attestation if the project has been made under foreign regulation
- Study on geotechnical and other investigation works
- Evidence that the applicant has the right to build on a certain property
Concessions may be issued for the use of natural resources, for business activities of extraordinary interest of the Republic of Croatia, and for construction and use of structures necessary for such activities. Concessions may be issued for the period not longer than 99 years both to domestic and foreign legal entities and individuals.
The decision on granting a concession is made by the Croatian Parliament (Sabor), the Croatian Government or a competent ministry, depending on the nature of investment, and following public collection of bids, a public tender or submission of the application. All concession agreements shall be entered into the unique concession registry (regkon.fina.hr) kept by the Ministry of Finances. Concession agreements relating to property shall be entered into land registries.
The General Urban plan is a document on zoning, defining basic organization of space, protection of natural, cultural and historical values, use and purpose of areas enjoying the right of privilege of their facilitation. The GUP contains the method and the forms of protection and use, conditions and guidelines for facilitation and protection of space, measures for improvement and environment protection, areas with specific spatial and other characteristics and other elements important for the area it relates to.
All GUPs are available to public in the zoning offices, and some counties and cities publish GUPs on their Internet sites.
Construction areas with hospitality and tourism purpose are in spatial plans marked with a letter T, and are intended to construction or renovation and reconstruction (in already built zones) of general tourist facilities; hotels (T1), bungalow (tourist) resorts (T2) and catering facilities – entertainment parks (T4), and sports and recreation facilities.
The average purchase price of business premises is from EUR 1,000.00 to EUR 3,000.00 per square meter. If you wish to rent business premises the average price of rents in the Republic of Croatia is from EUR 5.00 to EUR 8.00 per square metre depending on the location on the location, except for locations in the Varaždin Technology Park where companies can rent premises for free.
The price of industrial land depends on the location and includes infrastructure, thus ranging from EUR 0.15 to EUR 80.00 per square metre.
The price of agricultural land depends on the location and the quality or type and ranges from EUR 0.15 to EUR 20.00 per square metre.
| Warehouse |
Rent €/m2/monthly |
For sale €/m2 |
To build €/m2 |
| Prime |
5.5 - 8.0 |
1,000 - 1,100 |
300 - 500 |
| Secondary |
4.0 - 6.0 |
500 - 750 |
Source: KingSturge, 2008.
e-cadastre is a service enabling all legal entities and individuals access to all cadastre lots in the territory of the Republic of Croatia using the Internet site www.katastar.hr .
Following regulations are generally relevant for golf issues:
- Zoning Act (OG 30/94)
- Construction Act (OG 175/03, 100/04)
- Rulebook on the content, cartographic views scales, mandatory spatial indicators and zoning plans studies standard (OG 106/98, 39/04, 45/04 and 163/04)
- The Croatian Government decision of 26 August 1999, on accepting the golf development programme as an element of the Croatian tourism development policy
- The Croatian Government decision of 11 November 2001 on conditions and methods of leasing state owned land, forests and forest land to build gold courses
- Agricultural Land Act (OG 66/01, 87/02, 48/05, 90/05) – Change of agricultural land purpose and duties
- Rulebook on simple structures, which no location permit is needed for
- Zoning Plan is necessary for the intended construction site
Prior to the beginning of the project, the Investor should create the «Environment Impact Study». The stated study shall be produced by the registered company in cooperation with the Ministry of Environment Protection, Zoning and Construction.
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TAX SYSTEM
The profit tax rate is 20%.
Tax after deductions is paid at the rate of 15% for interests paid to foreign legal entities and for copyrights and other intellectual property rights, for market research services, tax and audit services and services of any business counseling paid to foreign individuals. As of 2005, the tax on dividends after deduction, paid at the rate of 15%, has been cancelled.
Income tax rates are progressive and range from 15 % to 45%.
| Tax Rate |
Monthly Tax Base (in HRK) |
Annual Tax Base (in HRK) |
| 15% |
to 3.200,00 |
to 38.400,00 |
| 25% |
next 4.800,00 |
next 57.600,00 |
| 35% |
next 14.400,00 |
next 172.800,00 |
| 45% |
above 22.400,00 |
above 268.800,00 |
Property traffic is charged at the tax rate of 5% for acquisition of the existing property and at the rate of 22% for acquisition of the newly constructed structures. Property traffic tax shall be paid by the Buyer of the related property.
