A Complete Guide to Open a Company in Croatia
Croatia is becoming an increasingly popular destination for entrepreneurs, with over 3.5 million people in a growing market within the European Union. In 2024, Croatia’s economy will continue to grow strongly, with foreign investments contributing to its progress. Starting a business in Croatia can provide access to local and international markets, especially within the EU, offering numerous expansion opportunities. The country’s business-friendly environment and strategic location make it an ideal choice for entrepreneurs worldwide. In this blog post, we will learn about the steps involved in opening a company in Croatia, including the legal requirements, business structures, and the overall process for a smooth establishment.
Types of Business Entities in Croatia
When starting a company in Croatia, one of the first decisions you must make is choosing the appropriate legal structure for your business. Several options are available depending on the company’s size, the number of owners, and the level of liability protection required.
Private Limited Liability Company (d.o.o.)
Croatia’s most common type of company is the Private Limited Liability Company (d.o.o.), which is ideal for small to medium-sized enterprises. This company structure offers limited liability protection, meaning the owners’ assets are not at risk if the business incurs debt.
- The minimum capital requirement for establishing a company is HRK 20,000, which is approximately EUR 2,700.
- A company can be established by a single person or multiple shareholders, offering flexibility in ownership.
- The key benefits include limited liability, an easy setup process, and a flexible management structure.
Simple Limited Liability Company (j.d.o.o.)
The Simple Limited Liability Company (j.d.o.o.) is a simplified version of the d.o.o. structure, designed for startups or small businesses that require a lower capital investment.
- The minimum capital requirement is HRK 1, which is approximately EUR 0.13.
- A single founder or multiple shareholders can establish a company.
- The key benefits include lower capital requirements and a flexible management structure.
Public Limited Company (d.d.)
A Public Limited Liability Company (d.d.) is suitable for larger enterprises or companies seeking to list their shares on the stock exchange.
- The minimum capital requirement is HRK 200,000, approximately EUR 27,000.
- Ownership is structured through publicly traded shares with multiple shareholders.
- The key benefits include the ability to raise capital by issuing shares to the public.
General Partnership (j.t.d.)
A General Partnership (j.t.d.) involves two or more partners who share unlimited liability for the business’s debts. This structure is best suited for small businesses with multiple owners.
- The key benefits include being simple to set up with no minimum capital required.
- A key consideration is the unlimited liability for partners, which means their assets are at risk.
Limited Partnership (k.d.)
A Limited Partnership (k.d.) includes both general partners (with unlimited liability) and limited partners (whose liability is restricted to their investment).
- The key benefits include flexibility in structuring the business with active and passive partners.
- A key consideration is that the general partner holds unlimited liability.
Sole Proprietorship (obrt)
A Sole Proprietorship (obrt) is an individual business structure where the owner has unlimited liability. This is the simplest business form in Croatia, commonly used by freelancers and small-scale service providers.
- The key benefits include being simple and inexpensive to set up, with full control retained by the business owner.
- A key consideration is that the owner is personally liable for all business debts.
Branch Office (predstavništvo)
Foreign companies can establish a Branch Office (predstavništvo) in Croatia to conduct business activities without creating a separate legal entity.
- The key benefits include a quicker and simpler process tailored for foreign businesses.
- A key consideration is that the branch office must be registered with the Croatian Court Registry and comply with Croatian laws.
Non-Profit Organisation (udruga)
A Non-Profit Organization (udruga) is suitable for businesses set up for social, educational, or charitable purposes.
- The key benefits include exemptions from certain taxes and fees, making it cost-effective.
- A key consideration is that profits cannot be distributed to members or founders.
Step-by-Step Guide to Opening a Company in Croatia
Now that you’ve decided which business structure is best suited for your needs, here’s a detailed guide to the steps involved in opening a company in Croatia.
