Pictures provided by Zagreb Tourist Administration
Croatia is a relatively developed country in the Balkan region with a good economic base. Although Croatia was affected by the European debt crisis after the 2008 economic crisis, its economy has been in recession for six years. Thanks to the strong growth of export and tourism, as well as the expansion of domestic demand and the influence of low oil prices, Croatia's economy, bottomed out in 2015, with GDP expanded by 1.6%. In 2016, Croatia's GDP even grew by 2.8%.
In recent years, Croatia's political situation is stable, and its financial system is relatively firm. After joining the EU, relevant policies and laws are fully connected with the EU’s. More and more Chinese investors begin to pay close attention to this country and look for corresponding investment opportunities.
How to treat the investment environment of Croatia correctly? What should we be noted when investing in Croatia? What are the procedures for company formation? We have collected the information on the "Croatian investment guide" and sorted them out appropriately.
The potential of attracting foreign investment awaits for being explored
According to the world investment report 2017 released by the United Nations, in 2016, Croatia absorbed USD174.5 million in foreign direct investment and USD42.2 million in OFDI (outward foreign direct investment).
Croatia's foreign investment is mainly distributed in the financial industry, wholesale and retail industry, real estate industry, telecommunications industry, chemical industry, etc. The main feature of foreign investment in Croatia is that the investment fields are narrow, mainly in the financial industry and the wholesale and retail industry. These two industries attracted 67.46% of Croatia's total investment.
Croatia's foreign investment sources are mainly concentrated in EU countries, with the top 10 sources accounting for 82.54% of Croatia's total investment.
Top 10 foreign investment sources in Croatia
Business cost is relatively low
Croatia has a high quality of labor force. In addition to the shortage of labor force in the peak season of tourism, there is plenty of labor force in other industries. In 2015, the average unemployment rate in Croatia was 16.3%.
According to the statistics of Croatia's National Bureau of Statistics, in March of 2015, the annual average salary of employees in corporate enterprises was 8055 Kuna before tax and 5711 Kuna after-tax, and about 60% of the employees did not reach the average income.
In March of 2015 employee’s income in Croatia
|
Income (unit: Kuna) |
Proportion (unit: % ) |
|
2500 or less |
5.4 |
|
2500-3500 |
19.2 |
|
3500-4500 |
18.3 |
|
4500-5500 |
16.6 |
|
5500-6500 |
15.4 |
|
6500-8000 |
12.0 |
|
8000-10000 |
6.5 |
|
10,000 or more |
6.6 |
Source: Croatian NBS(National Bureau of Statistics)
Zagreb has the highest salary level. In terms of the industry, the occupations with the highest monthly income are advertising and market development, air transport, finance, computer, senior managers, and telecommunications.
In big cities such as Zagreb, Split, Rijeka, and Osijek, the office rents are about 15 Euros per square meter per month.
In 2015, the average price of houses in Croatia was 10668 Kuna per square meter. The average price of the houses in Zagreb was about 11797 Kuna, and that in other cities was 9617 Kuna.
Foreign investment access rules
The government department in charge of domestic investment and foreign investment in Croatia is the Ministry of Economic Affairs, whose main responsibilities are to examine and approve investment programs, provide technical and advisory services for foreign investors, negotiate and implement specific investment projects together with other ministries and local competent departments, and solve problems arisen in the implementation of projects.
Investing in Croatia, the industries that require Concession are as follow:
The above types of Croatian investment and construction need to be gained through international public bidding.
In Croatia, the forms of enterprises through investment include general public enterprises, joint-equity public enterprises, joint-equity enterprises, limited liability companies, economic interest consortiums, and dormant partnerships.
The minimum share capital for setting up a joint-stock company is 200000 Kuna (around 28000 euros), and the nominal value of one share is at least 10 Kuna; the minimum share capital for setting up a limited liability company is 20000 Kuna (around 2800 euros), and the individual share capital is at least 200 Kuna. a foreign natural person can engage in handicraft jobs in Croatia only when he has obtained a handicraft license.
Now, the major way of foreign investment in Croatia is M & A, and there are very few Greenfield investments. Croatia’s joint-equity enterprise takeover law also stipulates that those who purchase more than 25% of the shares of listed enterprises shall report to the Croatian Securities Commission.
Croatian taxation system
Corporate tax
Croatia acts as territorial tax laws. At present, Croatia has established a tax system with income tax and value-added tax as the core. In addition to the differences in local taxes, Croatia acts as a unified national tax system. Foreign companies and foreigners pay the same tax as legal persons and natural persons of Croatia, and the enterprise profit tax is 20%.
