Employment & HR in Croatia

Got a fascinating business idea? And now, are you planning to make it a reality without waiting any longer? That’s amazing! However, you need to hold your horses and act diligently and patiently. The process of starting a business takes a lot of smart and hard work, along with the knowledge and skin to endure red tape to establish your project. 

Has Croatia been on your mind to locate your business? Well, then you are inviting yourself to relish fortuitous opportunities and possibilities in this land. Not only is Croatia ranked in a prominent position among the world’s most beautiful historic cities, but it also features a splendid location in the European Union. Since labor costs in Croatia are lower than in Germany or Austria, it will also make your business operation costs lower. On top of this, roaming around the cities of Croatia is safe at all hours of day and night, as the place flaunts very low robbery rates compared to the average robbery rates in Europe. The highest growth and scope in the country is enjoyed by the tourism sector of Croatia. All in all, you are welcomed to the land of excellent opportunities in this country. 

Starting a venture is not a walk in the park, without a doubt. You need to go through immense formalities, administrative procedures, send applications here and there, and whatnot. That’s why it is necessary to acquaint oneself with the process of starting a business in a particular country. Here, we shall walk you through the detailed account of launching a business in Croatia, its employment and labor regulations, and more. So, get going!

Quick Overview

It takes a few simple steps to start a venture in Croatia. Whenever starting a business, having a marketable business idea that is followed by deep market research and preparation of a solid business plan is ineluctable. After these steps, you will need to select a business name, where you have to take care of its originality and its availability. The chosen name then is registered. Now, you would have to procure your OIB and the court’s verdict on the establishment and set up a business bank account in Croatia where minimum paid-in capital is deposited. Finally, get your business registered with the tax authorities and acquire a business/ company seal to legally establish your business in the country. 

Now, we shall walk hash out the process of starting a business in Croatia in further detail. Read on!

Process of setting up a business in Croatia

Launching a business in Croatia is fairly simple and takes a few days. The country is one of the countries that are growing remarkable in terms of economic freedom. The government of Croatia is striving to expand investment policies for accelerating structural reform and is also enhancing labor market functioning in the country. Furthermore, Croatia also lowered income tax payments for small and medium-sized businesses and for foreign investors too. All in all, Croatia offers a highly business-conducive environment with remarkable opportunities for growth and expansion. 

Here is a detailed mention of the process of starting a business in Croatia, with all the things you will need to consider, requirements you will need to fulfill, and so forth. Read on!

• Prepare a solid business plan: Do your market research, find out the product/ service demand, gauge the market size, know your competitors, their strengths and weakness, lay out your budget and marketing strategies, etc., to prepare a masterful business plan. Having a business plan ready will facilitate your business in acquiring investors and potential associates to your business.

• Business name registration: Allow your creative energy to show some magic and craft a name that leaves others mesmerized. Not only should you take care of coming up with a business name that captures the essence of your brand and its values but also you need to ensure that it is original and not taken by anyone else. Once you have decided on a name, you may check its availability with the Croatian Court Registry. 

• Financial Agency (FINA): Here, you need to deposit the minimum share capital, which is 20.000,00 kunas, along with other essential documents at the HITRO.HR counter in Financial Agency (FINA). That would initiate the court register entry procedure. Furthermore, the initial capital must be paid within eight days. This is followed by the application by the notary public for the opening of a business which would be finished within 1 to 3 days. Other outlays involved in the process are:

1. 400,00 kunas as court fees for the founding capital payment. 
2. 900,00 kunas as court fees for notifying in the Official Gazette of the Republic of Croatia. 
3. Classification Notice for a business that may cost about 55,00 kunas. 
4. 200,00 kunas for a company stamp.

• Head to public notary: Now, you need to go to the notary public to certify the following documents:

1. Court registry entry application
2. Company contract or founding ac signed by all its founders or statement of establishment which is signed by only a single individual. At this point, all directors and founders of the business must be present unless it would be agreed with an attested power of attorney. Certification costs may lie between 2.000,00 to 2.5000,00 kunas. The court interpreter will translate all the documents scribed in a foreign language.

• Procure OIB number: To start a business in Croatia as a foreigner, OIB is allocated to ex-pats in the regional Tax Administration offices. To get OIB, foreigners need to turn in a valid ID issued in the country of which they are a citizen with the filled-out application form.
• Open a business bank account: To set up a bank account and create the mandatory application for Croatian Health and Pension Insurance, you need to get your business registered, and procure a statistical number and OIB. At this step, you will have to deposit paid-in minimum share capital in your business bank account. To open your Croatian Business Bank account, you will need:

1. Court register entry certification/ excerpt. 
2. A notice on the categorization of the Central Bureau of Statistics
3. ID card or a Passport

Once done with this step, you may slide into the next phase of registering with tax authorities. 

