The Benefits of Investing in Croatia

updated on
May 21, 2023
The Benefits of Investing in Croatia

Croatia is among the most strategically placed countries in Southeastern Europe. It boasts quality infrastructure, making it a perfect destination for investors and financiers. The local government has brought structural reforms and tax incentives to make it more feasible for investors. As stipulated by the Company Act of the Croatian laws, the foreigners and locals have equal investment chances.

The Advantages of Investing in Croatia

The country is one of the top investment destinations in the European Union. It has a growing economy and a stable political system. It has a well-established legal system, making it suitable for international investors. This section explores some of the country's strong points.

• An inclusive collection of entrepreneurial measures and laws by the local government.
• Government support for creating new job opportunities.
• Monetary assistance applied to capital spending
• Quality return on investments.
• Perfect charges for operations in the EU market.
• Impressive tax incentives.
• Many grants applied to the research and advancement activities.
• Thousands of foreign companies have already chosen the country for investment.
• Skilled multilingual workforce.

The Major Sectors for Investing in Croatia

Croatia has a diversified economy. The local government has taken several measures to attract foreign investors. These measures include tax incentives for companies and employment measures. All these make the investment climate ideal and perfect for foreigners. If you are looking to start a business in Croatia, this section explores some of the major sectors you can invest in.

• ICT industry
• Textile industry
• Tourism
• Precision engineering
• Pharmaceutical industry
• Food industry
• Automotive industry

Understanding the Investment Incentives in Croatia

The country has various laws regulating the business world. On these legal provisions, you will find everything regarding foreign investors and their obligations. It is crucial to note that foreign investors have equal rights as domestic investors. However, there are a few incentives provided to foreign investors. Here are some of the legislations you will find under these laws.

• There are enticements for small entrepreneurs.
• You get tax incentives in the form of the lower income tax rates in the corporate sector.
• You are eligible for labor incentives.
• You get state assistance for the introduction of innovative ideas.
• You enjoy the return of gains and capital when the termination of the investment comes into play.
• Get help for the innovation of new working areas (the help is non-refundable).
• You are eligible for zero refund grants for buying equipment and machinery.

Tax Measures in the Investment Legislation

Here are some of the tax measures in this legislation for foreign investments.

• Investors enjoy lower income tax rates for the corporate sector. It can go as low as 0% provided the conditions are met.
• There are tax exemptions for the reinvested profits.
• Investors get state help for innovative, development, and researching projects.
• The legislation enforces certain agreements to enable you avoid double taxes.
• The real estate transfer taxes are not paid when a business or corporation acquires a property (the company must be Croatian).
• As long as the foreigners are from the EU, they will not be paying any withholding taxes on their dividends and shares as long as they are 12%. (it only applies when they own not less than 10% capital for more than 24 months).

Other Business Structures for Foreign Entrepreneurs in Croatia

The Croatian Chamber of Commerce, the Croatian Employers Association, and many other associations in Croatia have been creating a favourable environment for investors. The Croatian Chamber of Commerce has provided quality assistance to investors looking to open businesses. For example, they have set up meetings to inform the investors on what kind of companies they can open and how best to do it.

There are very many business models for foreigners in Croatia. You only need to know what works best for you as long as you respect company formation laws in the country. For example, branches and subsidiaries overseas can run under the regulations of a limited liability company.

All these structures come with particular features and this depends on the particular business and the preferences of the investors. It is important to note that a branch does not qualify to be a legal establishment since it runs under the parent company's rules. For it to conveniently run, you only need to register the branch. The process is not complicated as long as the conditions are similar to the parent company.

On the other hand, subsidiaries are considered independent entities benefiting from the parent company. They can run under the regulations of public limited liability. The only condition is that the share capital must be not less than HRK 200,000. It should then be deposited into a local bank account.

How to Make Investments in Croatia

Croatia is one of the luckiest countries. It has a perfect geographic location that fuels sustainability in business collaborations with other countries. It also boasts a stable economy and thousands of business opportunities for locals and foreigners. What's more? The country's government has exciting tax incentives that make the business environment even friendlier.

When looking for investment opportunities, investors can try their hand in the food business, the tourism field, ICT, textile, manufacturing, pharmaceuticals, and the automotive field. These are the most developed sectors, and investors will surely have success in them. It is also important to note that the country has very low costs for bringing new staff on board, and you (as an investor) will hugely benefit from the multilingual workforce for the business. 

As an entrepreneur, you do not need to be a citizen of Croatia or have a work permit. You may even choose to open your business in another European country if you plan to operate there for an extended period. You need to prepare the necessary documents for opening a sole proprietorship. You must comply with the laws as set by the Company Act, the Handicraft Act, and the Croatian Trade Register rules.

Regardless of the kind of company or business you wish to open and carry out in Croatia, it is crucial get the help of an expert in the formation of a company rules and regulations. These experts will help you go through the entire process without breaking a sweat.

Understanding the Legal Requirements for Investments in the Country

There are several laws surrounding investments in Croatia. They are concerned with foreigners who are setting up businesses in the country. Nevertheless, even when the laws for local and foreign investors are the same, several regulations apply to the maritime, rail, and airfields. This section explores some of the government's incentives for investors.

• Repatriation of the profits.
• Low taxes for choosing the local workforce.
• Reduction in the corporate income tax.
• How you acquire the equipment and machines and the grants involved.

It is crucial to note that small investments that take the shape of small companies in the country are also subjected to various enticements.

What Other Benefits Do Foreign Investors in Croatia Get?

• Tax incentives on income and profits will increase the return on investment. These tax incentives can be as high as 20% of your investment. This is a lucrative benefit, especially if you are a businessperson.
• You get government for the development of great ideas, which is the backbone of the economy. This will ensure that you have sufficient funds to invest in developing your business and creating new jobs.
• You do not have to pay any registration fees for your company. This is something that investors love about Croatia due to its low-cost nature. It saves you a lot of money and time because you can start your company without spending much money. You can also get loans from lenders without waiting for long periods like other countries.
• You enjoy favorable tax treatment when it comes to repatriation of gains and business funds upon termination or completion of the investment period. This means that you get a refund upon termination or completion of the investment period, which is also something investors love about Croatia because they get their money back quickly without having to pay huge taxes at the same time.
• You enjoy non-refundable aid for creating new workplaces; you do not have to pay any taxes for creating new workplaces in Croatia if you are an investor.
• You can enjoy a very flexible labor market. This means that you can get the best employees from the country at very affordable rates. It is something investors love about Croatia because they have many qualified workers who are willing to work for them. They also get to hire the best ones for their business, which saves them a lot of money in salaries.

The Start-up Costs in Croatia

Croatia boasts a very attractive startup cost for foreign investor businesses. When forming a company, an investor must know what is required from their side. Here are a few fees that apply.

• HRK 20,000 for limited liability companies and the subsequent registration charges.
• You need at least HRK 200,000 in terms of share capital for the joint stocks.
• Zero minimum share for general and limited partnership companies in the country.
• Reduced registration fees that come along with the preparation of documents and notaries.

Apart from Croatia's generosity to foreign investors and its business climate, the country also backs up its excellence in numbers. 

The country also has reduced its administrative charges and made its laws easier to protect an investor’s intellectual property. All of these contribute to the attractiveness of Croatia as an ideal investment opportunity for foreigners. It is among the reasons why most foreigners find the investment weather friendly.

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