Value Added Tax shall be paid at a rate of 23%.
Other Value Added Tax rates are 0% and 10% and are related to the following:
- Value Added Tax shall be paid at a rate of 0%:
- all kinds of baked bread
- all kinds of milk
- books with contents that are professional, scientific, artistic, cultural and education, textbooks for elementary, secondary and tertiary education, printed on paper or other media for text including CD ROM, video cassette and audio cassette
- medicines determined by the Decision to determine the List of Medicines of the Croatian Institute for Health Insurance
- products that are surgically implanted into the human body – implants (heart valves, pacemakers, artificial joints, material for osteosynthesis, stents, IUDs and so on) and other medical products for making good physical impairment or shortcoming as defined in the Orthopaedic and Other Aids Manual Regulations of the Croatian Institute for Health Insurance
- scientific and scholarly journalsthe services
- public screening of films.
- Value Added Tax shall be paid at a rate of 10%:
- services of accommodation or accommodation with breakfast, full or half board in all kinds of commercial hospitality facilities and on services of agency commission for these services
- Daily and periodic newspapers and magazines with the exception of those that, in their entirety or mainly, contain advertisements or serve for advertising purposes.
Croatia has signed contracts on avoiding double taxation with 43 countries:
Albania, Austria, Belgium, Belarus, Bosnia and Herzegovina, Bulgaria, Czech republic, Chile, Denmark, Estonia, Finland, France, Greece, Italy, Ireland, Jordan, Yugoslavia, South African Republic, Canada, China, Korea, Latvia, Lithuania, Hungary, Macedonia, Malta, Mauritius, Moldova, the Netherlands, Germany, Norway, Poland, Romania, Russia, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, Great Britain.
Legal entities submit their tax reports to the Tax Office branch according to their respective seats. All necessary information can be found on the Internet page: www.pu.mfin.hr/. The VAT form can also be submitted online (e-PDV).
e-PDV replaces paper version of the tax report submitted to the tax official and enables all tax payers to submit monthly, quarterly or annual submission of tax reports online. The service is available on www.pu.mfin.hr/e-porezna/ePDV.asp.
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INCENTIVES
Tax benefits to encourage investment have been defined by the Investment Incentive Act, which regulates equal conditions of domestic and foreign investments of legal entities and individuals. All investors who invest a minimum of 300 thousand euros can use benefits. The amount of tax benefits with profit taxation has been defined by the amount of the invested funds and the number of employees.
| Investment value (in mil. EUR) |
No. of new job posts |
Duration of the incentive (years) |
VAT rate |
| 0.3 – 1.5 |
10 |
to 10 |
10% |
| 1.5 - 4 |
30 |
to 10 |
7% |
| 4 - 8 |
50 |
to 10 |
3% |
| > 8 |
70 |
to 10 |
0% |
Customs benefits for investments can be used until the day of accession of Croatia to the EU. When importing equipment which is integral part of the investment, no customs duties are charged for goods included in the Customs Tariff 84, 85, 86, 87 (except personal cars of engine capacity over 1,500 cm3), 88, 89 and 90 of the Customs Tariff Act.
The Investment Incentive Act regulates incentives for investors hiring new employees. The model defines that higher incentives are given in areas or counties with higher unemployment rates.
| County Unemployment Rate |
Support value in relation to eligible costs of opening new job posts |
Increase for technology, development and innovation centres |
Increase for business support strategic activities |
| < 10% |
10% do 1.500 EUR |
+50% (750 EUR) |
+25% (375 EUR) |
| 10 - 20% |
15% do 2.000 EUR |
+50% (1.000 EUR) |
+25% (500 EUR) |
| > 20% |
20% do 3.000 EUR |
+50% (1.500 EUR) |
+25% (750 EUR) |
The investor who has ensured opening of new job posts shall be granted a non-refundable support, for eligible costs of training of employees at their new working places, in a form of general or special training support, which should not be higher than maximum intensities as follows:
|
Special Training |
General Training |
| Large Enterprises |
up to 35% |
up to 60% |
| SMEs |
up to 45% |
up to 80% |
Eligible training costs may be costs of instructors, traveling expenses of instructors and training candidates and other current costs, costs of writ-off of equipment and devices including the scope of their uses for purposes of training, counseling costs related to the training project and costs of participants in training. The calculation also includes only active working hours of training, decreased for productive working hours or their equivalent.
