The investment environment in Croatia is regulated by the Croatian Companies Act, the Act on Investment Promotion, the Act on Strategic Investment Projects of the Republic of Croatia as well as other laws.
Foreign investors have the same rights, obligations and legal status within an enterprise as domestic investors, provided the condition of reciprocity is met.
The Croatian Constitution states that no law or any other enactment shall reduce the rights acquired through capital investment. It also ensures free repatriation of profits and capital upon termination of investment.
The Act on Investment Promotion (OG No. 102/15) provides the legal framework that prescribes certain incentives to investors.
Minimum investment required in order to become a beneficiary of incentive measures:
- 150,000 Euro with the condition of opening 5 new workplaces (for SMEs and large companies)*
- 50,000 Euro for micro entrepreneurs with the condition of opening 3 new workplaces*
- Investments of minimum 13,000,000 Euro with the condition of opening 10 high skilled (university degree level) new workplaces
* depending on the size of the investor
In order to be granted the status of a beneficiary of incentive measures a microenterprise, small, medium, large enterprise or a natural person liable to income tax, intending to use support for initial investment should apply for incentive measures to the Ministry of Economy, Entrepreneurship and Crafts, before the beginning of investment (start of the investment – the start of construction works or the first assumed obligation in the sense of the equipment work order, excluding the preparatory feasibility studies).
Jurisdiction of Ministry
Micro, small and medium enterprises:
Ministry of Economy, Entrepreneurship and Crafts
(Directorate for Investments, Industry and Innovations)
Address: Grada Vukovara 78, 10000 Zagreb, Croatia
Telephone: +385 1 6106 111
The Act prescribes following incentive measures:
1. Incentives for micro entrepreneurs
|Min. investment||Number of newly employed||Time for opening new workplaces||Corporate income tax rate shall be reduced by||Duration of incentives|
|50,000 €||3||1 year||50%||5 years|
2. Tax Incentives
|Min. investment||Number of newly employed||Corporate income tax rate shal be reduced by||Duration of incentives|
|0.15 to 1 mil. €||5||50%||10 years|
|1 – 3 mil.€||10||75%||10 years|
|More than 3 mil. €||15||100%||10 years|
Minimal period for maintaining investment project:
– SME – 3 years
– Large enterprises – 5 years
3. Incentives for eligible costs of opening new workplaces related to investment project
|County unemployment rate||Mandatory period for retaining new workplaces||Non-refundable financial incentive for the costs of opening new workplaces||Max. incentive amount|
|Up to 10%||5 years||up to 10% of eligible costs||3,000 €|
|10% - 20%||5 years||up to 20% of eligible costs||6,000 €|
|More than 20%||5 years||up to 30% of eligible costs||9,000 €|
– Eligible costs of opening new workplace are calculated as gross wage over a period of two years
– New workplaces related to an investment have to be kept for 5 years for large enterprises or 3 years for SMEs after the investment is finished and have to be opened in the period of 3 years after the construction finishes.
4. Incentives for eligible costs of training related to investment project
Eligible costs include:
– trainers’ costs spent in conducting the training
– expenses related to trainers and trainees directly related with the project of education, such as travel expenses, operating costs directly linked to the project, depreciation of tools and equipment, if used exclusively for the training project (accommodation costs are excluded)
– costs of advisory services related to the training project
– costs related to trainees and general indirect costs (administrative costs, rent, overheads) occured for the hours of training that trainees spend in training.
