Company formation in Croatia
The most common type of company in Croatia are the d.o.o. - similar to English limited company. Such company has limited liability up to the minimal amount of its share capital of 20,000 HRK (around EUR 2,700). It must have at least one member of the company - natural person or legal entity - and at least one director.
Name of the company can be in any official language of an EU member state.
can be in any official language of an EU member state, which is helpful for those who do not want to use a local language.
Business activities are already included in the Articles of Association of the company and there is no need to register them additionally as it is the case in some other European countries (Czech Republic, Germany, etc.). Nevertheless, in order to carry out certain
These will be included in the Articles of Association of the company and there is no need to register them additionally as it is the case in some other European countries (Czech Republic, Germany, etc.). Nevertheless, in order to carry out certain activities, it is necessary to have an authorised representative, insurance or special state license. However, in case that company is active in the tourism business, renting business or in trading activity it is not necessary to additionally register those activities.
The Founder of the company can be any legal entity or natural person. No special requirements exist. A valid passport and identity card are required by Companies register. In case that the founder of the company is a legal entity it is necessary to provide a certificate of good standing (extract from the Companies register) of the company founder.
The founder of a company can be any legal entity or natural person. No special requirements exist. A valid passport and identity card are required by Companies register. In case that the founder of the company is a legal entity it is necessary to provide a certificate of good standing (extract from the Companies register) of the company founder.
can be any natural person (no legal entity can be director of Croatian company) competent for legal acts. Every citizen of EU can be director of the company. Special rules apply if the director is a non-EU citizen.
This is the registered address of company within Croatia, this is needed for registration of the company in Companies register. A virtual office can be provided practically anywhere in Croatia.
The use of an accountant is mandatory for every company regardless of the activity or size. Many say it is important to use local accountant however, Croatia work to EU standards and any experienced ACCA or CIMA qualified accountant using Sage would be able to produce accounts.
COMPANY FORMATION PROCEDURE
Transactions can be made electronically or in cash. Base capital remains blocked during company formation procedure.
After the company is registered, company Seal is made and the company is registered on National Statistic Office, after which Business account is open.
It takes between 1-2 weeks for the overall procedure to finish and for you to be able to create your own Croatian company.
SEAT, VIRTUAL OFFICE
The seat of the Croatian company has to be registered at the national Companies register.
For those who have yet to secure a premises a virtual office. This can cut your cost to minimum assuring that you are only paying services you really need for your business.
SPECIAL LAWS AND REGULATION CHECK
On your request, we will check if your business activity is subjected to any special regulations and we will make sure that once you open a company you can run your business smoothly.
If you are EU citizen:
- As EU citizen you are eligible to buy real estates in Croatia under the same conditions as Croatian citizens. You cannot buy agricultural land and real estates within Parks of Nature, as well as protected real estates (e.g. historical buildings, castles, etc.).
- After the real estate is bought you can: use it, rent it, sell it, pawn it, give it, renovate, build and do anything as any Croatian owner.
- You just need as EU citizens, before you sign Purchase Contract, obtain Personal ID number in Tax Office (it is formality done within 1 day) for eventual tax payments etc. Same Law applies on you as for any Croatian citizen.
If you are not EU citizen:
- Non-EU citizens can buy real estates in Croatia based on Reciprocity agreement between two countries. That means that if Croatian citizen is allowed to buy real estate in your home country you can also buy real estate in Croatia.
- To buy a real estate in Croatia you need to have the consent of Ministry of Justice. Only citizens of countries with Reciprocity agreement with Croatia can obtain that consent.
- If your home country doesn’t have signed Reciprocity agreement with Croatia, you can incorporate a company in Croatia and then buy a real-estate on in a company name. In these cases you don’t need a consent from Ministry of Justice.
- If you are a non-EU citizen and you want to rent out your real estate then it is advisable to incorporate a company in Croatia and rent a real-estate through the company.
Purchase of land and real estate is exempt from VAT and is subject to 5% transfer tax, paid by a buyer.
For citizens of non-EU and non-EEA countries:
- Citizens of the countries that need a visa to enter Croatia should apply for Travel visa first in the nearest embassy to come in Croatia and start formation procedure.
