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Start a Business in Croatia

Start a Business in Croatia

Updated on Wednesday 20th May 2020

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The Croatian government encourages business start-ups through a series of measures aimed at strengthening entrepreneurship, stimulating exports and foreign investments, increasing competitiveness and employment and reducing the cost of administration. There are several aspects to take into consideration when it comes to business start-up costs in Croatia. The information below details the expenditures involved in starting a company with between 10 and 50 employees and a start-up capital 10 times of the economy's per capita gross national income (15,219 dollars in 2018). Our lawyers in Croatia specialized in company formation can provide you with assistance in setting up your business and offer you detailed information about business start-up costs.


The costs of start-ups in Croatia


When you open a company in Croatia, the setup costs may vary depending on its type. There are four expenses to consider when referring to start-ups in Croatia: the minimum amount of share capital involved, the registration fees and the fees for the official seal and the statistical registration number.
 
If you decide to set up a limited liability company (D.O.O.), you have an HRK 20,000 paid-in minimum capital requirement. If your choice of business in Croatia is a joint stock company, the minimum share capital needed for establishing this type of company is the equivalent of HRK 200,000. No minimum capital is required when setting up a limited partnership or a general partnership in Croatia.
 
Registering the company with the Commercial Court implies other fees. Irrespective of the type of company you open in Croatia, a notary fee is charged for drafting and notarizing the articles of association. Another notary fee is applied for drafting the application for company registration. Other several court fees will be added to the start-up costs and they are charged by the Commercial Court in Croatia when registering a company. Our attorneys in Croatia will gladly provide you with detailed information on the costs involved by start-ups in this country. Here is an infographic with details about how to open a business in Croatia:
 
the main steps to open a company in croatia1.png

 

Costs for opening a branch in Croatia

 
Large companies from abroad interested in opening branches in Croatia may do so and start the activities through a limited liability company. HRK 20,000 represents the minimum share capital for establishing a branch in Croatia. This kind of entity respects the business activities of the parent company, meaning that it has the same name, the same operations, and liabilities. As for the requirements in matters of documents, the foreign company needs to provide a document showing the existence of the firm abroad, plus a guarantee containing the declaration of the foreign company looking to incorporate a branch with the same activities. The registration fees imposed by the local authorities need to be considered at the time the branch is established in Croatia. The following table comprises information about the average business startup costs and other important requirements for the most common business structures in Croatia:
 
 
Business & Requirements LLC  Branch Stock Company Representative Office
Minimum share capital HRK 20,000 HRK 20,000 HRK 200,000 No
Ownership 100%  100%  100%  100% 
Shareholders 1 1 1 1
Directors 1 1 3 1
Corporate tax 18% 18% 18% No
Setup costs HRK 76,000  HRK 81,150 HRK 83,220 HRK 78,000
Annual fees HRK 25,550 HRK 25,550 HRK 25,550 HRK 25,550

 

The conditions and the startup costs for companies in Croatia are the first things to consider when deciding for business in Croatia. All the legal aspects involved can be explained by our Croatian lawyers specialized in company formation.
 

Taxes for companies in Croatia

 
Establishing a business in Croatia will have to involve complete information about the taxation regime for each type of structure, besides the startup costs. For example, the VAT in Croatia is set at 25% and it is imposed for companies operating on the market and having an annual income of around HRK 230,000. A low rate of 13% VAT is applicable for accommodations, water supply, entertainment services, and products containing sugar. The VAT rate of 5% is applicable for medical supplies, newspapers, and magazines, dairy products and medicines. 
 
As for other taxes in Croatia, entrepreneurs should consider the corporate income tax of 18% for businesses established in this country. We remind that foreign companies in Croatia are protected by the double taxation agreements signed with countries worldwide for avoiding the payment of taxes twice. The inheritance and gift tax, the real estate transfer tax, the consumption tax and the taxes imposed on holiday houses are among the fees you need to consider when wanting to set up a business in Croatia. It is important to have an idea about the business start-up costs and the taxes you need to pay in this state. Also, if you are looking for minimizing the costs, you can ask for specific financial solutions.
 

