Establishing a Subsidiary Company in Croatia: Step-by-Step Guide

Croatia is a growing economy, flourishing in significant industries like chemicals and plastics, electronics, food and beverages, tourism, and aluminum. It is now becoming one of the most lucrative destinations for starting a subsidiary business in Croatia. 

Croatia also has a social market economy where the country has integrated globalization at all levels. The country’s GDP is $73.490 billion, growing at a rate of 13.1%. The country is ranked 82nd in terms of nominal GDP and 83rd in terms of PPP. The country is a high-income service-based economy with a thriving service sector. The services sector contributes about 70.1% to the country’s income. 

Per the World Bank’s Ease of Doing Business 2020 report,  Croatia has acquired the 51st position in protecting minor investors and doing business. Hence, setting up a subsidiary business in Croatia is relatively straightforward. 

Croatia has long-term trade partnerships with Italy, Germany, Austria, and France. Hence, if you set up a subsidiary business in Croatia, you can also serve these countries. 

Read on to learn about the incorporation of a foreign subsidiary in Croatia to expand your business in the country without any hassle. 

What are the Types of Subsidiaries in Croatia?

Several kinds of businesses exist in Croatia. You can select a type of business based on your requirements. 

Private limited company

A private limited company is one of Croatia’s most common forms of company. The owner’s liability is limited to the capital they bring into the company. 

• In this company, two or more natural and legal persons come together and contribute to the company’s share capital.
• The shareholders’ stakes are decided based on the capital they bring into the company. 
• Anyone can incorporate a subsidiary business in Croatia, irrespective of nationality. 
• The company’s assets are considered separate from the owners’ private properties in a private limited company. 
• The capital contribution for starting a private limited company in Croatia should be at least HRK 20,000. 
• A private limited company must have a board of directors, and they should also have an annual general meeting. 

Simple limited company

A simple limited company is another type of limited company that is common in Croatia. 

• A simple limited company is one of the most straightforward companies to incorporate in Croatia. 
• The company consists of a maximum of three members. The management board of the company must have at least one member. 
• A simple limited company’s initial authorized share capital must stay above HRK 10.00.
• The company stakes are given in cash and cannot go below HRK 1,00. With every stake, the shareholder gets a right to vote. 

Public limited company

A public limited company is another form of a limited company found in Croatia. However, different aspects differentiate it from a private and simple limited company:

• The entire foundation of a public limited company is on the share capital that the owners bring into the company. The share capital is then divided into multiple shares.
• A single owner can start a public limited company, but the owner can dilute their stocks and onboard more owners.
• The shareholders of the company enjoy limited liability. Hence, they are not responsible for the company’s liabilities and debts. 
• A public limited company can have both local and foreign shareholders. 
• The authorized share capital of a public limited company is HRK 200,000. This share capital can be issued as shares either at par or at a higher value. 

General partnership

Like other countries, you can incorporate a general partnership business in Croatia.

• Two or more individuals come together in these businesses to start a business. They work under the same company name. 
• The partners of a general partnership firm have unlimited liability. Hence, the partners’ assets can oblige the company’s debts and liabilities. 
• Even foreigners can come together and establish a partnership in a general partnership business.
• A public limited company has no minimum capital requirement. Hence, the partners bring in equal stakes in the company.

Limited Partnership

A limited partnership is becoming quite popular in Croatia. There are several features of a limited partnership you should know about before opening a subsidiary business in Croatia. 

• Two or more people can come together in these businesses to conduct business under a single name. 
• One of the partners must have unlimited liability, while at least one should have a limited liability based on the assets they bring into the company. The general partner is usually the one who has unlimited liability. 
• People from any country can come together to incorporate a limited partnership firm.

How to Set Up Subsidiaries in Croatia?

You should consider the following steps if setting up a subsidiary in Croatia. 

Step 1: Decide a name

• The first step to setting up a subsidiary business in Croatia is deciding on your business’s name. 
• Visit the HITRO.HR entrepreneurial service window at any one of the branches of the Croatian Financial Agency. You need to fill in the application with your preferred business name.

Step 2: Submit the documents

• The government of Croatia has stipulated a list of documents, including the articles of association, details of the directors, etc., that you must submit.
• Foreign citizens trying to incorporate a company must bring an identity card or passport. 
• The cost of getting a certification depends on the company’s share capital. On average, the entire process costs around HRK 2500. 
• All documents must be translated into the local language by a certified translator. You can find the list of translators at the Croatian Chamber of Notaries. 

Step 3: Registration

• Once you submit all the documents, submit the registration application at the HITRO.HR window at any of the Financial Agency branches. 
• Once you submit the form and all the documents, you will begin registering to the commercial court register. 
• If approved, the data related to the registration process gets published on the registration website. 

Step 4: Classification of business activity

• You must submit the application for classification by activity to the Central Bureau of Statistics. 
• The classification of the activity must be done based on the National Classification of Business Activities. 
• Once the court decides to register the business, you will receive the registration number and the activity code in the next 15 days. 
• You will also receive a notice on the business classification from the HITRO.HR window. 

Step 5: Open a bank account

• You must have a local bank account to process your transactions in Croatia. 
• You can open a giro account by visiting the HITRO.HR window. Alternatively, you can also visit any bank for the process. 
• The bank account should also be used for depositing the share capital amount.
• You need an identity card, a notice of business classification, and an excerpt from the court register to open a bank account. 

