Business in Croatia

The Croatian legal framework governing foreign investment has been designed in a way that does not make any difference between domestic and foreign investors.  All possibilities in relations between domestic investors are also open to foreigners investing capital in Croatia, provided reciprocity principle is met.

 

Moreover, foreign investors enjoy additional guarantees that are not given to domestic investors. The Croatian Constitution provides that no law or other legal document shall reduce the rights granted to a foreign investor at the time of investment in Croatia. It also guarantees the free repatriation of profits or capital upon fulfillment of all legal obligations.


Starting up a business activity

Foreign legal entities and persons may:

  • invest capital on a contractual basis
  • invest in a company
  • invest in a bank or insurance company
  • set up as craftspeople or do business as sole traders
  • obtain a concession to exploit natural resources or other assets of interest to Croatia

Companies

A company is a legal entity established and organized in accordance with the Companies Act. All companies are registered in a court register following the Court Register Act and the Rules of Court Register Entry Procedures.

The law also regulates the establishment of branch offices and the position of sole traders.

 

A company is liable to settle its debts with all its assets. Owners/ shareholders in private and public limited companies and partners in a limited partnership are not personally liable for the obligations of the company, unless the Companies Act provides otherwise.
Partners in general partnerships and general partners in limited partnerships have unlimited liability to cover the debts of their partnership jointly, severally and with all their personal assets.

Founders:

A domestic or foreign legal entity or natural person may establish a company.

Company name:

A company name must consist of a proper name and an indication of the company’s business activity as well as abbreviation which clearly indicates the legal form of a specific company, for example Ltd or Inc.

 

It must be written in the Croatian language and Latin script, or in official language of member state of the European Union. Arabic numerals may also be used. The company name may contain foreign words if these are:

 

  • part of the name/company name owned by a partner/owner/shareholder, or
  • the trade-/service mark, (protected in the Republic of Croatia) of a partner/ owner/shareholder or their company registered in Croatia,
  • in cases when such words are common in the Croatian language or
  • where there is no appropriate corresponding word in the Croatian language, or
  • where words of a dead language are used.

The company name may be entered in a court register also in a translation in one or more foreign languages. If the word Croatia or any word form derived from it is to be used in the company name, special consent from the Government of the Republic of Croatia or by state authority authorized by the Government is a requirement.

Company forms

Private limited company (d.o.o.)

A private limited company is one in which one or more legal entities or natural persons invest stakes (not necessarily of the same amount) in the total authorized capital as contractually set beforehand. The total amount of all stakes must correspond to the amount of the company’s authorized capital.

Owners may be either domestic or foreign legal entities and natural persons. Just one owner may also establish this type of company.

A private limited company is a legal entity. This status is established by entry into a court register. Company assets are strictly separated from the property of owners. The company is liable for its debts with all its assets. Owners are not liable for company debts.

The initial authorized capital of a private limited company must be shown in Croatian currency – kuna (HRK), and the minimum amount of initial authorized capital may not be below HRK 20,000.

A company must have a management board and a general meeting. The company management board may have one or more members (directors). A foreign national may also be a member of the management board.

Simple limited company (j.d.o.o.)

A simple private limited company is a subtype of the private limited company as the most frequent type of company in Croatia. A simple private limited company can be founded in a simplified manner and it can consist of a maximum of three members and one member of the management board.

The minimum amount of initial authorized capital may not be below HRK 10.00, and the lowest nominal amount of the stake amounts to HRK 1.00. Stakes must be provided in cash only. Each amount of HRK 1.00 of the nominal stake gives the right to one vote, until the company’s initial authorized capital increases to a minimum amount of HRK 20,000 and the provisions of the Act pertaining to the classic private limited company start applying to it.

Public limited company (d.d.)

A public limited company is based on capital, with owners (shareholders) investing in authorized capital divided into shares. A public limited company may be started by a single owner, i.e. it may have only one shareholder.

The company is liable for its debts with all its assets. Shareholders are not liable for the debts of the company.

The minimum amount of authorized capital is HRK 200,000. The company may issue shares with an indication of their par value or shares without such indication.

General partnership (j.t.d.)

General partnership is a business entity where two or more individuals join in order to conduct business as a going concern and under a common company name. Every partner has unlimited and joint liability to cover the partnership’s debts with all his/ her assets.

