Investors wishing to invest in real estate in Croatia can structure their acquisition through a direct acquisition of the real estate or an indirect acquisition via a Croatian corporation.
Since 1 February 2009, EU residents have been allowed to acquire real estate in Croatia, other than agricultural land and designated environmentally sensitive areas, without having to obtain prior approval from the Ministry of Justice. The direct acquisition of real estate assets by non-EU residents is subject to reciprocity (ie it is permitted provided Croatian citizens are allowed to acquire real estate in the investor's home country) and requires written consent from the Ministry of Justice. Agricultural land and forests cannot normally be acquired by foreigners, unless an international agreement provides otherwise.
Last modified 22 Mar 2024
While it is possible to set up a branch office of a foreign entity (a permanent establishment) in Croatia, foreign investors who are not EU citizens may be subject to reciprocity (ie they can only acquire real estate in Croatia if Croatian citizens have equivalent rights in the investor's home country) unless they invest in real estate by acquiring all or part of an existing local legal entity, or by establishing a new company in Croatia.
Costs are between EUR500 for a limited liability company (doo) plus the minimum share capital amounting to EUR2,500.
On average, setting up a permanent establishment in Croatia takes approximately six weeks from the date all the necessary documents are submitted to the commercial court. A branch or representative office the foreign company must nominate a single person to represent it.
Last modified 22 Mar 2024
Types of corporate vehicle are:
Last modified 22 Mar 2024
A limited liability company is a company where the capital contribution is divided into shares. The shareholders have limited liability in relation to the company's activities and debts. This is the most common form of business enterprise in Croatia.
A public limited liability company is a company where the share capital is divided into stock. Stock is issued by the company in return for each contribution, and shareholders are free to transfer their ownership interests at any time by selling their stockholding. The shareholders have limited liability for the company's actions and debts.
A public partnership is a company established by two or more partners for the purposes of carrying on a permanent business activity under a single trading name. Each member of the partnership has unlimited joint and several liability to creditors to the full extent of their assets.
A limited partnership (komanditno društvo – kd) is a company established by two or more partners for the purposes of carrying on a permanent business activity under a single trading name. At least one member of the partnership has unlimited joint and several liability to creditors of the partnership to the full extent of their assets (a 'general partner'), and at least one partner is liable only up to the amount of its contribution to the partnership (a 'limited partner').
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EUR2,500.
EUR25,000.
No minimum capital is required.
No minimum capital is required.
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EUR2,000.
EUR 3,000.
App. EUR2,000.
App. EUR 2,000.
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App. 6 weeks.
App. 6 weeks.
App. 6 weeks.
App. 6 weeks.
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The shareholders' meeting, which must be convened at least once a year, is entitled to make decisions on any issue concerning the company, including those which fall within the remit of other governing bodies.
The management board is authorized to represent the company and to manage its day-to-day affairs. The company may be managed by one or more directors with sole or collective authority. A sole shareholder may also act as a sole director.
The supervisory board is the controlling body of the company. Setting up a supervisory board is mandatory only in certain cases (usually not applicable in case of vehicles investing in real estate).
The shareholders' meeting, which must meet within the first eight months of each business year, is the main governing body and is entitled to make decisions on any issue concerning the company, including those within the remit of other corporate bodies.
With two-tier structures the principle is that one of the company’s management bodies cannot interfere in the work of the other, except in exceptional circumstances. Accordingly, the management board is the management body which is authorized to represent the company. There can be one or more directors who are appointed by the shareholders in a general meeting. All directors must sign documents unless this is otherwise agreed when the company is incorporated.
The supervisory board is the controlling body of the company. It must have an odd number of members (at least three).
With a single-tier structure the shareholders in general meeting choose only a single managing board of directors. The managing board of directors then consists of executive directors, who directly manage the corporate business to the extent decided on and permitted by the managing board of directors, and of non-executive directors who only participate in the board's decision-making and in supervision. In this way, the management and supervisory functions are integrated.
