Why Invest in Croatia?
Business-oriented environment, an efficient, innovative, highly qualified and multilingual workforce, cost competitiveness, an exceptionally favourable geostrategic position, attractive incentives as well as professional and free services provided to investors are just some of the reasons to invest in Croatia.
Foreign direct investments in the Republic of Croatia
From 1993 to the end of 2022 Croatia received foreign direct investments in the amount of 42.5 billion €.
Foreign investors’ status
Pursuant to the Companies Act, domestic and foreign companies operate under equal conditions. A foreign investor may establish or participate in establishing a company and may acquire rights and/or obligations under the same conditions as any domestic investor. Foreign investors, with their registered head office or residence in a country that is not a member of the WTO, should satisfy condition of reciprocity.
The Constitution of the Republic of Croatia stipulates several guarantees for foreign investors. In particular, it stipulates that all rights acquired by investing capital will not be limited by law or other legal act, and that foreign investors are guaranteed free transfer and repatriation of profits and invested capital.
A foreign person who wishes to acquire ownership of real estate in Croatia has the right to do so only if there is a mutual possibility for Croatian persons to do the same in the foreign person’s country. This restriction does not relate to citizens and legal entities from EU Member States. Such persons acquire right of ownership of real estate under preconditions valid for exercising property rights by citizens of the Republic of Croatia and legal entities with their seat in the Republic of Croatia, except on exempted properties, i.e., on agricultural land determined by special law and protected areas according to special law. A foreign investor may establish a company in Croatia which, as a domestic legal entity, may acquire property without restrictions.
The Republic of Croatia does not screen foreign direct investments. However, it is part of the mechanism for screening of foreign direct investments into the Union for reasons of security or public order in accordance with Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, in relation to foreign direct investments not undergoing screening.
Incentive measures for investment projects
Incentive measures for investment projects in the Republic of Croatia are regulated by the Investment Promotion Act (OG 63/22) and relate to investment projects in:
production and manufacturing activities,
development and innovation activities,
business support activities and
activities of high value-added services.
Aid cannot be granted for fishery, aquaculture and primary agricultural production sector; steel, coal, synthetic fibres and transport sector as well as the related infrastructure; energy generation, distribution and infrastructure; broadband infrastructure; research infrastructure; shipbuilding sector; financial and insurance sector; the health, welfare and education sector; trade sector; construction and real estate sectors; and sectors of water management, waste management and environmental remediation, for the mining and quarrying sector; and for the transport and storage sector.
Tax incentives for micro-entrepreneurs,
Tax incentives for small, medium-sized and large enterprises,
Grants for eligible costs arising from new jobs related to investment projects,
Grants for eligible training costs related to investment projects,
development and innovation activities,
business support activities, and
high value-added service activities.
Grants for capital costs of the investment project,
Grants for labour-intensive investment projects,
Incentives for investment projects stemming from economic activation of inactive assets owned by the Republic of Croatia,
Tax incentives for the modernisation of business processes – automation, robotisation and digitalization of production and manufacturing processes.
Incentive measures may be used by entrepreneurs registered in the Republic of Croatia who invest the following minimum amounts in fixed assets:
€ 50,000.00 in addition to creating a minimum of 3 new jobs for micro entrepreneurs,
€ 150,000.00 in addition to creating a minimum of 5 new jobs for small, medium-sized and large entrepreneurs,
€ 50,000.00 in addition to creating a minimum of 10 new jobs for centres developing information and communication systems and software,
€ 3,000,000.00 in addition to creating a minimum of 15 new jobs for investment projects based on economic activation of inactive assets owned by the Republic of Croatia
€ 500,000.00 for projects to invest in modernisation and increasing productivity of business processes
Initial investment aid is calculated as a percentage of the investment value and based on eligible costs of the investment. Eligible investment costs are:
Tangible (value of property/buildings and equipment/machinery) and intangible assets (rights to patents, licenses, know-how), or
2 years of gross salary
The minimum period for maintaining the investment and newly created jobs linked to investment for a specific investment is 5 years for large enterprises and 3 years for micro, small and medium-sized enterprises, but not less than the period for utilising the incentive measures.