Short facts about the notary fees in Croatia

 
Opening a company in Croatia is also subject to varied notary fees an entrepreneur must the aware of. For instance, HRK 4,200 plus VAT is the fee for drafting and notarizing the Articles of Association, the company’s main documents. The application for company registration costs approximately HRK 710 plus VAT. It is good to know that the founders’ statements of the non-existence of debts needs to be notarized at the time you wish to start a business in Croatia, and it costs around HRK 35 plus a VAT of 25%. The same fee is available for notarizing the signature specimen of the directors in the firm. As for the statement of acceptance of appointment, this costs approximately HRK 115 plus a 25% VAT rate. As soon as the company is incorporated, ordering the official seal is the next thing to do, and that costs around HRK 169. There are no charges for issuing the statistical registration number, for opening a bank account or for VAT registration. The business start-up costs in Croatia are considered in the first place by a foreign entrepreneur who intends to make investments in this country. Legal advice is also recommended when opening a company, in order to understand better the investment legislation regarding foreign investors.


How to incorporate a start-up in Croatia


A start-up in Croatia can be incorporated and registered in a few simple steps. These are the following:

 

  • choose a name for your start-up and check its availability with the Court Registry in Croatia;
  • prepare the memorandum of association and address to a public notary for notarization. It is highly advisable to rely on the professional services of a law firm in Croatia for drafting the company's documents;
  • register the company with the Commercial Court – this usually takes 24 hours to complete electronically;
  • open a bank account, register for taxation in Croatia with the competent authorities and for insurance (pension and health);
  • order an official seal to use for all official documents – invoices and receipts.

 

The conditions and the startup costs for companies in Croatia are the first things to consider when deciding for business in Croatia. All the legal aspects involved can be explained by our Croatian lawyers specialized in company formation. They can also help you obtain the EORI number.
 

Open an LLC in Croatia

 
Public limited liability companies (A.D.) in Croatia can be set up for a minimum share capital of HRK 20,000 for business persons from EU countries and HRK 100,000 for non-EU nationals. After the acceptance of the main documents of the firm, the Articles of Association, the next step is to apply for different licenses and taxes. The following information needs to be mentioned by the Articles of Association :
 
  •     the name of the owners, the representative of the business and the registered office;
  •     comprehensive details about the operations of the limited liability company;
  •     the bank account where minimum share capital is provided for opening the firm;
  •     details about the liabilities in the company and the capital contribution.
 
We suggest you address your inquiries to our Croatian lawyers if you need legal assistance at the time of company incorporation. They can also help you obtain the EORI number.
 

Incorporation steps of a company in Croatia

 
The registration of a company in Croatia has been simplified in recent years, allowing local and foreign investors to incorporate faster the business they want to start in this country. Once the Articles of Association are submitted and accepted, the minimum share capital needs to be deposited in a local bank account. Then, the registration for tax purposes and social contributions needs to be considered. Also, applying for the Croatian Pension Insurance Fund is mandatory. The next step is to obtain the company seal before starting the activities on the Croatian market. One of our lawyers in Croatian can provide complete legal support if you are interested in opening a company in this country. They can handle all the incorporation formalities and they can represent your company in Croatia.

 

How easy is it to hire personnel in Croatia?

 
Many Croatian government incentives are offered for research and development and this grants the access of the population to a good education. The Croatian workforce is considered efficient and well trained. The main sectors where the efficiency of the workers can be observed are the business service sectors and high tech industries. Another good reason for hiring Croatian workforce is the fact that most of the employees speak many languages.
 
If a foreigner wants to be hired in Croatia, he/she must respect some basic rules, such as obtaining permission for permanent residency or prove that he/she will be involved in a foreign investment. This will give him/her access to a work permit, necessary in order to perform activities in a company. There are two types of work permits - a business working permit and the standard working permit. Both types require a special documentation including two passport photos, a copy of the passport and the passport in original, birth certificate, criminal record check, health insurance evidence, letter of employment, an evidence that shows the applicant has sufficient funds and an accommodation proof.

 

Legal support for signing contracts in Croatia

 
Companies developing business relations need to observe the contractual matters in this sense, with complete support offered by our attorneys in Croatia. Drafting and signing contracts in Croatia must be done in respect with the applicable legislation and that is the Civil Obligations Act 2015. It is good to know that each contract needs to stipulate the conditions of termination, but it is suggested to talk to a lawyer for more details in this matter.
 