Each member of a public partnership has the right and responsibility to manage the business of the company. However, the articles of association may provide for only one or more of the members to manage the business. In such cases the other members cannot participate in management. Each member authorized in this way has the right to manage the business independently of the others, unless the articles of association provide for joint management.
The general partners have responsibility for management of the partnership and are jointly and severally liable for any debts. Limited partners have limited liability and are only liable for debts to the extent of their individual contributions. They have no management authority.
Last modified 22 Mar 2024
Costs depend on the size of company, its business activities and the number of employees. The minimum is likely to be EUR 5,000 per annum.
Costs depend on the size of company, its business activities and the number of employees. The minimum is likely to be EUR 7,000 per annum.
Costs depend on the size of partnership, its business activities and the number of employees. The minimum is likely to be EUR 5,000 per annum.
The costs of compliance depend on the charges agreed with external advisors but normally costs can be expected to be comparable to, or lower than, those in other European jurisdictions.
Last modified 22 Mar 2024
Corporate income tax is payable at 10% if the annual income is below EUR 1 million ie 18% if the annual income is above EUR1 million.
For tax-resident shareholders which are corporations, dividends are not regarded as taxable income. In the case of tax-resident individuals, capital income and advance tax payments are withheld at 12% with no personal allowances included in the calculation. Withholding tax applies to dividends and profit shares distributed to foreign entities which are not private individuals. This tax applies at a rate of 10%. Since Croatia joined the EU, withholding tax on dividends and profit shares have not been payable if they are paid out to an enterprise that applies one of the joint taxation models applicable to holding and related companies in the various EU countries, if:
Capital gains on the sale of real estate assets are taxable. For a doo, capital gains are fully taxable at the 18% (or 10%) corporate income tax rate. Capital gains on the sale of a participation in a doo by individuals are taxable at the rate of 12% (if the participation has been held for less than two years).
Corporate income tax is payable at 18% or 10% (if the annual income is less than EUR1 milion) on income after the deduction of expenses.
As for a doo (see above)
Capital gains on the sale of real estate assets are taxable. For a dd capital gains are fully taxable at the 18% corporate income tax rate. Capital gains on the sale of stocks by individuals are taxable at the rate of 12% (if the shares are held for less than two years).
Corporate income tax is payable at 18 % (or 10%) on income after the deduction of expenses.
For tax-resident shareholders which are corporations, dividends are not regarded as taxable income. In the case of tax-resident individuals, capital income and advance tax payments are withheld at 12% with no personal allowances included in the calculation. Withholding tax applies to dividends and profit shares distributed to foreign entities which are not private individuals. This tax applies at a rate of 10%. Since Croatia joined the EU, withholding tax on dividends and profit shares have not been payable if they are paid out to an enterprise that applies one of the joint taxation models applicable to holding and related companies in the various EU countries, if:
Capital gains on the sale of real estate assets are taxable. For a public partnership capital gains are fully taxable at the 18% (or 10%) corporate income tax rate.
Corporate income tax is payable at 18% (or 12%)on income after the deduction of expenses.
As for a jtd (see above)
Capital gains on the sale of real estate assets are taxable.
For a limited partnership capital gains are fully taxable at the 18% (or 10%) corporate income tax rate. Capital gains on the sale of shares in a limited partnership by individuals are taxable at the rate of 12% (if the shares are held for less than two years).
Last modified 22 Mar 2024
Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
While it is possible to set up a branch office of a foreign entity (a permanent establishment) in Croatia, foreign investors who are not EU citizens may be subject to reciprocity (ie they can only acquire real estate in Croatia if Croatian citizens have equivalent rights in the investor's home country) unless they invest in real estate by acquiring all or part of an existing local legal entity, or by establishing a new company in Croatia.
Costs are between EUR500 for a limited liability company (doo) plus the minimum share capital amounting to EUR2,500.
On average, setting up a permanent establishment in Croatia takes approximately six weeks from the date all the necessary documents are submitted to the commercial court. A branch or representative office the foreign company must nominate a single person to represent it.
Last modified 22 Mar 2024