The maximum aid intensity does not exceed 50% of eligible costs, and can be increased up to 70% of eligible costs as follows:
– by 10 percentage points if the training is conducted for disabled workers
– by 10 percentage points if the aid is granted to medium-sized enterprise
– by 20 percentage points if the aid is granted to small and micro entrepreneurs
5. Additional incentives for specific business activities
Additional incentive measures are approved for investment in the following business activities:
- development-innovation activities
- business support activities
- high added value services
Non-refundable aid for the creation of new workplaces created is increased as follows:
|County unemployment rate||Mandatory period for retaining new workplaces||Non-refundable financial incentive for the costs of opening new workplaces||Max. incentive amount||Increase for development and innovation activities||Increase for business support activities and high value added services|
|Up to 10%||5 years||10% eligible costs||3,000 €||50%|
(max. 1,500 €)
(max. 750 €)
|10% - 20%||5 years||20% eligible costs||6,000 €||50%|
(max. 3,000 €)
(max. 1,500 €)
|More than 20%||5 years||30% eligible costs||9,000 €||50%|
(max. 4,500 €)
(max. 2,250 €)
For investment in the development and innovation activities, a non-repayable grant is approved for the purchase of equipment/ machinery in the amount of 20% of the actual eligible costs, and in the maximum amount of EUR 500,000 in equivalent HRK value, provided that the purchased machinery represents high technology equipment.
6. Incentive measures for capital expenses of investment project
|County unemployment rate||Cashgrant for the costs of the newly built object*||Cashgrant for acquisition of new production equipment||Max. amount of incentive for new equipment||Min. share of investment in new equipment/ high technology equipment share|
|10% - 20%||10% of eligible costs||10% of eligible costs||0.5 mil. €||40% / 50%|
|More than 20%||20% of eligible costs||20% of eligible costs||1 mil. €||40% / 50%|
Eligibility: over € 5 million and more than 50 new workplaces opened within the period of 3 years after the construction finishes
7. Incentive measures for labor intensive investment projects
|Number of new workplaces||Increase of support for opening new workplaces|
|100 and more||25%|
|300 and more||50%|
|500 and more||100%|
8. Incentives measures for investment in the minimum amount equivalent of 13,000,000 Euro
Incentives measures for investment in the minimum amount equivalent of 13,000,000 Euro, with the condition of opening 10 high skilled (university degree level) new workplaces related to the investment project:
- Incentives for ensuring the fixed conditions of business activity
Co-financing the differences in tax liabilities and liabilities arising from contributions determined in accordance with the regulations that were in force at the time of filing the application for approval of the status of the beneficiary and the tax obligations and liabilities arising from contributions in accordance with the regulations in force at the time of calculation of those liabilities, for a period of 10 years from the start of investment
- Investment incentives
Possibility of co-financing a part of the tax liabilities of the beneficiary towards the state (excluding VAT), that is a part of the obligatory contributions in the period of up to 10 years from the start of investment
- Incentives half and half
– Possibility of co-financing up to 50% of tax due on income from employment and/or
– Possibility of co-financing up to 50% of income tax liability and advance payment of income tax
- Grace period for paying tax liabilities
Interest free loan for the payment of tax liabilities (excluding VAT) for a period of 3 years from the start of the investment
Tax system in the Republic of Croatia is based on and divided into two major clusters: direct and indirect taxes. Direct taxes are paid in person or by an employer (personal income or corporate income tax) whereas the final burden of the indirect taxes (such as VAT and excise duties) is borne by the end-user (buyer) of products and services.
When considering the level of government authority, the tax system in the Republic of Croatia consists of a group of government, county, municipal or local, shared taxes as well as taxes and fees on games of chance and any winnings.
Some of the important taxes in Croatian tax system:
|TAX||TAXPAYER||TAX BASE||TAX RATE|
|Value Added Tax||Legal and natural person delivering goods or performing services||Fee for provided goods or services||25%, 13%, 5%|
|Personal Income Tax||Natural person realizing taxable income||Total income realized in Croatia and abroad (for foreign taxpayers income realized in Croatia) reduced by personal deduction for residents/non-residents||36% and 24%|
|Corporate Income Tax*|
|A company or some other legal entity pursuing independent and permanent business activities in order to generate profit, business unit of a foreign entrepreneur (non-resident)||Profit (difference between revenue and expenditure)||18% and 12%|
|Real Estate Transfer Tax||Buyer of the real estate||Market value of the real estate at the moment of acquisition||4%|
|Surtax on Personal Income Tax**||Income tax taxpayers||Income tax||1-18%
*According to the Act on Investment Promotion and Enhancement of the Investment Environment (OG 111/12), corporate income tax can be reduced to 0% if the prescribed conditions are met.