Additional incentives can be realized by investors at incorporation and development of technology and innovation centres and at incorporation and development of business support strategic activities (or of customers/clients support centres, joint activities centres, logistic and distributional centres, information and communication centres and development centres). Furthermore, additional incentives may be realized on the grounds of opening new job posts.
Besides, for projects of incorporation and development of innovation centres, a non-refundable financial support is granted for purchase of technology, development and innovation centre equipment up to 5% of real eligible costs of the equipment, and not higher than the kuna countervalue of EUR 500.000,00 provided the purchased equipment of the technology, development and innovation centre is high-tech.
Additional incentives for large projects (minimum 15 mil euros and 100 new jobs) may be realized as a non-refundable financial support of 5% for all construction costs of the new factory or purchase of new machines (max. 1 mil euros). The support up to 5% shall also be given for infrastructure construction costs (max. up to 500,000.00 euros).
The application for receiving incentives is to be submitted to the Ministry of Economy, Labour and Entrepreneurship, prior to the beginning of investment.
Croatia has signed agreements on mutual incentives and protection of investments with 53 countries:
Albania, Argentina, Austria, Benelux, Republic of Belarus, Bosnia and Herzegovina, Bulgaria, Chile, Denmark, Egypt, Finland, France, Greece, India, Indonesia, Iran, Italy, Israel, Jordan, Cambodia, Canada, Qatar, China, Cuba, Kuwait, Latvia, Libya, Hungary, Macedonia, Malaysia, Malta, Moldova, the Netherlands, Germany, Oman, Poland, Portugal, Romania, the Russian Federation, the United States of America, Slovakia, Slovenia, Serbia and Monte Negro, Spain, Sweden, Switzerland, Thailand, Turkey, Ukraine, Great Britain and Northern Ireland and Zimbabwe.
New Investment Incentive Acts has been fully complied to the Acquis in the area of state grants.
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LABOUR FORCE
The total number of employees in the Republic of Croatia is about 1.4 million, and according to the structure of employees per activities we can define that the Republic of Croatia is a developed society because the share of services and industrial activities has increased. According to business activities the largest share in employment belongs to the processing industry, i.e. food, textile and metal).
According to the World Bank research of Croatian companies, Croatian labour force is highly qualified because 93% of companies operating in the Republic of Croatia is satisfied with skills and professional qualifications of Croatian workers.
Source: ICS – Investment Climate Surveys, World Bank
One of the characteristics of the Croatian population is multi-linguism, because 49% of Croats speak English, 34% German, and 14% speak Italian.