• Registration with tax authorities: As a final step, you will need to register for taxation and acquire the company seal to finalize the registration process of the venture in Croatia. In Croatia, the corporate income tax is fixed at specific rates, where the taxation is levied on the amount registered. The standard VAT rate in Croatia is fixed at 25 percent for the majority of services and goods, given that lower VAT rates are applied for medicines, utilities, food, etc. On the capital gains pro
  cured from trading acts, there is no income tax imposed upon it. 

Hiring Employees in Croatia 

Eventually, you will need to hire employees to work for your company. It is recommended for startups to hire the least required number of talented people. As the venture mushrooms, you can recruit more staff and employees to perform different business operations. However, as an employer, you need to be familiar with the laws and regulations that oversee the domain of hiring people. This is why having an experienced HR consultant like Zimyo is highly recommended to streamline the process for you.

• Trial Period/Probation Period: According to Article 31 of the Croatian Labor Act, a probationary period may be stipulated in the labor contract. The trial period in Croatia can exceed a period of six months. In the scenario where the trial period has been mentioned, the notice period must be for at least seven days.
• Leave and Holidays: Article 47 of the Croatian Labor Act clearly sets the provision of annual leave as follows: 

1. An employee must receive a minimum of 18 working days of paid annual leave each calendar year. 
2. A minor worker must get a minimum of 24 working days of paid annual leave each calendar year. 
3. Any worker who is engaged in a job that poses a significant threat to the wellbeing and safety of the worker even after adopting security measures is entitled to get a minimum of 30 days of annual leave each calendar year. 
4. As per Article 48 of the Croatian Labor Act, non-working days holidays are not entailed in the annual leave duration. 
5. A phase of temporary incapacity to perform the job is not entailed in annual leave duration. 
6. The annual leave period may be extended beyond the minimum set period under the collective agreement, labor contract, or employment rules.

Following are the scenarios that qualify for paid leave as mentioned in the Article 57 of Croatian Labor Law:

1. A close relative or family member is to be taken care of. 
2. To take care of those related to the employee in marriage, for childbirth, death of a close family member, or serious illness. 
3. To receive general or occupational schooling or training. 
4. To acquire the rights related to employment. 
5. To donate blood voluntarily.

• Maternity Leave: Article 66 of the Croatian Labor Act clarifies the provision of maternity leave for pregnant employees as follows:

1. A pregnant employee is entitled to get maternity leave during pregnancy, childbirth, and the nursing period. 
2. A pregnant employee is entitled to take 45 days of maternity leave before the expected date of delivery and may continue the leave until the child turns one year old. 
3. An authorized physician shall determine the expected date of child delivery. 
4. A pregnant employee may take maternity leave 28 days before child delivery until the child turns six months old. 
5. A female employee may get back to work even before a child is six months old if she wants. However, she is not allowed to join back before 42 days are over after childbirth. 
6. In the case of premature birth, the leave period can be extended.

• Termination of Services: According to Article 10 of the Croatian Labor Act, the labor contract may be terminated in the following scenarios: 

1. If the worker deceases. 
2. The definite term contract has expired. 
3. If an employee turns 65 years old and has completed 20 years of employment. 
4. Under an agreement between an employer and the worker. 

Employment contract termination must be clarified in written form, as stated by Article 111 of the Labor Contract. 

• Pension: As per the statutory scheme of pension, individuals can get their old-age pension after meeting the qualifying period of 15 years. The retirement age for men in Croatia is 65, while that for women is 62 years. The pension system in the country is classified into three types of pension funds, namely, Prvu Stup, Drugi Stup, and Treci Stup.
• Work Hour Norms: As per the Croatian Labor Act, the standard duration of a full-time working week cannot exceed the limit of 40 hours. Only under a collective agreement working hours can exceed 40 hours under certain conditions. 

Working hours are reduced in correspondence with malignant effects of working conditions on the worker’s wellbeing. In the cases of pressing needs or a temporary surge in workload, employees may engage in overtime work. Overtime work cannot exceed the limit of 10 hours per week. Minors are prohibited from performing overtime jobs. A mother who has a kid under three years of age, is a single parent of a kid under six years of age, or is pregnant will have to yield a written statement for her consent to engage in overtime work. 

How easy is it to conduct business in Croatia?