Croatia's central tax includes individual income tax, enterprise profit tax, value-added tax, special tax (car, ship, aircraft, gasoline, wine, beverage, tobacco, coffee), etc.; provincial tax includes inheritance tax, motor vehicle and ship tax, etc.; municipal tax includes consumption tax, corporate tax, public area use tax, etc.
According to the enterprise profit tax law of Croatia, the deadline for declaring dutiable goods shall be no later than 4 months after the end of the tax year.
Individual income tax
From January 1, 2015, Croatia started to implement the newly revised tax laws and regulations. The deduction before tax of individual income tax was increased from 2200 Kuna to 2600 Kuna. The individual income tax is still divided into three grades which are 12%, 25%, and 40%.
The threshold of 40% individual income tax rate was increased from 8800 Kuna monthly net income to 13200 Kuna. The Croatian government hopes to stimulate consumption through the adjustment of the individual income tax and reverse the continuous downward trend since 2008. If the enterprise invests its profits in long-term assets, it will get tax relief.
VAT and the Consumption Tax
Sales of goods and services in Croatia are subject to pay VAT by month. The tax base of VAT is the turnover of goods or services, that is, the balance after subtracting the VAT from the value of goods sold or providing services. Small businesses can pay VAT after invoicing or after receiving payment.
Since March of 2012, the basic tax rate of value-added tax in Croatia has been raised from 23% to 25%, the VAT rate of edible oil and grease, children's food and grain processing food for infants, not bottled and not packaged drinking water, white sugar has been reduced from 23% to 10%, the VAT rate of the hotel service industry is 10%, and the VAT of bread, milk, books and some drugs and other products is exempted.
From January of 2015, Croatia began to levy land value increment tax on real estate development.
In addition, the consumption tax of Croatia's cars, boats, and airplanes varies according to the price, length (boats), and the number of seats (airplanes). Consumption taxes on gasoline, ardent spirits, wine, fruit wine, non-alcoholic drink, and tobacco are also different
Encourage foreign investment by various means
In recent years, the Croatian government has announced a series of infrastructure development plans and allowed and encouraged foreign investors to participate in local infrastructure investment. At the same time, tourism is the pillar industry in Croatia. At present, the Croatian government has listed tourism-related industries as an important encouraging investment field. For example, the newly approved Porec peninsula project of the KPG is a strategic investment project in this field.
Another good thing is that Croatia has newly issued the investment incentives law, and specific preferential policies have been defined for foreign investment in taxation, tariff, and other aspects. On September 21 of 2012, investment promotion and improvement of investment environment law was issued, giving specific preferential policies to encourage foreign investment and increase employment. The specific tax preferences are:
For the above investment projects, the investment horizon should not be shorter than the time limit of enjoying the incentives. Large enterprises’ duration should last for at least 5 years, and small and medium enterprises’ duration should last for at least 3 years.
Preferential policies for the special economic zones
In order to ensure the implementation of some preferential policies, Croatia has set up 12 special economic zones, which provide the following preferential policies:
Applicable parks mainly include warazidin Park, buyerova Park, osiek Park, Zagreb Park, cook janovo Park, Pula port Park, Sprite Park, ukova Park, riyeka port Park, etc.
The investment priority areas are processing activities, innovation and development activities, business support activities (customer/customer contact center, logistics center, software development center), high value-added service activities, tourism service activities, and labor-intensive projects.
Main procedures for company formation
If you want to set up a company in Croatia, the main procedure is to first apply for a tourist visa from the Croatian embassy in your country (generally a single entry and exit, with a maximum stay time of three months), and process the relevant formalities in the notary office, register the company in the commercial court, and apply for a business permit from the Croatian DOI (Department of the Interior) by the company manager or director (only one person). The business permit is equivalent to a temporary residence and multiple-entry visa. Others of the company apply for work permit and temporary residence from Croatian DOI (Department of the Interior).
It usually takes a month to register a company.
For company formation in Croatia, relying on the partners with local professional service teams will make investment more convenient and appropriate.