Source: Euro barometer 2006, European Commission
| Unemployment rate (%) |
2006. |
2007. |
2008. |
| Republic of Croatia |
17,7 |
16,3 |
14,3 |
| Zagreb County |
14,2 |
12,9 |
10,6 |
| Krapina-Zagorje County |
14,0 |
12,1 |
9,6 |
| Sisak-Moslavina County |
28,9 |
26,3 |
24,9 |
| Karlovac County |
26,1 |
24,1 |
21,8 |
| Varazdin County |
13,6 |
11,6 |
9,8 |
| Koprivnica-Krizevci County |
17,0 |
16,1 |
14,0 |
| Bjelovar-Bilogora County |
25,9 |
24,9 |
23,1 |
| Primorje-Gorski Kotar County |
13,4 |
12,3 |
10,8 |
| Lika-Senj County |
22,1 |
22,0 |
18,8 |
| Virovitica-Podravina County |
30,3 |
28,7 |
25,8 |
| Pozega-Slavonia County |
21,7 |
21,1 |
19,4 |
| Brod-Posavina County |
29,6 |
27,6 |
24,7 |
| Zadar County |
20,9 |
20,1 |
17,7 |
| Osijek-Baranja County |
26,1 |
24,2 |
22,0 |
| Sibenik-Knin County |
25,0 |
23,5 |
19,6 |
| Vukovar-Syrmia County |
31,3 |
29,4 |
27,5 |
| Split-Dalmatia County |
22,2 |
21,4 |
19,1 |
| Istria County |
8,4 |
8,0 |
6,7 |
| Dubrovnik-Neretva County |
18,3 |
17,9 |
15,3 |
| Medjimurje County |
15,8 |
14,0 |
11,6 |
| City of Zagreb |
9,2 |
7,8 |
6,2 |
Source: National Bureau of Statistics
Work relationships in the Republic of Croatia have been regulated by the Labour Act. Its provisions guarantee safety both for the employer and the employee. Work relationship may also be regulated in collective agreements, signed by and between one or more employers or association of employers as one party and one ore more trade unions on the other. Every employer employing over 20 employees must have a Rulebook covering all areas connected to employment and labour force, particularly covering areas defined by the Labour Act, and provide possibilities of free choice among various options.
Employment in based on the Work Contract which is generally signed for indefinite or definite period of time. After signing the Work Contract, the Employer has to register the worker at the Croatian Social Security Institute and the Croatian Pension Insurance Institute.
There are two types of work contract termination: regular and extraordinary
Regular termination of the work contract is possible in the following cases:
- cease of need for performing a certain job for economic, technical and organizational reasons (notice caused my business conditions),
- if the worker can not perform his business responsibilities on regular basis due to certain permanent characteristics or abilities (notice caused by personal conditions), or
- if the worker breaches liabilities resulting from the employment (notice caused by the worker’s incorrect behaviour).
Extraordinary termination of the work contract is possible in case of a severe breach of employment liabilities. Work contract can be terminated as extraordinary, only in the period of 15 days as of the day of learning about the fact, based on which the contract is to be terminated.
Notice period is conditioned by the time of duration of the work contract and has been defined by the law (it varies between two weeks for people who had been working for less than a year, to three months for people whose employment lasted for 20 consecutive years).
Any foreign person can work in Croatia if he/she possesses a valid working permit or a business permit, unless otherwise defined in the Foreign Persons Act (Article 85 Par 1 Foreign Persons Act, OG 109/03).
A foreign person holding a working permit has to regulate his/her temporary stay based on the purposes of employment (Article 40, Paragraph 1).
A business permit is considered to be the approval for a temporary stay and work in the territory of the Republic of Croatia (Article 35, paragraph 5).
Application for obtaining a working permit for a foreign person is submitted by the employer, to the police department/station in their respective seats. Working permit is issued within 15 days as of the day of application (Article 88 Paragraph 1 of the Labour Act).
With the application for obtaining the working permit the employer shall enclose the following: details on the foreign person he/she intends to sign a Work Contract or any other suitable contract; details on the job, type of job and conditions of work; evidence on registration of the company, representative office or craft in the Republic of Croatia; evidence on settling all tax liabilities and contributions and explanation of justified reasons for employing a foreign person. (Article 89 the Labour Act).
The Croatian Government decides upon the annual quotas of working permits pursuant to the proposal of the Ministry of Labour. In 2007, the annual quota was 4,613 working permits, of which a quota for extension of already issued working permits was 2,000 working permits, and for new employment 2,613 working permits issued for strictly defined professions in the areas of civil construction, shipbuilding, tourism, culture, traffic, health and science and education.
The quota does not comprise working permits issued complied with Article 87 Paragraph 2 Foreign Persons Act, for example workers-foreigners as daily commuters; workers-foreigners and members of their families whose status has been regulated by the Stabilization and Association Agreement between the European communities and their member countries and the Republic of Croatia; for foreign persons who perform key tasks in companies; foreign persons who have been transferred within the internal transfer complied to the Treaty of Marrakesh regulating establishment of the World Trade Organization, etc.