Step 6: Register the company with pension and health insurance

• Once the business commences its activity, you need to submit Form M-11P at the Croatian Pension Insurance Institute in the next 24 hours.
• You must also attach the notice on the Central Bureau of Statistics classification.
• You must submit the Contribution Debtor Application, Application for Basic Health Insurance for an Insured Person, and Application for Basic Health Insurance for a Family Member at the Croatian Health Insurance Institute. This institute is also a part of the Financial Agency. 

Step 7: Register with the tax authorities

• Once you register the company with different insurance bodies, you must also register with the tax administration. 
• The company should be registered with the Registry of Corporate Taxpayers and the Registry of VAT Registered Persons. 

Benefits of Setting Up a Croatia Subsidiary

There are several benefits of starting a subsidiary business in Croatia which include:

• As there are no restrictions on the nationality of the people incorporating a company, foreign nationals can register a subsidiary in Croatia quite easily. 
• Croatia is ranked 51 in the ease of doing business index. It moved from 58th to 51st rank as the government optimized the process of setting up a business in the country. Hence, setting up a subsidiary business in Croatia is hassle-free. 
• The process of incorporating a subsidiary in Croatia requires less documentation, making it easier for foreign companies to set up subsidiaries in the country. 
• As the country is close to major European countries like France and Italy, you can quickly expand your business to other countries. 
• The same rules apply to a Croatia subsidiary as to all other Croatian businesses. As a result, the subsidiary’s employees have the same rights as all other businesses.

Documents to Prepare When Opening a Subsidiary in Croatia

There are a few essential documents that you must collect before you start the incorporation process. Some of these essential documents you must certify by a notary public are as follows:

• The ‘Po’ form or the application for entry in the court register
• The Memorandum and Articles of Association duly signed by all company shareholders.
• Acceptance letters and a statement by the members authorized to represent the company. 
• Appointment letters of all the board members or a declaration stating the names of the board of directors. 
• Signatures of all the directors or the members of the Management Board
• If there is a supervisory board, submit the signatures of all the members
• A document highlighting the company address
• Identity cards and passports of all the founding members

You must get all these documents notarized by a sworn translator. You can refer to the notary office address book on the Croatian Chamber of Notaries website. 

What Business Forms Can Croatia Subsidiaries Take?

Croatia is a versatile country that supports different company formats. You can easily set up a wholly-owned or partially-owned subsidiary if you plan to open a subsidiary business in Croatia. 

All kinds of limited liability companies, whether simple, public, or private, are quite popular in Croatia. The incorporation process of these companies is relatively easy. The best part about them is that the partners or the shareholders have limited liability, i.e., the personal wealth of shareholders cannot be used to pay off the company’s liabilities. There are different types of partnership businesses too that you can incorporate in Croatia.

Croatia Subsidiary Laws

Following all the subsidiary laws and regulations while opening a subsidiary in Croatia is vital to avoiding hefty penalties and smooth operations. These regulations are designed to maintain a structure in how companies function in Croatia. Also, these regulations safeguard the interest of the employees working across different Croatian subsidiaries. 

You must collect the incorporation certificate and the decision on the registration in the court register. You must also obtain the administrative fee payment slip, which will help confirm that you have made all the payments. You must also open a bank account to conduct all business-related transactions. 

Post-Incorporation Compliance

You must meet the compliance for a foreign subsidiary in Croatia requirements while establishing a company in Croatia. Some of these requirements include the following:

• You must register with Croatia’s tax administration and the Registry of Corporate Taxpayers. You must pay all the taxes on behalf of your employees on time.
• You must conduct an annual general meeting incorporating a limited liability company.
• You must register the business with the HZMO and HZZO. These bodies manage the pension and health insurance of all the companies in Croatia. 
• The directors’ and the CEO’s responsibilities must be established and adequately carried out.

Taxes on Subsidiaries in Croatia

From a taxation perspective, subsidiaries in Croatia are handled the same as any other local business. This implies that the corporate income tax, which is 18% in Croatia, must be observed. Entrepreneurs from abroad should be aware that, except for dividends given to a resident firm, Croatian dividends are not taxed but are subject to a withholding tax. However, if the company’s annual revenue is lower than HRK 7.5 million, the corporate tax rate reduces to 10%.

Tax Incentives for Businesses Opening a Subsidiary in Croatia

Several reliefs are provided under the Act on Investment Promotion, which brings in taxpayers relief. If a company starts a project in the following sectors, it can make use of these incentives:

• Manufacturing
• Processing
• Development and innovation
• Business support
• High value-added services

The amount of assistance must be expressed as a portion of investment value computed using approved investment expenses. The country has double tax treaties with different countries to avoid double taxation on worldwide income. 

Other Important Considerations

Establishing a Croatian subsidiary takes time. You must take a few weeks to concentrate on the company’s growth and satisfy all legal requirements. You can assign the task to another business executive or work alongside them if your parent firm keeps you occupied.

You must also stick to a budget to finish each phase of establishing a Croatian subsidiary firm. Because it will keep you in check, create a budget before forming a foreign subsidiary in Croatia.

How Multiplier’s Employer of Record Can Help You Hire and Expand in Croatia

Any firm, domestic or worldwide, needs time and money to plan its opening. When forming a subsidiary online, you need assistance abiding by all applicable labor laws and local ordinances.

Why not utilize a service provider like Multiplier to help your business surpass this growth obstacle? You don’t need to worry because Multiplier handles all the formalities in entering a new market. Our team of experts has a broad knowledge of all the domestic and international laws. We ensure that all labor laws and conventions in Croatia are strictly followed. You may swiftly assemble worldwide teams and take advantage of fresh market prospects with a PEO like Multiplier.