- In order to own a company in Croatia and be employed in it as Director, a company must have base capital of 200,000 HRK (around EUR 26,500) and at least 3 Croatian citizens should be employed.
- If you do not own a company but you will be the Director, a company must have base capital of 101,000 HRK (around EUR 13,300) and at least 3 Croatian citizens should be employed.
- After a company is registered, and 3 Croatian citizens are employed we can submit on your behalf through POA application for Temporary Residence. Waiting period for approval is around 45 days.
- Director’s salary should be at least high as an average salary in Croatia for the previous year.
TAXATION IN CROATIA
Corporate income tax rate is 20%. The corporate income tax base is the accounting profit adjusted for deductions and disallowed items. Expenditures are considered to be expenditures if they are related to the taxpayer's business activity.
Value Added tax (PDV)
Being an EU member state Croatia falls under the EU VAT regime meaning that it has adopted EU VAT Directives into their own legislation.
- Standard VAT rate is 25 %.
- Reduced rate of 13% applies to all tourist accommodation services and catering services.
- Some services are VAT exempt, e.g. insurance and financial services, medical services, education, welfare etc.
- VAT registration is compulsory when the annual turnover exceeds HRK 230,000.
Croatia Real Estate Transfer Tax
Purchase of land and real estate which is exempt from VAT are subject to 5% transfer tax.
Croatia has a high tax regime, but this shouldn’t affect you unless much of your income derives from sources within the country–or you become a tax resident. Tax residents are generally taxed on their worldwide income.
Based on physical presence, you are a tax resident in Croatia if you stay for at least 183 days under circumstances that indicate your visit is not temporary. The 183-day visit may overlap calendar years.
Based on maintaining a home in Croatia, you are a tax resident if you have a residence there at your exclusive and continuous disposal for at least 183 days under circumstances that indicate you intend to keep and use that accommodation. Again, this period may overlap calendar years. Your length of stay is not relevant, nor does it matter if the accommodation is owned or rented.
This may seem surprising, but if you do not receive a salary, consultancy fees, or a similar income in Croatia, then the tax situation is much more favourable, particularly for retirees.
Croatia has no wealth tax, and the following income is tax-free:
• Pensions received from abroad
• Interest payments on loans, investments, securities, deposits with financial
institutions, and similar incomes
• Capital gains from trading securities and other financial assets
• Capital gains from real estate if you occupied the property, held it more than three years, or sold it to your spouse or an immediate family member
• Inheritance and gifts are exempt from taxation in the first line of succession. (In other cases, there is a flat rate of 5%.)
Foreigners are subject to tax on the following forms of Croatian income:
• Income from employment that is received in Croatia or from work in Croatia
• Income from a business in Croatia
• Income from real estate
• Income from one’s own or chartered marine ships/aircraft used for dispatching goods or people from Croatian ports/airports
• Income from independent personal activities (deliveries of goods or rendering of services) that are carried out in Croatia or abroad, and are used for the performance of an activity in Croatia
• Income from capital or insurance that originates from within Croatia.
Current income tax rates are as follow:
• Up to 36,000 kuna ($6,120): 15%
• Over 36,000 kuna ($6,120) and up to 81,000 kuna ($13,770): 25%
• Over 81,000 kuna ($13,770) and up to 252,000 kuna ($42,840): 35%
• Over 252,000 kuna ($42,840): 45%.
Corporate income tax is typically 20%. Croatia’s financial regulations also allow for municipalities to charge an income surtax. However, this will not affect you if you are not tax domiciled in Croatia. Equivalent to a poll tax, the amount payable is taken on income tax thresholds and is levied at varying rates throughout the country:
• A commune can charge at a rate of up to 10%
• Cities with a population of below 30,000 can charge at rates of up to 12%
• Cities with a population over 30,000 can charge at rates of up to 15%
• The city of Zagreb, the capital, can charge as much as 30%.
That’s what municipalities can charge, and it needs pointing out that Dubrovnik already goes for the full whack of 15%. In other places, though, the surtax is often way under those figures. Some examples: Split, 10%; Rijeka, 6.25%; Zagreb, 18%.