Step 1: Choose a Business Structure
The first step is choosing a legal structure for your company. As outlined above, the most common options are the d.o.o., j.d.o.o., or d.d., depending on the size and nature of your business. For most small businesses, the d.o.o. is the preferred option due to its flexibility and limited liability protection.
Step 2: Name the Reservation
Before registering your company, you must choose and reserve your company name. It must be unique and comply with Croatian regulations. You can check name availability through the Croatian Financial Agency (FINA).
Note: Your chosen business name cannot be the same as an existing registered company, and it cannot use Croatian national symbols or other protected terms without prior approval.
Step 3: Prepare and Notarise Required Documents
To officially establish your company, you’ll need to prepare several documents, including:
- Articles of Association: This document outlines the internal rules and the company’s structure.
- Shareholders’ agreement: If there are multiple shareholders, this document will define the rights and responsibilities of each party.
- Personal identification: Passports for foreign investors or Croatian identification cards for local investors.
In Croatia, documents must be notarised by a public notary. This step can typically be done at the notary’s office and may require physical presence, depending on the bank’s requirements.
Step 4: Open a Business Bank Account
Once the Articles of Association are notarised, the next step is opening a business bank account in Croatia. You’ll need to deposit the required minimum capital for your company (HRK 20,000 for d.o.o. and HRK 1 for j.d.o.o.) into the account.
Most Croatian banks will require the physical presence of at least one director or shareholder to open the account. However, some banks may offer online services for foreign investors.
Step 5: Register with the Court Registry
Once your documents and bank deposit are ready, you can submit the registration application to the Croatian Court Registry. This process involves:
- Submitting the notarised documents.
- Paying the registration fee (approximately EUR 100).
- Receiving confirmation of registration from the court.
Once registered, your company will officially exist as a legal entity in Croatia.
Step 6: Register for Taxes
After registering your company, you must register with the Croatian Tax Administration. You will receive a Tax Identification Number (OIB) for all business transactions in Croatia.
If your company’s annual turnover exceeds HRK 300,000 (approximately EUR 40,000), you must register for VAT. This registration is necessary for companies selling goods or services in Croatia or the EU.
Step 7: Set Up Accounting and Bookkeeping
Croatian law requires companies to keep accurate accounting records. Depending on the size and nature of your business, you may need to hire an accountant or use an accounting service to ensure compliance with tax laws.
- Annual financial statements must be submitted to the Croatian authorities.
- Auditing: Companies with higher revenue or certain thresholds may be subject to an annual audit.
Post-Incorporation Obligations
Once your company is up and running, there are several ongoing obligations to be aware of:
Register Employees
If you plan to hire employees in Croatia, register them with the Croatian Institute for Health Insurance and the Croatian Pension Insurance Institute. This registration ensures that employees can access health insurance and contribute to the national pension scheme, meeting mandatory legal requirements. Croatian labor law mandates several employee benefits, such as paid holidays, sick leave, and maternity leave, to safeguard workers’ rights. Additionally, employers are responsible for managing payroll, which includes accurately calculating salaries, handling tax withholdings, and adhering to all applicable regulations.
Obtain Additional Licenses and Permits
To operate legally in Croatia, your business may require additional licenses or permits depending on its activities. Businesses in regulated sectors such as food, healthcare, or construction often need sector-specific permits to comply with local laws. These licenses are crucial for meeting industry standards and ensuring smooth operations. It is important to research and obtain all necessary approvals for your specific industry to avoid legal complications and maintain compliance with Croatian regulations.
Ongoing Compliance
Once your company is established, you must ensure compliance with Croatian regulations, including:
- Filing annual tax returns.
- Submitting VAT returns if applicable.
- Keeping accurate records of all financial transactions.
Cost Breakdown for Opening a Company in Croatia
The costs of setting up a company in Croatia will vary depending on the business structure you choose, the services you require, and the size of your company. Here’s an overview of typical costs:
Incorporation Costs
- The registration fee for the Court Registry is around EUR 100.
