9 things I would change about Croatia (if it were up to me)
On May 7 each year, I mark my Croanniversary – the day I moved to Croatia. Luckily, the city of Split has its own celebrations on that day honoring the city of Split and its patron saint, Sveti Duje. The whole city comes out to play, as if they are all partying with me.
2021 marks 9 years for me in this weird, yet wonderful country. If you’ve read any of my previous streams of consciousness, you know that I hold an extremely romantic and idealized view of Croatia. I am, quite frankly, happier than a pig in shit.
Regardless of those rose-colored glasses, I do think there are things that should and need to change to make the country better – for everyone. So, instead of giving you a big dose of nostalgia and sweet stories, I am instead going to share what I think Croatia needs to do differently – one for every year of my life in Croatia.
Let’s dig in…
9 things I would change about Croatia (if it were up to me)
#1 Implement a program to repurpose, restore and rebuild old stone homes
One of the most beautiful and unique features of Croatia is its white stone architecture, most common along the coast, but also found inland.
Sadly, there are crumbling stone homes and buildings all over the country that have been completely abandoned. Some are in the countryside, some are in cities, some are on the islands. They are just sitting there while gravity and Mother Nature take over.
This is a total waste. I’d like to see Croatia set up a program to repurpose, restore and rebuild these homes and buildings.
First, each općina (municipality) can identify which properties they consider completely abandoned in their jurisdiction. Next, they can publicize the property for a defined period to see if any heirs seek a claim to the property. If nobody comes forward, then it should be auctioned off so someone else can buy the property and restore it.
Alternatively, some properties could be donated to an udruga who can use it for non-profit initiatives that serve the community.
As part of this program, there should be a specific residence permit for non-EU nationals who purchase these derelict properties. They receive year-round residence in exchange for purchasing the property and committing to rebuilding or restoring it.
This will boost tax revenue for the state, increase the amount of available housing and help rebuild Croatia at the same time. Most of the expense is on the buyer, with minimal burden on the government.
#2 Change the rule on giving up nationality for naturalization
There are 8 different paths someone can take to gain Croatian citizenship. Most people apply based on lineage or origin. Many apply based on marriage to a Croatian. Very few apply based on naturalization.
Naturalization is for people who are on their own, with no family ties to Croatia – like me. Most people that fall into this category are here based on work – either they work for a Croatian company or they operate their own company.
After 8 years of continuous residence plus approved permanent residence, this group can apply for citizenship by naturalization. However, there is a catch.
To get citizenship through this path, you are required to relinquish all other nationalities. Of the 8 paths to citizenship, this is the only one that requires you to do this. It’s pretty messed up.
For example, that means if I were to naturalize, I would have to give up being a US citizen if I wanted to be become a Croatian citizen.
To achieve 8 years of continuous residence without having family ties is challenging. There are lots of road blocks Croatia puts in place specifically to prevent people from ever reaching this point, so if you have, it is a massive achievement. Aside from that, you have to really love Croatia to be here that long.
Your reward for all that hard work and love for Croatia? Give up all of your other nationalities or else NO CITIZENSHIP FOR YOU.
Come on, Croatia. There is absolutely no reason why those of us who have made serious investments in this country in both money, time and headache should be singled out in this manner. We’ll take the test, just let us keep our other nationality.
#3 Transition government employees to the private sector
Croatia’s population is in decline. Croats are fleeing to other parts of the EU where they have more opportunity and higher salaries. It seems that the government’s solution is to incentivize people to have more babies. Well, babies don’t pay taxes. Once those babies grow up in 20 years, they’ll leave like all the others if there are no good jobs in Croatia.
The only way to stop the exodus is to offer better opportunities HERE.
Croatia can offer tax breaks to multi-national corporations in exchange for bringing their offices and facilities to Croatia. There is a ton of talent in this country, but that talent needs opportunities to keep them in Croatia. Croatia’s best in tech, science and healthcare are all moving abroad.
Not only could these companies bring good-paying jobs, but Croatia could leverage these new relationships to shed some government weight. In a country of 3.8 million people, approximately 500.000 work for the government. That’s far too much.
