Domestic and foreign investors who plan to invest in business activities in the Republic of Croatia can count on a range of tax and other incentives, benefits, reliefs, aid and grants in accordance with legal regulations, approved programs or public tenders.
Most measures are targeted at micro, small and medium-sized enterprises.
The type of forms and the height of the incentives depend on a several elements, and mainly:
The competent ministries, local government and self-government units, HAMAG and HABOR can implement incentive measures, and funding sources can come from various domestic and EU funds (ESIF).
For example, a very stimulating industry branch is manufacturing, and investing in manufacturing processes can bring great benefits for investors. On the contrary, the trade activity is not an incentive activity at all.
The Ministry of Tourism usually encourages the construction, adaptation and equipping of high-class accommodation facilities (4 and 5*), as well as the implementation of various offer facilities such as swimming pools, wellness centers, sports fields, playrooms, etc. into existing facilities.
If you intend to engage in agricultural activity and if you are enrolled in the appropriate farm registers, you are likely to receive direct and other forms of incentive measures prescribed by the law on agriculture. The type and amount of incentives depends on the size of the agricultural land, the economic strength of the farm, the agricultural crops, the number of plantations, specially protected crops, organic production, etc.
Tax incentives and benefits are prescribed by the Investment Incentives Act and tax regulations.
The Investment Incentives Act provides entrepreneurs from the manufacturing and processing industries and labor-intensive industries with the opportunity to submit permanent registration of investment project, subject to certain prescribed conditions.
For example, a micro-entrepreneur in the manufacturing industry can, with a minimum investment amount of € 50,000 and 3 job openings, get a tax relief in the form of a 50% deduction of income tax rate over a five-year period, as well as a certain amount of financial support for newly employed workers.
The tax regulations provide for the possibility of using the reduction in the taxable base for the costs of education and training of workers and investment in research and development projects. This option is available and is equally applicable to all entrepreneurs regardless of their registered activity.
Entrepreneurs engaged in the activities in the area of the City of Vukovar and in the area of the first group of state care enjoy certain reliefs and exemptions prescribed by special regulations. Entrepreneurs engaged in the activity in the area of the City of Vukovar, employing more than five employees on permanent contracts, with more than 50% of employees residing in the assisted area of local self-government units classified in Group I by level of development, that is, in the area of the City of Vukovar, they do not pay income tax.
Entrepreneurs engaged in the activity in the area of local self-government units classified in group I by level of development, employing more than five employees on permanent contracts, with more than 50% of employees residing in the assisted area of local self-government units classified in group I, according to the level of development, that is, in the area of the City of Vukovar, they pay 50% of the prescribed tax rate.
Transport industries that have the appropriate license to carry out the activity of passenger or freight transport can make certain savings by reimbursement of excise duties on the purchase of fuel.
Owners of ships, yachts in maritime navigation, craft and inland navigation vessels engaged in a registered activity, and entrepreneurs in agriculture and fisheries can use the privilege to buy motor fuel (exemption from excise duty on motor fuel for navigation, and in agriculture and fisheries).
Highly incentive and prosperous investments are innovation, information and communication technologies, high value-added industries, and investments that contribute to increasing the competitiveness of entrepreneurs in the market. For these types of activitiesthe Ministry of the Economy issuespublic tenders for grants(usually once a year).
Certain incentives are given in the form of subsidized interest on loans to entrepreneurs for investing in fixed assets.
The Croatian Bank has several credit lines in its programfor reconstruction and development with very stimulating interest rates for the Croatian market. So there are special lines of credit such as entrepreneurship for young people, beginners and women; loans for export, loans for private entrepreneurship (business modernization, introduction of new technologies, increase of capacities, investment in research and development and introduction of new products or services, promotion of environmental protection projects, energy efficiency and renewable energy sources, tourism capacities and contents and promotion of new employment), ESIF loans for growth and development. The HAMAG BICRO loan (micro, small and for rural development) offers extremely favorable financing conditions for the purchase of equipment and landscaping, with an interest rate of 0.5 – 1.5%.
Entrepreneurs in labor-intensive industries can make some cost savings when hiring labor. For example, hiring persons without work experience or under the age of 30 on permanent contracts exempts entrepreneurs from paying contributions to their salaries of 16.5% over a period of 1-6 years.
In conclusion, with carefully planned investments based on sound advice and a well-prepared business plan, entrepreneurs in the Republic of Croatia can realize numerous benefits and savings.