Any legal entity or individual, both domestic or foreign, may become a partner.

A general partnership does not have authorized capital. Unless otherwise provided by the articles of association, partners should bring equal stakes into the company. The stakes may consist of cash, tangibles, rights, labor and other services and goods.

Limited partnership (k.d.)

A limited partnership is a company where two or more individuals associate together in order to conduct business as a going concern under the same company name. At least one partner has unlimited and joint liability for company debts with all his/her assets (general partner), and at least one partner has limited liability proportional to the assets invested (limited partner).

Both domestic and foreign individuals and legal entities may be partners in a limited partnership. A limited partnership does not have authorized capital.

Economic interest association

An economic interest association is a legal entity established by two or more natural persons or legal entities for the purpose of facilitating and promoting their business activities, but in a way that the legal entity earns no profit for itself. Members of the association may be persons who perform any economic activity as well as free-lance employed persons.

An economic interest association is established without authorized capital, and the rights of members may not take the form of securities. The business activity of the association must be related to members’ business activities as an activity that supports them.

Branch office

Under Croatian legislation, foreign companies and sole traders may conduct business in Croatia by setting up a branch office (Art. 612). The start-up and operation of branch offices owned by foreign companies are governed by the same regulations that apply to the establishment of branches by domestic companies.
A branch office is not a legal entity.
The liabilities and rights stemming from its operation do not belong to the branch office but to the founder. The branch office operates under its own name. The name should also indicate both the branch’s and the founder’s registered office.

Establishing a company


01
FINA
HITRO.HR counter

First it is necessary to choose a name for you company. When chosing a name for your company, it is advisable to use the website of the Ministry of Justice: https://sudreg.pravosudje.hr in order to check whether the name of your choice or similar name has already been chosen and used by another company. For this reason it is advised to prepare alternative names in addition to the proposed company name.

02
NOTARY
public

The Application for Entry in the Court Register (PO Form) and some of its enclosures have to be verified by a notary public. When paying a visit to the notary public, you should take your ID or passport (obligatory for the foreign citizens). The presence of all founders and other persons whose signatures sholuld be verified is obligatory.
N.B. – If you are a foreign national and don’t speak Croatian, a presence of court interpreter for the language is required.

03
FINA
HITRO.HR counter

Registration documentation sealed by the Public notary is submitted to the HITRO.HR counter that can deliver documents for court registration and the National Bureau of Statistics for you. You can make the payment of court fees and the initial capital at FINA’s branches.

 

If the delivered documentation is correct and complete, the Commercial Court shall register the company in the court register within 24 hours, and electronically deliver the Decision on the establishment and Confirmation of OIB (Personal identification number) of the newly formed company to the Office HITRO.HR.

 

At the HITRO.HR counter you will receive an RSP Form which you will have to fill out in order to obtain a Notification of Classification pursuant to the National Classification of Activities of the Central Bureau of Statistics. HITRO.hr will, after receiving the Court’s decision on the establishment automatically and electronically obtain a Notice of classification of the business entity within 1 day period.

 

After registration is completed it is necessary to make an official company stamp and open a business account so that the initial capital could be transferred into company account. That, as well as the necessary first registrations of the company, its owner and employees with the Croatian Pension Insurance Institute (HZMO) and the Croatian Health Insurance Institute (HZZO) can be arranged and executed electronically at the HITRO.HR counter.


Financing a business activity

Business activities in Croatia can be financed either through standard loans of commercial banks or institutions offering more favourable interest rates or issuing guarantees for bank credits.
Consisting of 30 banks, 1 saving bank and 5 building societies, a traditionally stable and highly developed sector, the Croatian banking system offers high diversification and good quality of financial products and services. The list of commercial banks in Croatia can be found here.

 

An important role in helping companies in their further developing and exporting activities has the Croatian Bank for Reconstruction and Development (HBOR). Through its specialized programs HBOR provides support to start-ups, exporting companies, new production and companies from different sectors of economy such as industry, tourism, environmental protection and energy efficiency, agriculture, etc. More information about HBOR programs can be found on its web site www.hbor.hr .