- Notarisation of documents typically costs EUR 50–100, depending on the complexity.
- The minimum capital required is HRK 20,000 (approximately EUR 2,700) for a d.o.o. or HRK 1 (roughly EUR 0.13) for a j.d.o.o.
- Accountancy and legal fees for setting up a company are approximately EUR 500–1,000.
Ongoing Operating Costs
- Accounting services start at EUR 100 per month for bookkeeping and tax compliance.
- Employee costs, including the average gross salary, range from EUR 1,000–1,500 per month, depending on the industry.
- The corporate tax rate in Croatia is 18%, with potential tax incentives available for small businesses.
Advantages of Opening a Company in Croatia
Croatia offers several advantages to entrepreneurs looking to establish a business:
Access to EU Market
As a member of the European Union, Croatia provides access to over 450 million consumers in the EU market. This allows businesses based in Croatia to expand their reach and trade freely with other EU countries.
Favourable Taxation System
Croatia has a relatively low corporate tax rate of 18%, making it an attractive destination for businesses. Small businesses may qualify for lower rates, and there are incentives for research and development.
Support for Foreign Investors
Foreign investors are treated equally to Croatian citizens regarding business regulations, meaning foreign-owned companies can operate without additional barriers. Additionally, the government offers support programs for startups, including grants and incentives.
Business Environment
Croatia has a modern infrastructure, a skilled workforce, and competitive wages compared to other EU countries. The cost of living is lower, which makes it an attractive option for entrepreneurs looking to reduce operating costs.
Challenges to Consider While Opening a Company in Croatia
While Croatia offers many benefits, there are also challenges that entrepreneurs may face:
Bureaucracy and Administrative Delays
Although the process for opening a business in Croatia is straightforward, bureaucracy can sometimes cause delays. Entrepreneurs may face challenges in navigating administrative procedures, so planning for additional time is crucial.
Language Barrier
Most business dealings in Croatia are conducted in Croatian, and legal documents are generally in the local language. Hiring a translator or working with a local legal expert is essential to ensure compliance with all regulations.
Hiring and Employee Regulations
Understanding Croatian labour laws is essential when hiring employees. Croatia has strong worker protections, and employers must know legal requirements regarding employee benefits, working hours, and dismissal procedures.
How to Use Financial Services for Smooth Operations
Managing finances efficiently is crucial for the success of any business. You can use international financial platforms like Wise to streamline payments and manage multi-currency accounts. Wise allows businesses to hold and exchange multiple currencies at competitive rates, reducing the cost of international transfers.
Hiring local financial experts is another smart option to ensure your business complies with Croatian tax laws and regulations. With the right tools and expertise, you can focus on growing your business without worrying about administrative hurdles.
FAQs
Can Foreigners Start a Business in Croatia?
Yes, foreigners can start a business in Croatia. They are treated equally to local entrepreneurs. You can register a company from the EU or a non-EU country, provided you meet the legal requirements and obtain the necessary permits.
How Much Does It Cost to Open a Company in Croatia?
The costs depend on the business structure. For a d.o.o., the minimum capital is HRK 20,000, with additional fees for registration, notarization, and accounting, averaging EUR 1,000–2,000 for initial setup. Costs vary for other entities.
How to Open a Limited Company in Croatia?
To open a limited company (d.o.o.), reserve a name, prepare and notarise documents, deposit HRK 20,000 as capital, and register with the Court Registry. Additional steps include tax registration and opening a business bank account.
How Much Is a Work Permit in Croatia?
A work permit in Croatia typically costs around HRK 560 for the application fee and an additional HRK 240 for a biometric residence card. Costs may vary based on the type of permit and your nationality.
How Do I Get PR in Croatia?
Permanent residency in Croatia requires living in the country continuously for five years. You must have a valid temporary residence permit, proof of income, accommodation, and meet integration requirements, such as learning basic Croatian language skills.
