Is Croatia Tax Haven or Tax Peril? Finally Revealed! Read On To Stay Informed…
There is a belief among the public that taxes in Croatia are extremely high. This may be the case when viewed from the position of a worker whose salary is subject to income tax at fairly high rates. The fact that the value added tax is 25% contributes to this belief. However, when it comes to running a business, Croatia is in many ways a true tax haven.
Limited liability company
The most common form of business activity in Croatia is d.o.o., which has the lowest share capital of around 2,700 euros. It is increasingly common for entrepreneurs to establish j.d.o.o. – simple limited liability company. Its share capital is only HRK 10. Almost all taxi drivers in the Bolt and Uber system in Croatia have established their own individual or a group j.d.o.o.
Trading companies are also established for the need to purchase real estate when the buyer is a person outside the EU.
Profit tax is only 10% for turnover up to EUR 1 million per year
There are extremely low corporate tax rates in Croatia. For turnover up to EUR 1 million per year, the profit tax rate is 10%. For income higher than 1 million euros, the tax rate is 18%. These are rates that are extremely low compared to rates in other EU countries and neighboring countries.
You can have a company without a single employee
Unlike other countries, d.o.o. or j.d.o.o. in Croatia, they do not need to have employees, and the director can be any person, regardless of citizenship and residential address.
If the director is a foreigner, it is necessary to collect documentation proving that social contributions are paid for him in the country of origin. If the director is a Croatian tax resident and is not employed, for him d.o.o. pays contributions on a special basis for the so-called entrepreneurial salary.
Business premises in cm2
To do business in Croatia, it is not necessary to have business premises, it is only important to have the address of the headquarters. The address of the registered office can also be obtained with the help of an intermediary by concluding a business address contract and then register it in the court register and report the lease to the tax administration.
Flat-rate trades – the most economical form of hiring associates
A large number of IT experts, workers in creative industries, consultants, translators and similar activities operate through trades that pay taxes in lump sums. These amounts are extremely low, and are not paid at all if the craftsman is employed by another employer at the same time.
During 2021, tens of thousands of so-called flat-rate craftsmen received a special questionnaire from the tax administration. The questionnaire was intended to determine the so-called working relationship of these flat raters with their suppliers. The questionnaire was composed in such a way that it had “trick-questions” whose goal was to get the craftsmen to admit that they are not really independent and that they depend on the principals. The tax administration charges the differences in taxes to craftsmen.
Opening a business account in banks is challenging
The establishment of a d.o.o. in Croatia can be carried out with the help of a lawyer and a notary public. Company registration can take a month, although official sources say it is shorter.
PS- Before opening a business account in the bank, it is necessary to engage a lawyer for consultation and mediation in agreements with the bank. The question of tax residency and the ownership structure of a company is often raised, and the current European sanctions against Russia significantly affect the possibility of opening a business account in Croatia, so it is necessary to find a concrete solution.
For more information on this or any other legal, tax, or business topic, you may freely and with no charges reach out to us at [email protected] at any time or call us on the phone number +381113281914 during every working day from 08:30 to 16:30.