 

Additional support to business activities is provided by the Government Agency for SMEs, Innovations and Investments (HAMAG-BICRO). HAMAG-BICRO issues guarantees for bank credits approved by credit institutions and other legal entities approving loans to SMEs and makes direct financial contributions to SMEs in a form of grants. More information about HAMAG-BICRO guarantees and grant schemes can be found on its web site www.hamagbicro.hr.

 

There is an additional financing option for entrepreneurs and investors in developing their projects in Croatia, and that are EU funds. As 28th full member state of the European Union, the Republic of Croatia has possibility of using the assets from the Structural Funds and Cohesion  Fund.



Costs of doing business

Starting and conducting a business activity requires an insight and estimation of costs that will result from this activity. Here you can find examined six different cost components: oil, gas, electricity, water, utilities and salary costs.


Oil prices

 

With its petrol prices, Croatia still successfully competes with countries in the region and Europe, thus contributing to lower costs of business activities.

  HRK /lit€/lit
UnleadedBMB EURO BS 959.3700.998
DieselDiesel8.771.167
Source: Europe’s Energy Portal

 

 

 

Petrol prices in EU countries – diesel

Source: Europe’s Energy Portal (Sep. 2017)



Natural gas

The price of natural gas in Croatia varies depending on the county and distributor/distributors present in a county as well as its final user (household/industry). There are currently 36 gas distributors on the territory of the Republic of Croatia. The maximum amount of tariff models for all gas distributors is determined by the Croatian Energy Regulatory Agency HERA.

 

There are 12 tariff models based on a yearly customer’s average natural gas consumption. Each Tariff model consists of two Tariff items. Tariff item (Ts1) is a unit price of delivered quantity of energy (HRK/kWh) and it represents the final price of gas, while Tariff item (Ts2) represents fixed monthly fee. Tariff item 1 includes bulk supply price with the tariff item for storage, tariff item for gas transport, tariff item for distribution and tariff item for gas supply (HRK/kWh). Tariff item 2 is expressed in HRK and it represents fixed monthly fee not connected to the delivered quantity of natural gas, allocated to covering a part of fixed expenses of supplying natural gas to tariff customer.

 

The amount of tariff items for natural gas distributors is available on the website of the Croatian Energy Regulatory Agency (HERA) or on the following link.

The list of registered natural gas distributors can be found on the following link.



Electricity

The average price in Croatia for industrial users is 0.09 EUR depending on tariff model and the time of consumption. With its lower electrical energy process, Croatia still very successfully competes with the countries in the region and Europe, thus contributing to lower costs of business activities.

Electricity prices for industrial consumers EUR per kWh, end 2016

 

Source: Eurostat, 2017

 

Electricity suppliers:

 
A supplier is an energy entity having a license for performing the activities of electricity supply. They can purchase electricity from a producer, trader or another supplier.

The list of energy suppliers in Croatia can be found on the website of the Croatian Energy Market Operator ltd (HROTE)

 

Connection price:

 

Connection price depends on the voltage level (low, middle or high voltage) and the connection capacity. The connection over 10 MW may not be realised on low voltage. The connection equipment and the measuring equipment is an obligation to be financed by the customer and are owned by the electricity distribution company. As the distribution company (HEP ODS Ltd.) is a state-owned company, the connection financing is obliged to be realised via public procurement, so the customer may not be provider of the connection. The customer has to secure the budget for the connection prior to the launching of the public procurement.

 

The legal regulation governing the field of the public procurement is in the process of adapting so the actual rules might change in the future. All the technical rules are under distributor’s jurisdiction while the Croatian Energy Regulatory Agency (HERA) is in charge of administrative rules. The Agency has to prepare the conditions for the connection grid according the Electricity Market Act (Official Gazette 22/2013, 95/2015, 102/2015). More details about the electricity market can be found following the link



Water

Water contribution fee (average)*

ZoneABC
Office space (except production plants)16.73 HRK/m310.05 HRK/m35.03 HRK/m3
Production plants3.00 HRK/m31.80 HRKm30.60 HRK/m3
Open business buildings4.91 HRK/m32.96 HRK/m30.98 HRK/m3

*Water contribution fee is paid by an investor on construction of a building

Zone A: the City of Zagreb and protected coast
Zone B: the rest of Croatia (except from Zone A and C)
Zone C: regions of special state concern

 

Water consumption price*

CityHouseholds (Kn/m3 )Industry (Kn/m3 )
Zagreb15.2926.96
Osijek12.6817,57
Rijeka10.3714.65
Split11.6015.29
Slavonski Brod10.7715.66

*prices include fees, VAT (13%) and fixed drainage price; prices do not include fixed part
Source: Utility companies

Water consumption price varies from city to city and according to the end user (household or industry). It consists of variable part (according to consumption per m3) and fixed part (determined by local authority independent of consumption).



