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

Address: Grada Vukovara 78, 10000 Zagreb, Croatia

Telephone: +385 1 6106 111

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

Domestic payer who pays interest, dividends, profit shares, royalties and other intellectual property rights (reproduction rights, patents, licenses, copyrighted marks, designs or models, manufacturing procedure, production formulas, sketch, plan, industrial or scientific experience, and other similar rights) to foreign persons that are not natural persons, and who pays market research services, tax and business counselling, and auditing services to foreign persons.

• 15% except for dividends and shares in profit for which the withholding tax is paid at a rate of 10%,
• 25% on all types of remunerations and services to non-residents and on services of market research, tax and business counselling and auditing, when paid to persons having their headquarters or place of effective management, or supervision of business, in the countries placed on the EU list of non-cooperative jurisdictions for tax purposes, with which the Republic of Croatia has no double taxation treaties applicable,
• 10% for performances of foreign performers.

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.
 

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