Croatia: Business Environment

Accounting Rules

Tax Year: The fiscal year begins on January 1st and ends on December 31 of the same year or any 12-months period approved by the tax authorities.
Accounting Standards: In Croatia, International Financial Reporting Standards (IFRS) are mandatory for big companies and for those that have their bonds on the stock exchange market. All the others can also report respecting the rules set by Croatian Committee for Financial Reporting Standards, a 9-members professional body appointed by the government.
Accounting Regulation Bodies: Croatian Committee for Financial Reporting Standards (in Croatian only)
Accounting Reports: These documents must contain: a balance sheet, a profit and loss account, a cash-flow report, a review of the changes of the authorized capital, comments and annexes.
Publication Requirements: The Croatian entrepreneurs are subjected to the obligation of information about their financial situation. The documents of financial information must be drafted in Croatian and expressed in the national currency (the Croatian kunas) usually once per calendar year. A business year can be different from the calendar year only if there is an exception or if the activity is a seasonal one. The account book and the ledger must be kept up to date and then kept during at least 11 years.
Professional Accountancy Bodies: Croatian Association of Accountants and Financial experts , (in Croatian only)
Certification and Auditing: The financial documents of firms with more than 30 million croatian kunas (approx. 4.3 mil. EUR) annual sales should be checked by an independent external auditor who will have the responsibility to guarantee the sincerity and the accuracy of the given information.

Deloitte, KPMG, PricewaterhouseCoopers, Ernst & Young.

The State Audit Office

Croatian Auditing Chamber (in Croatian only)
Accounting News

Tax Rates

Consumption Taxes

Nature of the Tax: Value Added Tax - Porez na dodanu vrijednost (PDV)
Tax Rate: 25%
Reduced Tax Rate: Exempt: public interest activities, postal service, hospital services and health care services, social care services, financial services, insurance transactions, real estate transactions, services closely linked to sports, etc.
5%: bread, milk, technical and educational books, medicine (approved by the State Health Insurance Office), surgical material for implants, scientific magazines, cinema tickets, newspapers and magazines published daily.
13%: on accommodation services, daily and periodic newspapers/magazines (if not for advertising purposes), oils and fats for human consumption in accordance with special legislation, supply of water (with the exception of water marketed in bottles or any other packaging), white sugar produced from sugar cane or sugar beet, car seats, babies’ nappies, baby food and processed grain food for infants and small children, concert tickets, restaurants and catering services, urns and coffins, seedlings and seeds, fertilizers and pesticides and other agrochemical products, animal food, excluding food for pets, live animals, fresh or cooled meat, fresh meat products, fresh fish, fresh crabs, fresh vegetables, fresh fruit and nuts, fresh eggs, writers, composers and artists’ services and related royalties, etc.
Other Consumption Taxes: Excise taxes are levied on oil products, tobacco, alcoholic beverages, soft drinks, coffee, electricity, natural gas, cole and coke, personal cars (except for electric cars) and luxury products.

Corporate Taxes

Company Tax: 18%
Tax Rate For Foreign Companies: Non-resident companies are subject to the same tax rates as local firms but only on their Croatia-source income. Companies qualifying for the Investment Promotion Act may be eligible for a 50% or 100% deduction in income tax rate for a five to ten-year period, depending on the size of the enterprise, the amount of the investment, and the number of new jobs created. The minimum amount of investment in fixed assets is EUR 50,000 with three new jobs created for micro-enterprises, and EUR 150,000 with five new jobs created for small and SMEs and large enterprises.
An entity is resident if it is incorporated and registered in Croatia or if it is controlled and managed in the country.
Capital Gains Taxation: Capital gains are included in taxable income and taxed at the standard corporate income tax rate of 18% (or 10% for companies whose annual income is below HRK 7.5 million).
Main Allowable Deductions and Tax Credits: Amortisation of tangible and intangible assets is tax-deductible at rates ranging from 5% to 50%. Land, financial assets, cultural monuments and works of art are not affected by this depreciation. Goodwill cannot be amortised for tax purposes.
Start-up expenses can be deducted in the year in which they were incurred.
Interest charges are deductible up to the higher of 30% of taxpayer's earnings before interest, tax, depreciation, and amortisation (EBITDA), or to EUR 3 million. Interest expenses that cannot be deducted in their year of occurrence may be carried forward to a period of three years.
Bad debts are generally deductible. Receivable write-offs that are made in line with the regulations on bankruptcy that apply to special interest entities, are also deductible.
Donations to charitable organisations are deductible up to 2% of the previous year's taxable income. This rate can be exceptionally higher if donations are made according to ministerial policies on the funding of special activities or programmes.
Fines and taxes are not tax-deductible.
Tax losses can be carried forward up to five years. The carryback of losses is not permitted.
Other Corporate Taxes: The purchase of real estate is subject to a property transfer tax of 3% of the market value of the property in question. The acquisition of property subject to VAT is exempt from property transfer tax. There is no regular property tax to pay.
Social security contributions payable by the employer amount to 16.5% of salary. Companies with more than 20 employees not complying with prescribed requirements for disabled employees are obligated to pay a monthly fee amounting to 30% of minimal salary (HRK 4,687.50 in 2022).
Employers are not liable for payroll tax, but they are required to withhold between 20% and 30% of their employees' gross income.
The annual membership fee to the Croatian Chamber of Commerce (mandatory) varies between HRK 42 and HRK 3,973 depending on the type of company.
No stamp duties are levied in Croatia. Companies may be subject to forest contributions, tourism contributions, and cultural monument contributions.
Other Domestic Resources: Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Croatia	Eastern Europe & Central Asia	United States	Germany
Number of Payments of Taxes per Year	12.0	13.9	10.6	9.0
Time Taken For Administrative Formalities (Hours)	206.0	226.2	175.0	218.0
Total Share of Taxes (% of Profit)	20.5	36.5	36.6	48.8

Source: Doing Business - Latest available data.