 

Short facts about the Croatian Trade Register

 
The Croatian Trade Register is the institution in charge of company incorporation among other things, under the management of the Chamber of Commerce in Croatia. When registering a company in Croatia, the first thing to do is to verify the validity of the business name, and then start creating the Articles of Association, the main documents of the company. The registration process of a company also must be done with the Financial Agency of Croatia that approves the application and sends it to the Croatian Trade Register. The Certificate of Incorporation of a company in Croatia is issued by the Croatian Trade Register and shows that your business is legally registered in this country. The Trade Register in Croatia deals with other important things too, like the verification of companies, the institution providing access to a large database of company information, under certain conditions. If you would like to know more about the Croatian Trade Register, feel free to talk to one of our lawyers in Croatia.
 

Sole traders in Croatia

 
There is also the possibility of acting on your own in terms of business and have activities as a sole trader in Croatia. This is the simplest form of business that must respect the Crafts Act in Croatia, applied by the Minister of Crafts, Small and Medium Enterprises in Croatia. In terms of taxation, sole proprietorships in Croatia are quite advantageous. A 12% income tax rate applies to companies having profits of around EUR 3,500 or HRK 26,400 per year. Both local and foreign entrepreneurs can start as sole proprietorships in Croatia and then, if the business develops, transform it into a new business structure, with the help of the Croatian trade Register and other institutions in charge.
 
 

What are the main points of interest for foreign investors?

 
Because of the strategic locations and amazing landscapes, Croatia is considered an excellent holiday destination. This explains why the services sector is so well developed. The Croatian budget is receiving most of its funds from the tourism sector. The banking sector is also very developed especially since most of the banks were privatized. Other developed sectors in Croatia which attract every year foreign investments are the telecommunications, pharmaceutical, IT, engineering and manufacturing.

 

Why invest in Croatia?

 
The government is giving many incentives to the foreign investors in its desire to attract them. For example, there is no difference between local investors and the foreign ones. Many double tax treaties were signed in order to avoid the double taxation of incomes both in Croatia and in the country of origin. Another good reason to invest in Croatia is the fact that the local workforce is very well trained and adaptable and a big majority is multilingual. Since the tourism sector is very developed, the infrastructure is also extremely advanced. This grants the access to all the Croatian facilities and also eases the processes of the trading sector. The tourism, agriculture, and the manufacturing sector are among the fields that attract a large number of investors on a yearly basis. The following numbers and stats show in large lines the business and economy direction of Croatia:
 
  1. Around USD 32,884 million was the total FDI stock for Croatia in 2018.
  2. Around 20% of the investments made between 1993 and 2017 came from the Netherlands, one of Croatia’s main business partners.
  3. According to the World’s Bank 2020 Doing Business report, Croatia ranks 51st out of 190 worldwide economies.
  4. 63 is the Global Competitiveness Index for Croatia in 2018.
 

What is the minimum share capital of a company?

 

A private limited liability company must have a minimum share capital of at least HRK 20,000, while a public limited liability company must provide a minimum share capital of HRK 200,000.

 

How quickly can I incorporate my company in Croatia?

 

Usually, the incorporation term doesn’t exceed one week if all the requirements are met.


 

Tax registration in Croatia

 

Before commencing any activities on the Croatian market, entrepreneurs need to register for tax purposes and to apply for the tax identification number. This is a simple registration process for which the Tax Administration in Croatia supports the companies with the online platforms and the services offered in this sense. The income tax, the VAT, the excise tax and contribution for mandatory insurance are among the tax responsibilities of both local and foreign entrepreneurs in Croatia. It is good to know that the tax authorities in Croatia issue the Personal Identification Number or the PIN  for all foreigners willing to set up the operations on the market in a legal manner.
 

Setting up a bank account for a company in Croatia

 

All types of companies in Croatia need to open a bank account for the minimum share capital. This is normally a provisory account which can later be linked to the firms’ financial operations. Entrepreneurs can choose from a wide range of financial institutions, local or foreign for future banking activities. In this sense, the company’s documents in original and also a set of copies are necessary at the time of opening a bank account, but the institution can also ask for additional papers. Depending on the business relations and the direction of your enterprise, the bank account in Croatia can help newly-registered companies in this country with bank loans and credits for future investments. All the legal aspects in this matter can be offered by our team of advisors in Croatia.
 