Communal Utilities

Communal Contribution Tax

  • is a fixed monthly cost paid by a physical and legal entity, owner or user of a residential living space, office space, garage space, construction area. The amount of the communal contribution tax is set by a local authority according to the type of a real estate, its size (m2) and location. For the amount of the charge for a particular type of business premises it is necessary to contact the local government.

Overview of the amount of communal contribution tax in selected Croatian cities

CityNumber of zonesLiving space (HRK/m 2 )Office space (HRK/m 2 )
ZagrebI0.878.70
II0.838.27
III0.706.96
IV0.575.66
V0.484.79
VI0.393.92
VII0.303.05
VIII0.262.61
IX0.171.74
OsijekI0.594.88
II0.563.25
III0.452.28
IV0.321.87
V0.29-
RijekaI1.2712.70
II0.3410.41
III0.307.75
IV0.275.08
V0.234.19
Slavonski BrodI0.381.14
II0.330.99
III0.230.69
IV0.150.46
SplitI0.706.30
II0.544.85
III0.363.21
IV0.161.45

(March 2014)
Source: Ministry of Construction and Physical Planning

Communal Contribution Fee

  • One-time charge paid by investor or owner of a building plot for construction or reconstruction of objects. The amount is set by a local authority and is calculated on the basis of the volume of the building (m3) and its location.

Overview of the amount of communal contribution fee in five selected Croatian cities

CityNumber of zonesLiving space (HRK/m3) MaxOffice space (HRK/m3) Max
ZagrebI118118
II108108
III7575
IV5656
OsijekI8090
II6090
III4530
IV-15
V-20
RijekaI96.80138.29
II87.12131.38
III77.44131.38
IV53.24131.38
Slavonski BrodI35.6035.60
II35.6035.60
III3030
IV3030
SplitI116.99116.99
II107.04107.04
III85.0585.05
IV52.9752.97
V38.0338.03

(March 2014)
Source: Ministry of Construction and Physical Planning



Salaries

Average salary in February, 2017

CurrencyNetGross
KN5,8947,930
EUR791.061,064.3

Exchange rate: 7.450718 (February 2017)
Exchange rate: HNB


A person liable to contributions, based on labour relations, is the insured person whereas the employer or any other entity, that pays the salary in the name of the employer, is liable to calculate and pay the contributions.

 

The insured person (employee) is liable to pay contributions, whereas the employers or entities, paying the salary, are obliged to calculate, suspend and pay the following regular contributions (1*):

  • Compulsory pension insurance based on generational solidarity (“1st pillar” – amounting to 15 or 20%)
  • Compulsory pension insurance based on personal individualised capitalised savings (“2nd Pillar – amounting to 5%)

Contributions, paid by the employers, amount to 17.2% and are divided as follows (2*):

  • Compulsory health insurance (15%)
  • Compulsory health insurance related to occupational safety and health (0.5%)
  • Compulsory employment contribution (1.7%)

The lowest gross monthly wage in 2017 totals HRK 3,276.00.

Example monthly wage calculation

Gross salary 10,000 HRK
On salary contributions paid by the employers 17.2%+1,720 HRK
Total cost to the employer (2*)11,720 HRK
Regular „on salary contributions“ paid by employee
Gross salary 10,000 HRK
Compulsory pension insurance “1st pillar“ (15%)-1,500 HRK
Compulsory pension insurance “2nd pillar“ (5%)-500 HRK
Income =8,000 HRK
Personal allowance -3,800 HRK
Tax base =4,200 HRK
24% (for monthly salary to 17,500 HRK)-1,008 HRK
36% (for monthly salary above 17,500 HRK)-
Total tax amount =1,008 HRK
Surtax (Zagreb: 18%)-181.44 HRK
Tax + surtax =1,189.44 HRK
Net salary =6,810,56 HRK

This calculation is based on a salary of a taxpayer living (single) and working in Zagreb.