Individual Taxes

Tax Rate

Personal income tax
HRK 0 - 360,000	20%
Over HRK 360,000	30%
Interest on savings accounts	10%
Municipal tax	Ranging from 0% to 18%

Allowable Deductions and Tax Credits: All individuals are entitled to a flat monthly deduction from their income up to HRK 4,000. The monthly allowance for a family dependent is HRK 1,750 per dependent (HRK 2,500 for second child, HRK 3,500 for third child), plus HRK 1,000 for disabled persons.
Other deductions include social security contributions on wages of new employees (in the first year of their employment), health insurance contributions and scientific research expenses (for self-employed individuals).
Gross income is reduced by the individual’s pension contribution payments (calculated at a rate of 20% of gross income from employment and at a rate of 10% of certain other gross income).
Special Expatriate Tax Regime: Resident taxpayers are subject to worldwide taxation in Croatia. Non-resident taxpayers are liable for their Croatian-source income.
Income earned by individuals who are employed or work as a freelancer for a foreign employer not registered in Croatia and who have the status of a “digital nomad” under the new Foreigners’ Act is exempt from taxation.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: See the list of the Double Taxation Agreements
Withholding Taxes: Dividends: 0 (resident company)/10%/20% (if paid to a company in a blacklisted country)/10% (for individuals), Interest: 0 (resident company)/15%/20% (if paid to a company in a blacklisted country)/10% (for individuals), Royalties: 0 (resident company)/15%/20% (if paid to a company in a blacklisted country)/20% (for individuals).
Bilateral Agreement: Croatia and Mauritius concluded a Double Taxation Agreement.

Sources of Fiscal Information

Tax Authorities: Overview of Croatia's tax measures in response to Covid-19
Croatian Tax Administration Office
Other Domestic Resources: Croatian Tax Legislation
Invest in Croatia - Tax information

Intellectual Property

National Organisations: The body responsible for industrial property is the State Office for Intellectual Property.
Croatia signed the Agreement of Paris concerning the protection of industrial property and the agreement which establishes the World Intellectual property Organization (WIPO). They are a part of the Agreement of Madrid, on the international register of the trademarks.
International Membership: Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Patent Law 2007	20 years, may be renewable in some cases
Trademark Trademark law 2007	10 years (renewable for indefinite number of times)	Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design Design Law	5 years (renewable, for a maximum of total 25 years)
Copyright Copyright law	70 years after author's death	WIPO Copyright Treaty

Legal Framework

Independence of Justice: The judicial system suffers from numerous problems, most notably inefficiency. Judicial personnel shortages have led to a huge backlog of cases, though it decreased in the last years. Excessive trial length and a lack of enforcement of judicial decisions, especially in cases related to the repossession of property owned by Serbs, plague the system. Despite some improvements, a lack of impartiality among the local courts remains a problem.
Equal Treatment of Nationals and Foreigners: Yes, the law prohibits discrimination based on gender, age, race, disability, language, or social status. However, some cases of discrimination against women, ethnic Serbs, and Roma are still reported.
The Language of Justice: Official language also in justice is Croatian. The exception are officially recognized ethnical minorities: Serbs, Bosnians, Italians, Hungarians, Albanians, Slovenes and Rumanians. They have right to use their language in the local courts where their minority rights are officially recognized.
Sources of the Law and Legal Similarities: The main source of the law is the constitution of 1990 (revised in 2001) which is based on civil law system. However, the Croatian legislation has been widely harmonizing with the EU legislation.
Checking National Laws Online: Official Gazette of Croatia publishing all legislation (in Croatian only).

Standards

National Standards Organisations: Croatian Standards Institute
State Office for Metrology
Integration in the International Standards Network: Croatian Accreditation Agency is a full-member of European Co-operation for Accreditation (EA) and associate member of International Laboratory Accreditation Cooperation (ILAC). The rules of accreditation are in line with European standards 45000 and international standards 17000 according to the rules and guidelines of EA, ILAC and IAF.

Croatian Standards Institute is a member of: International Organisation for Standardization (ISO), International Electrotechnical Commission (IEC), European Committee for Standardization (CEN), European Committee for Electrotechnical Standardization (CENELEC), European Telecommunications Standards Institute (ETSI).
Classification of Standards: Accreditation is done according to the international (ISO) and European (EN) standards that are recognized as Croatian (HRN) ones.
Online Consultation of Standards: Catalogue of Croatian Standards
Certification Organisations: Croatian Accreditation Agency
State Office for Metrology

Business Practices

General Information: Passeport to trade - Croatia, Business etiquette in Croatia
Commisceo Global, Croatia Guide: Language, Culture, Customs and Etiquette
Opening Hours and Days: Banks open from Monday to Friday usually from 8.00 AM to 7.00 PM, on Saturday from 8.00 AM to 12.00 AM
Public administrations are opened Monday to Friday from 9.00 AM to 5.00 PM
Shops are opened Monday to Friday from 8.00 AM to 8.00 PM and on Saturday from 8.00 AM to 3.00 PM

Public Holidays

New Year	1st January
Epiphany	6th January
Easter Monday	Movable feast
International Labor Day	1st May
Corpus Christi	Movable
Anti-fascist Resistance Day	22nd June
Statehood Day	25th June
Victory and Homeland Thanksgiving Day	5th August
Assumption Day	15th August
Independence Day	8th October
All Saints' Day	1st November
Christmas	25th and 26th December

Periods When Companies Usually Close

New Year

1 week between Christmas and New Year

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