Investment Environment

Incentive measures for investment projects in Croatia are regulated by the Investment Promotion Act (OG, No. 63/22) and are applicable to projects in:

• manufacturing-processing activities
• development and innovation activities
• business support activities
• activities of high value-added services

Minimum investment required in order to become a beneficiary of incentive measures:

• € 50,000 together with creating at least 3 new jobs for microenterprises
• € 150,000 together with creating at least 5 new jobs for small, medium and large enterprises
• € 50,000 together with creating at least 10 new jobs for centers developing information and communication systems and software
• € 500,000 for investment projects in modernizing and increasing business process productivity
• € 3,000,000 together with creating at least 15 new jobs for investment projects based on economic activation of inactive assets owned by the Republic of Croatia

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 and Sustainable Development, 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).

The minimum period for maintaining the investment and newly created jobs linked to investment is five years for large enterprises, and three years for small and medium-sized enterprises, but no less than period of use of the incentive measures.

No less than 25% of justified expenses of investment must be secured by holder of incentive measures and cannot contain any kind of aid granted by the state.

The application to be granted a status of a beneficiary of incentive measures must be submitted to the Ministry of Economy and Sustainable Development before the start of investment!

Ministry of Economy and Sustainable Development

Address: Grada Vukovara 78, 10000 Zagreb, Croatia

Telephone: +385 1 6106 111

New vacancies have to be filled within 3 years after the start of investment.

Minimal period for maintaining investment project:

• SME - 3 years
• Large enterprises - 5 years

4. AID FOR DEVELOPMENT AND INNOVATION ACTIVITIES

Investments in technological development and innovation activities are eligible for grants for the purchase of equipment/machinery for up to 20% of actual eligible costs of purchasing equipment/machinery, where the maximum amount is equivalent to € 500,000.00, provided that the purchased equipment/machinery is classified as high-tech.

5. INCENTIVES FOR THE CAPITAL COSTS OF THE INVESTMENT PROJECT IN PRODUCTION AND MANUFACTURING SERVICES

Conditions for exercising the right to implement incentive measures for capital costs of an investment project: where the investment in fixed assets amount to at least € 5 million, subject to the creation of a minimum of 50 new jobs.

6. INCENTIVES FOR LABOR – INTENSIVE INVESTMENT PROJECTS 

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:

According to the Act on Investment Promotion (OG 102/2015, 25/2018, 114/18, 32/20, 20/21), 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.

Witholding tax

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 for which the withholding tax is paid at a rate of 10%)
• 10 % – 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.

Tax exemptions*

• 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 10% 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.
 

The educational system in the Republic of Croatia is divided into preschool education, elementary education, secondary education and higher education.

Preschool 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

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

Secondary education is implemented through a network of more than 700 secondary schools that are divided according to the program they offer as follows:

1. Gymnasiums (general or specialised) – offer a program that lasts at least four years
2. 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
3. Art schools (music, dance, visual arts and others) – offer a program of at least four years

Higher eduaction

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 128 higher education institutions in Croatia.

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:

English:

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

Italian:

Juraj Dobrila University of Pula

Source: www.mzos.hr; www.studyincroatia.hr