Furthermore, complied with provisions of Article 95 of the Foreign Persons Act, there are 23 categories of strangers who do not need a working permit.
A business permit is issued to a foreign person who has a registered craft or free profession, runs activities in a company or legal entity which he has a majority part in, or to a foreign person or a foreigner providing services on behalf of a foreign employer, and meet the conditions for a temporary stay (Article 97, Paragraph 1 Foreign Persons Act).
Pursuant to Article 85 Paragraph 3 and Article 97 Paragraph 1, the Agreement on Providing Services must be signed between a domestic company registered in the Republic of Croatia and a foreign company registered abroad, and foreign persons providing services pursuant to the Agreement on Providing Services have to be employed with the foreign employer at the moment of signing the Contract. This considering (Article 85 Paragraph 3 Foreign Persons Act), transferring liabilities for execution of the agreed work to sub-contractors is excluded.
A working permit is issued to a foreign person by the Police Department/Station as per the seat of the employer and not later than 15 days as of the day of application (Article 88 Foreign Persons Act). The Permit is issued for a definite period of time and is valid as long as the signed work contract or other applicable contract but not longer than two years (Article 92 Foreign Persons Act).
Application for obtaining a business permit is submitted to the Police Department/Station by the foreign person in the place of residence. As an exception, foreign persons providing services on behalf of the foreign employer, can submit their applications in a diplomatic missions or a consulate in the Republic of Croatia (Article 97, Paragraphs 5 and 6 Foreign Persons Act). The business permit is issued by the Police Department/Station not later than 30 days as of the date of application (Article 97, Paragraph 2 Foreign Persons Act). The first permit is issued for the period of one year and can be extended to two years (Article 35 Paragraphs 1 and 2 and Articles 98 Paragraph 1 Foreign Persons Act)
Collective agreement is a special agreement signed voluntarily by the employers or employers’ associations and unions or union associations. The purpose of a collective agreement is to increase workers’ rights, i.e. to guarantee their rights, both existing and more extensive, by an employer binding document.
There are two categories of working hours, i.e. for full time jobs and for part time jobs. Working hours may be shortened if the worker cannot be protected from adverse impacts despite use of protection equipment. Working hours are shortened in proportion to the adverse impact caused by conditions of work influencing the worker’s health and working ability.
Full time working hours cannot extend 40 hours per week, but there is the option of overtime. The common working hours are 9 a.m. to 5 p.m., and the business week is from Monday to Friday.
In case of force majeur, extraordinary work load and in other emergency need situations, the worker shall, upon his employers’ request, work overtime but not longer than 10 hours a week.
Pursuant to the Labour Act, the shortest annual holiday lasts 18 working days.
Non-business days (public holidays) are the following national and religious holidays:
| Public Holidays |
Occasion |
| January 1st |
New Year's Day |
| January 6th |
The Epiphany |
| April 16th |
Easter (2006)) |
| May 1st |
Labour Day |
| June 15th |
Corpus Christi (2006) |
| June 22nd |
Anti-Fascist Resistance Day |
| June 25th |
Croatian National Day |
| August 5th |
Victory Day and National Thanksgiving Day |
| August 15th |
Assumption |
| October 8th |
Independence Day |
| November 1st |
All Saints Day |
| December 25th-26th |
Christmas |
| County |
Average gross wages (employee/EUR) |
Average net wages (employee/EUR) |
| Republic of Croatia |
954 |
657 |
| Bjelovar-Bilogora County |
784 |
560 |
| Brod-Posavina County |
789 |
567 |
| Dubrovnik-Neretva County |
919 |
639 |
| Istria County |
938 |
653 |
| Karlovac County |
867 |
611 |
| Koprivnica-Krizevci County |
844 |
596 |
| Krapina-Zagorje County |
781 |
557 |
| Lika-Senj County |
846 |
608 |
| Medjimurje County |
724 |
519 |
| Osijek-Baranja County |
827 |
587 |
| Pozega-Slavonia County |
772 |
557 |
| Primorje-Gorski Kotar County |
942 |
657 |
| Sisak-Moslavina County |
870 |
619 |
| Split-Dalmatia County |
908 |
635 |
| Sibenik-Knin County |
864 |
610 |
| Varazdin County |
767 |
543 |
| Virovitica-Podravina County |
753 |
543 |
| Vukovar-Syrmia County |
791 |
573 |
| Zadar County |
891 |
635 |
| Zagreb County |
898 |
625 |
| City of Zagreb |
1.177 |
776 |
Source: National Bureau of Statistics
Contributions from and on the salary are paid by a total rate of 37.2%, of which 20% is charged to the employee and 17.2% to the charge of the employer.