**detailed table for each municipality and city is available on this link.
Withholding tax is a tax on profits earned by a non-resident in the Republic of Croatia. The taxpayer is an entity that makes disbursements to a non-resident legal entity whereas the tax base is considered as a gross fee, paid by the resident to the non-resident.
The withholding tax is paid for:
- interest rates (not applying to commodity and banking credits);
- bonus sums and shares in profits;
- royalties and other intellectual property rights such as reproduction, patents, licenses, brand names, designs, models, production procedure and formulas, designs;
- market research services, tax and business consultancy and auditing services.
Withholding tax is paid at the rate of:
- 15% (with the exception of bonus sums and shares in profits)
- 12 % – bonus sums and shares in profits
- 20% – for all types of services which are paid to entities with the headquarters, head office or supervising office in countries considered tax havens or financial centers, except EU member countries and countries that Croatia has signed and applies treaties of avoidance of double taxation, providing that the above mentioned country has been published in the State Register (issued by the Finance Minister) and are not member country of the European Union.
More information and details about the Croatian tax system can be found on the website of the Tax Administration of the Ministry of Finance.
Double Taxation Treaties
The Republic of Croatia has signed over 50 treaties of avoidance of double taxation. The complete list of countries that Croatia has double taxation avoidance contracts can be found here.
- Reinvested profit – when the profit is invested into the share capital of the company and the share capital increase is registered with the Commercial Court (profit reinvested with aim to increase the share capital, which is not realized in the banking e.g. financial non-banking sector), the tax base is reduced by the reinvested amount
- Withholding tax is not paid if the paid fee is credited as income of the resident permanent unit of foreign entrepreneur
- Withholding tax on dividends and shares in profit – foreign recipients of dividends from the EU are not paying withholding tax on dividends and shares in profit at the rate of 12% if they own at least 10% of the capital for a continuous period of 24 months
- Real estate transfer tax – is not paid when a property is brought into a company as equity stake or to increase the share capital (in accordance with the provisions of the Companies Act). This tax is also not paid when a property is acquired in the procedure of acquisition, merger or demerger of the company (in accordance with the provisions of the Companies Act)
- State aid for education, research and development projects – can be used by the profit tax payers (resident permanent unit of foreign entrepreneur) as an additional reduction of the tax base.
Dividends and shares in profit based on capital interest up to HRK 12,000 per annum are not subject to personal income tax
*These tax exemptions are examples chosen for informative purpose. They do not represent all of the existing tax exemptions in the Croatian tax system.
Whether established with domestic or foreign capital, legal entities registered in Croatia are considered domestic legal entities and they have the right to acquire real estate. Mortgage on real estate is possible in favour of foreign entities.
Provided the condition of reciprocity is met, foreign natural persons and legal entities are free to acquire real estate in Croatia. The acquisition of real estate is regulated by the Property and Other Material Rights Act, and needs approval by the Ministry of Justice. More information about the necessary procedure is available on the website of the Ministry of Justice.
Labour relations in Croatia are regulated by laws, collective agreements and individual contracts, and rules adopted by employers. The Labour Act is in harmony with the conventions of the International Labour Organisation.
The main issues regulated by this Act are:
- legal basis for labour relations – a work contract (the form, duration and obligatory contents of the contract are defined);
- working hours (40 hours per week), overtime work, annual and other leave (at least 4 weeks), forms of maternity protection and protection of employees who are temporarily or permanently disabled;
- salaries: the employer must not pay a lesser amount than what is stated in the collective agreement (salary system discrimination is prohibited);
- the procedure for the termination of a work contract, i.e. related procedures, the reasons for a regular and irregular notice of dismissal (there are provisions for obligatory severance programs in the cases when an employer considers downsizing for organisational, economic or technical reasons), periods of notice;
- assuming employment rights and regulations (decision making on rights and regulations and their legal protection);
- employees’ rights in the decision-making process with respect to their economic and social rights and interests (through representatives on the employee council).
