Starting a business in Croatia - few important tips

Before starting a business in Croatia, there are few very important things you should know.

Croatian Personal Identification Number

Personal Identification Number (OIB) is allocated and assigned to foreigners in local offices of the Tax Administration when there is a cause for monitoring. The cause for monitoring may arise due to: incurred tax liability, acquiring assets in the territory of the Republic of Croatia, registering in any of official records or for other reasons at the request of a foreigner. For the purpose of assigning of OIB, the foreigners are obliged to submit valid documents with the filled-out application form confirming the stated data, in particular, the European identity card or identity document issued in the country of citizenship with the proof of citizenship. Non-residents are the one who are not residents.

Resident vs non-resident tax obligation

Resident taxpayers pay taxes (personal income tax or corporate income tax) on their world-wide income, while non-resident taxpayers pay income taxes only on their income with source within Croatia. For the purpose of corporate income tax residents are legal and natural persons whose registered office is registered in the commercial or other registry or record in the Republic of Croatia, or whose effective management and supervision location is in the Republic of Croatia. Residents are also entrepreneurs - natural persons with permanent residence or habitual residence in the Republic of Croatia, whose activity is inscribed in a registry or record.

Croatian businesses are required to have an accountant

The accountant will take care of all your obligation according to the Croatian Law on Accounting, file your tax returns, communicate with the government, file your VAT reports and calculate the salary payments for all of your employees. They can also pay invoices on your behalf.

Is fiscal representative compulsory in Croatia?

Croatia is a European Union Member State. If your business is established in another European Country appointing a tax agent or VAT representative is not compulsory. Croatia yes REQUIRES a tax representative for non-EU businesses.

VAT system in Croatia

For resident taxpayers (companies with headquarters or a PE in Croatia), the VAT treshold for small companies is 300.000,00 kn (app. 40.000 euro) in a year. Thus, the company or natural person becomes compulsory a VAT payer if its turnover passes the 300.000,00 kn in one year. This treshold is not applied for foreign persons doing business in Croatia without a PE or without a company incorporated in Croatia, or for natural persons without a permanent residence or habitual abode in Croatia. Thus, for example if a non-resident taxpayer rents an apartment in Croatia to tourists, it must charge the VAT on the invoice issued from the start.

Official registered address in Croatia

If you will set up a company in Croatia, think carefully before you decide on your official registered address. Changing your company’s registered address later will require a notary and may require you to re-file your formation documents, which is pricey. A lot of Croatians use the address of a home they or their family owns. As a foreigner, since you may not own a home, some accountants will allow you to use their address for your company and accept mail on your behalf for a monthly fee. The likelihood that their business will move will be lower than the chances you will move.