As a member of the European Union, Croatia offers an attractive business environment for foreign investors thanks to its strategic location, developing infrastructure, and investment-friendly legislation. Having adopted the Euro as its currency as of 2023, Croatia has strengthened its financial integration within the EU while also providing investors with an environment free from exchange rate risks. With significant potential in sectors such as tourism, information technology, and renewable energy, the country serves as an important gateway for businesses looking to enter the European market.
Country Overview
- Official Name: Republic of Croatia (Republika Hrvatska)
- Capital: Zagreb
- Population: Approximately 3.9 million (as of 2024)
- Official Language: Croatian
- Religion: Christianity (predominantly Roman Catholic)
- Climate: Mediterranean on the coast, continental inland
- Time Zone: UTC+01:00
- Country Code: +385
- Currency: Euro (EUR)
Types of Companies in Croatia
| Company Type | Description |
|---|---|
| Limited Liability Company (Društvo s ograničenom odgovornošću – D.O.O.) | The most common type of company in Croatia. Minimum share capital is HRK 20,000. Requires at least one shareholder (individual or legal entity) and one director. Attractive due to EU access and favorable tax system. |
| Joint Stock Company (Dioničko društvo – D.D.) | Requires a minimum capital of HRK 200,000 (approx. €27,000). Must have at least one shareholder and one director. Suitable for large-scale operations and public offerings. Foreigners can be shareholders or directors. |
| Limited Partnership (Komanditno društvo – K.D.) | Formed by at least one general partner (fully liable) and one limited partner (liable only up to their contribution). No minimum capital required. Only the general partner may represent the company externally. |
Taxation in Croatia
Understanding the tax structure is crucial for investors planning to set up a company in Croatia in terms of costs and strategy. The country’s two-tier corporate tax system and various VAT rates play a decisive role in corporate tax planning.
Corporate Tax
In Croatia, corporate tax is applied in two tiers based on the company’s annual income. The rate is 10% for companies with annual income up to 1 million euros, and the standard rate is 18% for companies above this amount. This structure aims to encourage small and medium-sized enterprises (SMEs).
| Oran Türü | KDV Oranı | Uygulama Alanları |
|---|---|---|
| Standart Oran | %25 | Çoğu mal ve hizmetler (genel perakende satışlar, elektronik ürünler, otomobiller vb.) için geçerli ana KDV oranıdır. |
| İndirimli Oran I | %13 | Otel ve restoran hizmetleri, çocuk bezleri, kadın hijyen ürünleri, basılı yayınlar gibi günlük ihtiyaçlara yönelik belirli ürün ve hizmetlerde uygulanır. |
| İndirimli Oran II | %5 | Sosyal öneme sahip temel gıda ürünleri (ekmek, süt vb.), reçeteli ilaçlar, tıbbi cihazlar ve kitaplar için geçerlidir. |
This structure is a fair and competitive system developed to support the growth of SMEs.
VAT
The VAT system in Croatia is one of the most important tax areas that investors should pay attention to. VAT rates and areas of application are as follows:
| Rate Type | VAT Rate | Applicable Areas |
|---|---|---|
| Standard Rate | 25% | The main VAT rate applied to most goods and services (general retail sales, electronic goods, automobiles, etc.). |
| Reduced Rate I | 13% | Applied to specific goods and services related to daily needs such as hotel and restaurant services, diapers, feminine hygiene products, publications. |
| Reduced Rate II | 5% | Applicable to socially important goods and services such as basic food items (bread, milk, etc.), prescription medicines, medical devices, and books. |
VAVAT Registration
Mandatory VAT Registration: In Croatia, businesses with an annual turnover exceeding EUR 60,000 are required to register for VAT.
Voluntary VAT Registration: Companies may also opt for voluntary VAT registration before reaching this threshold. This option allows businesses to:
- Avoid the risk of penalties for late registration in the future,
- Establish more professional trade relationships with suppliers,
- Claim VAT refunds on input costs.
As a member of the European Union, Croatia offers a stable and advantageous business environment for foreign investors, thanks to its attractive tax rates, diverse company structures, and adoption of the Euro.
For professional assistance throughout the entire process—from company formation to tax planning—feel free to contact us.