According to the Foreigner Act, a non-resident is allowed to work within the Republic of Croatia, providing that he/she holds a Permit for Stay and Work or Work Registration Certificate if the Act does not proscribe otherwise. Croatian Government establishes the annual quota for the employment of non-residents according to the migration policy and current situation on the labour market.
The Ministry of Interior issues the Permit for Stay and Work at the request of the employer, based on the place of nonresident’s stay. The Permit for Stay and Work is issued for a certain period of time, which corresponds to the duration of Work Contract or any other valid Contract, but no longer than one year. A Perimt for Stay and Work may be issued outside the annual quota to daily migrant workers under the condition of reciprocity, key personnel, providers of services, workers and their family members, whose status has been regulated by the Stabilisation and Association Agreement between the European Communities and their Member States and the Republic of Croatia, non residents performing key activities in companies, non-residents who are self-employed in a company they own or in a company in which they hold a share of more than 51% or in their own trade, professional athletes or sports workers, artists working at cultural institutions in the Republic of Croatia, teachers and lecturers who do their teaching at educational institutions or language school and other. A Work Registration Certificate is issued to a non-resident for the duration of their work within the Republic of Croatia.
Hence, Certificates may be issued for 30, 60 or 90 days per annum. Any legal or natural person, who is to use the services of a non-resident is obliged to acquire the certificate at the competent police administration or police station, prior to having started working. A legal or natural person, employing or using the services of a non-resident, is obliged to acquire a corresponding contract or any other relevant document signed with a non-resident, deploying the non-resident to work in the Republic of Croatia.
More information on the rules and regulations governing the stay of foreigners as well as the necessary application forms can be found on the website of the Ministry of Interior.
The educational system in the Republic of Croatia is divided into preschool education, elementary education, secondary education and higher education.
Preschool education in the Republic of Croatia encompasses education and care of the children of preschool age, realized though educational, health care, nourishment and social care programs for children from six months of age until school age.
Elementary education in the Republic of Croatia lasts for 8 years and it is compulsory and free for all children between the ages of six and fifteen (this refers to all children with permanent residence in the Republic of Croatia, irrespective of their citizenship). There are around 860 elementary schools on the territory of the Republic of Croatia.
Secondary education is implemented through a network of more than 700 secondary schools that are divided according to the program they offer as follows:
- Gymnasiums (general or specialised) – offer a program that lasts at least four years
- Vocational or trade schools (technical, industrial, trade and others) – offer a program that lasts from one to five years, and programs of from one to two years
- Art schools (music, dance, visual arts and others) – offer a program of at least four years
Secondary school graduates
Vocational secondary schools structure
(detailed analisys of graduates in Vocational secondary schools)
Croatia has three types of higher education institutions: universities (sveučilišta), polytechnics (veleučilišta) and colleges of applied sciences (visoke škole). Croatian education system is harmonized with the EU education system (Bologna). There are currently 132 higher education institutions in Croatia (the list of institutions)
The Croatian higher education system comprises:
- 8 public universities
- 2 private universities
- 11 public polytechnics
- 4 private polytechnics
- 3 public colleges
- 22 private colleges
The Croatian higher education system has a long educational tradition preserved primarily through the work of its public universities, which are (in alphabetical order): J.J. Strossmayer University of Osijek, Juraj Dobrila University of Pula, University North, University of Dubrovnik, University of Rijeka, University of Split, University of Zadar and University of Zagreb.
There is a possibility of studying some degree programes entirely taught in a foreign language and these are offered by the following institutions:
International Graduate Business School Zagreb, Josip Juraj Strossmayer University of Osijek, University of Rijeka, University of Split, University of Zagreb, Zagreb School of Economics and Management, University of Zadar, University of Dubrovnik, Juraj Dobrila University of Pula
Hungarian and German:
Josip Juraj Strossmayer University of Osijek
Juraj Dobrila University of Pula
Graduates from professional and university study 2014
Registered unemployment by educational background, 2014
Unemployment by activities (of previous employment), 2014