1. Doing Business in Croatia
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New Orleans
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2. Croatia General info: 4,3m inhabitants Major economical info:
As of Croatia is going to be part of EU
Croatian Kuna is linked to € (1 € = app 7,5 HRK) → most companies get loans in € currency.
Possibility of finance through Pre-Accession Funds of EU (i.e. for agricultural and food processing industry there is possibility to get even 50% of investment needed)
Liquidity problems in Croatia (mostly by state owned companies) →new Financial stability Act as of that should secure liquidity in economy.
In a process of encourageing small business and major investors in Croatia
Political stability:
2 major parties (democratic party and socialistic party) → government change happened in January 2012

3. Business entities 2 major business entities:
Limited liability company (d.o.o.)
Most frequent type of company in Croatia
Minimal capital = HRK (app €, 3.500$)
Opening LLC takes app. 2 weeks, cost – app HRK (app 1.000€, 1.300$)
Company is liable to settle its debts with all its assets. Owners are not personally liable for the obligations of the company, unless the Company Act provides otherwise.
Members of company management board can be foreigners
Stock company (d.d.)
Minimal capital = HRK (app €, $)
→ we are in process of introducing „small LLC”, which can be found with a minimal capital of 10 HRK

4. Accounting and Auditing Requirements:
Accounting Requirements
Croatian FRS = short version of IFRS. In case Croatian FRS does not prescribe how it should be booked, company needs to use IFRS.
Auditing requirements
Ending with the financial statements for 2013, all companies with income greater then app. 4m EUR (5,2 m $) should have an audit
After Croatia joins EU, all medium sized and big companies will be subject to obligatory audit → app. 50% less obligatory audits.
Size of company:
Accounting standards:
Small
Croatian FRS
Medium sized
Big
IFRS as used in EU

5. Taxation in Croatia (I):
VAT
One of the highest VAT rates in EU – 25% standard rate (increased due to the crisis within a period of 3 years for 3% - i.e. from 22%)
Additional rates: 10% for tourism, 0% for milk, bread and books
→Until the end 2012, Croatia needs to adopt new VAT tax law, due to the harmonization with EU laws. We are expecting some major changes in VAT regulations.
Profit tax
Standard rate 20%
Tax losses can be forwarded for 5 years
→ there are no indications that Profit Tax Act will change with entrance of Croatia in EU.

6. Taxation in Croatia (II):
Withholding tax
15% for parent company interest, dividends, market research services, audit services, tax consulting services and business consulting service, royalties and other intellectual property rights (copyright, patent, licensing, trade mark, design or pattern, production procedure, production formulas, drafts, plan, industrial or scientific experience and similar rights)
→In case of double taxation treaty – taxation is based on double taxation treaty. Croatia has signed a double taxation treaty with most of the EU members.
20% of all services paid to persons who have their permanent establishment or headquarters in the countries, except EU, in which general or average nominal profit taxation rate is lower then 12,5%

7. Taxation in Croatia (III):
Personal taxation:
Tax rates: 12%, 25% and 40% for payroll
Calculation of a monthly payroll in gross amount of HRK (app €)
Position: %
Amount in HRK:
1. Bruto payroll:
22.500
2. Pension security:
20%
4.500
3. Personal allowances
2.200
4. Income taxation
4.714
5. City tax
18%
849
6. Net payroll
12.437
7. Taxation on payroll
15,2%
3.437
8. TOTAL PAYROLL COST
25.920

8. Taxation in Croatia (IV):
Personal taxation (II):
Taxation of dividends = starting = 12%;
Taxation of interest rate received by bank = 0%;
Taxation of interest rate received by a company (i.e. owned by the physical person) = 40%
Taxation of capital gains = 0%

9. Tax incentives in case of new investments:
Amount of investment
Amount of employees:
Max. years of tax incentive
Profit tax deduction
Manufacturing activities
Technological development and innovation
mil €
mil € 10 5
50%
mil € 30 15
65%
mil € 50 25
85%
8.0+ mil € 75
100%

10. Labor law: Minimal pay: 2.800 HRK (app. 375€)
There is a new labor law expected (final date –i.e. with entrance of Croatia in EU), that should be more flexible regarding:
hiring and firing employees;
possibility to be employed part time at several employees;
possibility to work from home (i.e. for mothers with small children);
Employment of pensioner.
Due to the high unemployment rate of young people, there is a possibility to employ young employees without previous employment without a payment (those people are receiving HRK from Government).

11. More about investing in Croatia:
Croatia Your Business Partner.PDF
How to Start Up an Enterprise in Croatia.PDF
Croatian Tax System.PDF
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