Compared to other countries in the region, contributions in the republic o Croatia are extremely low and mandatory employer’s contributions are lower only in Slovenia.
The example relates to the net salary of 5,000.00 kuna paid in Zagreb (with the highest surcharge tax rate of 18%) for a tax payer with no children.
| NET SALARY FOR PAYMENT |
|
5.000,00 |
| Social Security - Pillar I: |
15,00 % |
1.103,83 |
| ISocial Security - Pillar II: |
5,00 % |
367,94 |
| Total contributions from gross: |
20,00 % |
1.471,77 |
| Total benefit: |
|
1.600,00 |
| Taxed income: |
|
4.287,09 |
| Total tax: |
|
751,77 |
| Surcharge tax: |
18,00 % |
135,32 |
| Total tax and surcharge tax: |
|
887,09 |
|
|
7.358,86 |
| Contributions on salary for Health Insurance: |
15,00 % |
1.103,83 |
| Contributions on salary for employment: |
1,70 % |
125,10 |
| Contributions on salary for work injuries: |
0,50 % |
36,79 |
| Total contributions on gross: |
|
1.265,72 |
| GROSS SALARY |
|
8.624,59 |
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EDUCATION
|
No. of institutions |
| Pre-School Education |
1.190 |
| Primary Education |
2.141 |
| Secondary Education |
665 |
| Higher Education |
106 |
Croatia has signed the Bologna Declaration and thus became liable to become a part of a unique European system of higher education. The first generation of the Bologna students enrolled in the academic year 2005./2006.
| Year |
Natural sciences |
Technical sciences |
Biomedical sciences |
Biotechnical sciences |
Social sciences and humanities |
Total |
| 2000 |
422 |
3.804 |
1.049 |
547 |
7.468 |
13.510 |
| 2001 |
382 |
3.670 |
1.009 |
539 |
7.668 |
13.810 |
| 2002 |
417 |
3.281 |
1.128 |
367 |
8.437 |
14.868 |
| 2003 |
317 |
2.709 |
1.555 |
549 |
8.991 |
15.762 |
| 2004 |
407 |
3.479 |
1.728 |
614 |
10.957 |
17.391 |
| 2005 |
500 |
3.636 |
1.714 |
580 |
11.527 |
18.190 |
Source: National Bureau of Statistics
United States Patent and Trademark Office
Source: EUROSTAT
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Trade and Investment Promotion Agency (APIU)
Basic activities of the Agency are focused on proactive search, attraction and realization of qualified investment projects including production of high added value goods and services, intended for export and projects creating new jobs.
TO INVESTORS WE PROVIDE INFORMATION ON:
- Investment projects
- Economic and legal investment framework
- Free zones and technology parks
- Available property
WE PROVIDE ACTIVE HELP WITH:
- Obtaining necessary permits
- The procedure of receiving grants/incentives
- Implementation of all investment project stagesa
WE CONNECT THE INVESTORS TO:
- Government bodies
- Local and regional institutions
- Public utility and infrastructure companies
- Financial, accounting, legal and other business counselors
Trade and Investment Promotion Agency provides services to companies whose investment projects include production of high added value goods and services intended for export and projects creating new jobs.
Basic task of the Agency is to ensure a package for investors acceptable for them and to help them get the desired information quickly, in a transparent way and totally free.
There are nine advantages beneficial to our clients:
- Each qualified investor has his project manager
- Available 24/7
- Fast and professional service, free of charge
- All relevant information in one place
- Selection and organization of visits to best locations
- Help with obtaining necessary permits
- Search for local partners
- Help with receiving incentives
- Connecting with state and local institutions
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