Extra chapter: Invest in Croatian tourism
The tourism industry plays an important role in Croatia's economic development. In 2018, the number of tourists in Croatia reached 19.7 million, making it the most popular tourist destination in the whole Mediterranean region. The economic income generated from the tourism industry accounted for about 20% of Croatia's GNP, and its positive impact also promotes the retail industry, processing industry, and summer seasonal employment to booming.
|
years |
Number of tourists |
Year-on-year growth |
Duration of Stay |
Year-on-year growth |
|
2018 |
4,456,792 |
6% |
28,443,129 |
3% |
|
2017 |
4,223,233 |
10% |
27,511,615 |
10% |
|
2016 |
3,852,114 |
8% |
25,010,890 |
6% |
|
2015 |
3,570,668 |
9% |
23,668,568 |
6% |
|
2014 |
3,272,280 |
2% |
22,274,541 |
1% |
|
2013 |
3,195,564 |
5% |
22,032,695 |
7% |
Source: Istria County Tourist Offices
Tourism-related industries are concentrated on the coast of the Adriatic Sea. The holiday paradises along the Adriatic coast and small island group have many tourism services from entertainment, catering to souvenirs. At the same time, due to its numerous wharves and yacht clubs with more than 16000 berths, its navigation tourism industry is also very developed. In addition, the attractive medieval cityscape and rich cultural activities along the coast of Stella Peninsula also make cultural tourism quite prosperous.
Like mentioned above, as the second developed region after Zagreb in Croatia.
This triangular Peninsula, located in the northeast of the Adriatic Sea, was conquered by the Ancient Roman Empire around the 2nd century BC, and was successively ruled by Byzantine Empire, Lombardy Kingdom, and the Venetian Republic. During this period, it is a tourist resort with a long-standing reputation for the European nobles and later the public. After the Renaissance, the European tourism industry began to flourish. In 1815, the Adriatic coast part of the Venetian territory, which was annexed by the Austro-Hungary. Therefore, the whole peninsula also became the territory of the Austro-Hungary. The "luxury hotel" of Opatija and the “Empire Hotel " of Dubrovnik built-in 1890 were the first resort hotels at that time.
Istria Peninsula has become a new favorite of European tourism in the past few years. From the steadily increasing number of tourists and the length of stay in recent years, it can be seen that the Istria Peninsula attaches great importance to the tourism industry. The following is the statistical data from relevant departments.
Such a superior and convenient transportation environment can provide a tourism paradise for more than 300 million people within 300 kilometers.
The Istria region, known as "Little Tuscany", is preferred by famous institutions and investors from all over the world. Goldman Sachs in 2018 invested in company Arenaturist, a local hotel operation group in Istria. Another top-notch private equity investment company from the United States, Advent international with the EBRD together, have invested in the local financial system and private banks in Istria.
Many stars have also invested in castle villas and private manors which have a profound historical background, such as Sir Anthony Hopkins, the Oscar winner from the UK, Brad Pitt, F1-Schumacher, as well as some British aristocrats, famous European politicians, and the upper celebrities, who are investors and owners of private manors in Istria.
As Croatia's richest region, Istria, like Croatia's Shanghai, gathered the most cutting-edge fashion art, worldwide food, the healthiest living conditions, and the paradise-like luxurious enjoyment.
Porec Peninsula is located on the northwest coast of the Istria Peninsula, between the tourist resorts Porec and Novigrey, close to the beautiful Adriatic Sea, it is one of the most attractive tourist destinations in Tar-Vabriga.
Due to the unique geographical location of the coast, the Porec peninsula is very suitable for the development of multifunction tourism real estate projects, including golf resorts, beach houses, high-end resort hotels, tourist-gambling entertainment center, etc. Thanks to the mild Mediterranean climate of the Istria Peninsula, high-end leisure sports such as golf and tennis can be played here almost all year round.
The Porec peninsula project is a regional large-scale development plan planned by the government, which is expected to directly improve the overall quality of tourists in Croatia, promote the development of the local service industry and retail industry, and stimulate the employment market.
This project has been aroused wide concerned and welcomed by local governments and communities. According to the professional report, this project will directly create hundreds of new jobs in this region and play a positive role in the development of local enterprises.
In 2016, the project of Porec Peninsula and its golf resort was officially approved by the government of Croatia and jointly managed by Croatia Ministry of National Assets and the Ministry of tourism. In 2019, KPC was authorized by the government to become the operating partner of this project.
As a member of the Kylin Prime Family Office, Kylin Prime Capital, KPC devoted itself to helping high net worth families and individuals achieve quality management of wealth and lifestyle worldwide. This cooperation with Croatian authority is another expansion strategy of its global investment, and also provides another ideal path for clients to enter Europe.