EORI registration in Croatia – What you need to know

 
EORI is the unique number assigned to companies operating in the import and export sector inside the European Union. This identification number can be obtained from the Croatian Ministry of Finance and particularly from the customs department if your company is a VAT payer in Croatia. Companies that are not registered for VAT will have to observe specific requirements in this sense. In terms of documents, the certificate of registration, the VAT number, and a power of attorney are necessary for EORI registration in Croatia, also considering that the entire process might prolong for 30 days or less. Companies wanting to activate in the trading sector in Croatia will have to respect the Union Customs Code and the declarations involved, like the Entry Summary Declaration and the Single Administrative Documents. If you are interested in obtaining the EORI number, we recommend you to talk to our team of lawyers in Croatia for in-depth assistance and legal advice.
 

Special licenses and permits in Croatia

 
Telecommunication, banking and insurance, import and export, fishing and hunting, air and road transportation are only a few of the sectors where licenses and permits are needed. The construction sector requires complete attention as there are several requirements imposed by the Land Registry, the Fire Inspectorate, the Local Water Authority, the Sanitary Inspectorate and by many other authorities. Such licenses and permits are needed for companies registered in the construction field in Croatia. Legal assistance can be provided by our team of attorneys in Croatia to foreign entrepreneurs interested in a business license or permit necessary at the time of company registration.
 

What are the reasons to open a company in Croatia?

 
 
Most of the investors appreciate in a huge proportion the business climate quality of a country before deciding on a specific business to open. The tax structure will also play a major role in the field of investors who would rather focus on extra investments instead of paying a multitude of taxes. Croatia is among the countries that offer both a respected business environment and a relaxed tax structure. More than that, the country benefits from an excellent geolocation with several port exits to the Adriatic Sea that ease the business path and relations with numerous countries, allowing entrepreneurs from abroad set up companies in the tourism sector, a well-developed business sector in Croatia. Dubrovnik, Split or Zadar are three important destinations with full potential and possibilities for opening travel agencies, hotels, logistic companies or developing a business in the fishery sector. Other reasons to consider when opening a business in Croatia are related to the start-up expenses like low incorporation fees or a minimum share capital or HRK 20,000 for opening a limited liability company in this country. If you would like to start a company in Croatia and you need legal advice in this direction, you can easily get in touch with our team of lawyers in Croatia and address your inquiries.
 

Investing in Croatia – Benefits for entrepreneurs

 
There are already more than 20,000 companies established in Croatia, a good sign that this country is a strong and appreciated business hub for domestic and foreign entrepreneurs wanting to thrive in their field of interest. The Croatian government worked on offering good business conditions and also several incentives among which no profit tax for 10 years on foreign business in Croatia. The investment legislation in Croatia offers equal business chances for local and international entrepreneurs with the possibility of establishing branches, subsidiaries, partnerships or sole proprietorships. In addition to a proper business climate, the local workforce highlights the reasons why foreigners should choose to set up their activities in this country, taking advantage of a multi-skilled labor force in most of the domains. Just like any country part of the European Union, Croatia aligns with the general rules linked to the European funds which are at the disposal of any entrepreneur looking for business expansion in this country. If you decide on making investments in Croatia and if you would like to know the registration process of a company in Croatia, it is recommended to ask for assistance and legal support throughout the whole process of incorporation. Our local lawyers know the business rules and the legal formalities for opening a company in Croatia and can guide foreigners towards the proper ways for a fast implementation of the firm.
 

Procedure for registration in the Croatian Trade Register

 
The first step is to submit an application for registration. The application must be given to the Financial Agency of Croatia, another entity that handles registration. This is the entity that will first determine if the required documents are valid and complete. Along with the application, notarized documents must be attached. One of these notarized documents is the articles of incorporation which contain:
 
  •  the company’s name,
  •  the initial capital raised,
  •  the names of the shareholders,
  •  the names of the members of the board.
 
If all these are present, the Financial Agency forwards the application to the Trade Register of Croatia. If the Croatian Commercial Court deems it necessary, it may require additional information to be submitted. If everything is in order, the Trade Register will issue a certificate of registration which serves as proof of membership in the Croatian Chamber of Commerce. The issuance of the certificate of registration is also the beginning of the legal personality of the company. Our attorneys in Croatia can help you prepare the documents needed for registration. They can also help you obtain the EORI number.
 

Access to Croatian Trade Register

 
Under Croatian Law, information about registered companies with the Croatian Trade Register is made accessible to the public. This information can be accessed online through an electronic database called the Croatian Company Directory. This is a very useful tool for businessmen who want to do a background check on companies that they are transacting with. You can consult our Croatian lawyers on the data that you can check with the Company Directory.
 
If you need help in starting a company and assessing its initial costs, don't hesitate to contact our Croatian lawyers.