Profit tax incentives
* the amount of support is calculated as a percentage of eligible costs for creating a new job and refers to those persons registered in the unemployment register for a duration of at least 6 months, regardless of length of service and level of education, persons over 50 registered in the unemployment register and persons without employment length of service registered in the unemployment records of the Croatian Employment Service, and persons whose employment contract has been terminated due to the opening of bankruptcy proceedings. In all, 40% of the aid amount will be granted for the employment of other categories of workers.
** Development and innovation activities:
Activities that affect the development of new and significant improvement of existing products, production series and processes and production technologies.
*** Business support activities:
Business activity centers are:focused on the separation and / or concentration of business activities, such as: data centers, product design and design centers, multimedia contact centers and information technology development centers
Logistics and distribution centers are: aimed at establishing and building high-tech logistics-distribution centers that enable: intermodal transport of goods, packaging and handling of goods to significantly improve logistics and distribution operations within business processes and delivery of goods, and relate to investment projects in the manufacturing industry
Centres for development of information and communication systems and software for: for: development and application of information systems; separation of information systems management; development of telecommunication-network operations centers; and the development and application of new software solutions.
**** High value-added service activities:
Creative services activities: activities in the field of architecture, design, media communication, promotion and other activities in the field of creative industry
Activities of sustainable high value – added tourism services that provide the beneficiary after the expiration of the three – year period of implementation of the investment project with the operational tourism business for a minimum of six months during the calendar year, and represent: 1. projects of catering and tourist facilities for accommodation, categories of at least four stars, types: hotel, aparthotel, tourist settlement and camps 2. projects of catering and tourist facilities: heritage hotel and diffuse hotel, created by the restoration of cultural and historical heritage, in accordance with the regulations governing the protection and preservation of cultural property 3. projects of accompanying contents of all previously mentioned types of accommodation facilities, including: health, congress, nautical, cultural, golf, sports-recreational, entertainment-thematic and tourist-ecological content, as well as other innovative contents in high value-added tourism 4. nautical tourism projects, categories of at least four anchors 5. amusement and theme park projects
The activities of industrial engineering services are focused on: modeling, design, restructuring and optimization of production and manufacturing business processes.
Aid for development and innovation activities
Investments in technological development and innovation activities are eligible for grants for the purchase of equipment/machinery for up to 20% of actual eligible costs of purchasing equipment/machinery, where the maximum amount is equivalent to € 500,000.00, provided that the purchased equipment/machinery is classified as high-tech.
Incentive measures for the capital costs of the investment project in production and manufacturing activities
Conditions for exercising the right to implement incentive measures for capital costs of an investment project: where the investment in fixed assets amount to at least € 5 million, subject to the creation of a minimum of 50 new jobs.
Incentive measures for labour-intensive investment projects
Aid for investment projects based on economic activation of inactive assets owned by the Republic of Croatia
Inactive property in terms of this Act consists of land and/or buildings owned by the Republic of Croatia and managed by the Ministry of Physical Planning, Construction and State Property, where such property has not been put into function and which does not perform any specific economic activity. In terms of this Act, inactive property with unresolved property rights, property on which there is any type of registered lien and property that is designated as having the status of agricultural, forest or tourist land is not deemed as inactive property owned by the Republic of Croatia.
*After the lease expiration or reaching maximum aid intensity, the aid beneficiary may enter into an Agreement with the Ministry of Physical Planning, Construction and State Property in order to purchase the property or extend the contract on leasing inactive assets owned by the Republic of Croatia without the use of aid for economic activation of inactive assets owned by the Republic of Croatia for a period of ten years.
According to the application procedure for the use of incentive measures pursuant to the Investment Promotion Act, an entrepreneur wishing to acquire the status of Holder of Incentive Measures is obliged to submit an application in the Croatian language for the use of incentive measures using the form as prescribed by the Ministry of Economy and Sustainable Development before the start of the investment project.
Source: The Ministry of Economy and Sustainable Development in the Republic of Croatia