Conducting a business in a country can be easy or challenging depending on several factors, such as how easily you can connect your business to the electricity grid, get credit, resolve insolvency, procure permits licenses, enforce contracts, and so forth. The World Bank has taken the responsibility of estimating these indicators and then conferring an overall Ease of Doing business rank to a country by comparing 190 countries. According to the Doing Business report 2020, Croatia received the 51st rank and scored 73.6 out of 100. Let’s see now where this country falls on the individual sub-indices. 

• Starting a Business: Starting a Business is a Doing Business indicator wherein the World Bank measures the procedures, formalities, cost (paid-in minimum share capital), and time it takes to launch a venture in a country. Croatia received 114th rank out of 190 countries and scored 85.3 out of 100. The country enhanced one-stop-shop services, there rendering the process of starting a business easier in 2008. On top of this, in 2011, Croatia also enabled limited liability companies for registration application filing with the court registries through an online notary public, t
  hereby easing the process further.
• Managing Permits: Businesses and new companies are required to procure relevant permits and licenses to establish and operate legally. The process may involve lesser time, procedures, and costs in some countries than the others. Croatia bagged the 150th position among 190 countries and scored 57.8 out of 100. In 2009, the country implemented a new building code that did away with various procedures that the process of acquiring construction permits entailed, thereby rendering the process smoother. In 2010, Croatia kicked off the operations of a one-stop shop and enforcement of the building code, which enhanced its construction allowing process.
• Getting Electricity: Electricity is needed in every aspect of a business, starting from its establishment to carrying out different business operations. The Doing Business is an indicator measured to gauge the general EODB rank of an economy, where it looks at the time, procedure, and costs involved in gaining electricity connection for a business. Furthermore, it also peruses the transparency of tariffs and reliability of electricity supply in the country. Croatia got 37th rank among 190 countries and scored 86.8 out of 100. In 2018, the country adopted mechanisms for financial deterrence, which were intended to limit power outages, thereby enhancing the reliability of the power supply.
• Getting Credit: Credit can safely be labeled as one of the lifelines of a business. It is sough to expand the venture, fulfill current expenses of the operations, recruit additional staff, and so forth. Depending upon the funds lending system of the country, a venture can procure credit easily and in lesser time. However, it may take ages in other nations to procure credit. The Doing Business checks efficiency of credit information systems and movable collateral regulations in a country. According to the Doing Business report 2020, Croatia got the 104th position in this sub-index and scored 50 out of 100. In 2012, the country improved its credit information system by initiating the collection and distribution of information on enterprises.
• Managing Payroll: As the business grows, you will have to hire more people and recruit more staff. That’s great. However, you must have heard, “with great power comes great responsibility”. The adage fits perfectly here as well. To manage the payment and reimbursements of employees and staff, you will need to integrate an efficient payroll management consultant like Zimyo into the company. Doing so will not help you in said activity but also will take care of your taxes and social security aspects, and thus, facilitate in abiding by the laws.
• Paying Taxes: You will need to pay corporate income tax, VAT, and other taxes specific to your business in a country. Different laws govern the taxation system, which determines the tax rates for businesses. The tax regulations can render the process easier or more challenging. The easier it is to file taxes and go through the post-tax-filing procedure, the higher the rank of a country in this subindex. According to the Doing Business report 2020, Croatia got 49th rank among 190 countries and scored 81.8 out of 100. The country introduced online tax filing to make the process of paying taxes easier.
• Enforcing Contracts: This is another Doing Business marker where it measures the cost, time, and formalities one has to undergo to resolve a legal, commercial dispute. Furthermore, the quality and efficiency of court processes and regulations are also analyzed. Croatia got the 27th position among 190 countries and scored 70.6 out of 100. In 2014, the country eased the litigation proceedings process as well as streamlined the transferring of specific enforcement procedures from the relevant courts.
• Resolving Insolvency: Resolving Insolvency is another sub-index prepared by Doing business, which ranks the countries on the basis of how much time, recovery rate, cost, and procedures the process of resolving insolvency is required there. Furthermore, it also assesses the efficiency of legal frameworks and the judicial system in resolving insolvency. Croatia got 63rd position and received 56.5 points out of 100 among 190 countries, according to the Doing Business report 2022. In 2008, the country amended its insolvency act to regulate the profession of bankruptcy administrators, thereby rendering the process of resolving insolvency easier. 

Croatia is one of the beautiful countries to reside and base your venture. The country offers immense opportunities and possibilities to new businesses and startups, thanks to its high-income, service-based, and developed economy. Furthermore, people here are amicable and as mesmerizing as Croatia’s landscape. Ventures enjoy full-fledged support for their incorporation, social contribution and tax registration, permits and licenses, and more. 

Zimyo is a leading HR and Payroll management services provider in Croatia with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.