Croatia could work directly with these global corporations to create a training and transition program for redundant government employees. Government employees would be incentivized to leave the public sector for higher-paying jobs and the bureaucracy becomes a little less bloated.
At a bare minimum, the pandemic has proven that Croatia cannot continue to be a tourism one-trick pony. The country needs to diversify its industries if it wants to achieve stability and prosperity.
#4 Cut PDV
PDV is Croatia’s VAT (value-added tax) that is added to most purchases. The standard tax rate at the moment is 25%, which is the second highest in Europe.
This exorbitant tax rate has resulted in businesses and individuals operating under the table to avoid paying it. And if businesses and individuals don’t report transactions, the government misses out on both the VAT and the associated income tax.
If the government were to cut PDV to something more reasonable and less mafia-like, lots of good things could happen like:
- People buy more things!
- Fewer people commit tax evasion!
- People are happier and they vote for you!
- More people open businesses!
- Those businesses hire people!
- So, more people are employed!
#5 Make it cheaper for locals to enjoy Croatia
Croatia is no longer a cheap destination for tourists coming from abroad. Tours, dining, tollroads and national parks are all expensive, rivaling western European cities. These prices proved to be a deterrent to tourists in 2019, as many chose to holiday in Greece or Turkey instead.
Locals, on the other hand, have been completely shut out from enjoying their own country during high season due to the steep costs. Ticket, tour and dining prices are starkly out of proportion with incomes.
Due to the pandemic, many people around the world are choosing to travel within their home country, rather than traveling abroad. This presents an opportunity for Croatia.
Given that it will take time for Croatia’s tourism industry to recover, it is worth offering incentives to Croatia’s residents to travel and spend within the country.
Offer a discount to any person with a resident card at national parks, on tollroads and ferry boats during high season. When Plitvice National Park offered a deep discount for tickets last summer when the borders were locked down, my friends and I hightailed over there.
#6 Let foreign retirees settle here
However, those options force you to leave for 90 days at the end of each permit term and you have to wait a full 6 months before you can apply for a permit again. That makes it impossible for anyone in this situation to ever achieve permanent residence or completely settle down.
Retirees are a potential golden goose for Croatia. The vast majority of them want to buy property. They won’t be taking anyone’s job. They are unlikely to cause any trouble. Pensioners are already required to pay more in health insurance premiums than other foreigners. They are more prone to volunteer. All they will be doing is enjoying their time in Croatia and spending money. There is no downside.
Create a retirement residence permit for third-country nationals as long as they can prove they are collecting retirement and you’ll see them flood into Croatia to spend their nest eggs.
#7 Develop a winter conference season
For those that are dependent on tourism for their livelihood, many experience a similar cycle. In spring and early summer, you earn money to support yourself. In summer, you earn money to support yourself during winter. In winter, you try to budget so you don’t run out of money before the next season. In February, the money runs out at the same time the bad weather starts, so you’re angry. Then it all repeats.
It doesn’t have to be this way.
Croatia could have a year-round season, if it wanted to. Winter is the perfect time for conferences and company-sponsored events. Given the temperate climate on Croatia’s coast during winter, it’s a great place for EU companies to bring their employees for some quality team-building away from harsh winters.
If Croatia could fill its winter with conferences and corporate events, lots of good things could happen like:
- More people visit Croatia!
- Restaurants could stay open!
- Tours could operate!
- Transfer companies would have work!
- More tax revenue is generated!
- Fewer people would need unemployment support!
- Families dependent on tourism would earn more money!
- So, they would be happier and vote for you!
#8 Finalize a double taxation treaty with the US
Croatia is the only EU nation without a double taxation treaty in place with the United States. It’s absurd and it is past time this was resolved.
Ultimately, the United States has to push this one forward just as much as Croatia. Speaking as a US citizen, please just GET IT DONE.
This is not solely an issue for Americans living in Croatia. There are over 400.000 people of Croatian descent in the United States, whom the government desperately wants to move to Croatia. That’s why they are handing out passports to diaspora like lollipops.
A common road block for many is the lack of a double taxation treaty. If you’re paying income tax in the United States, paying income tax in Croatia and paying 25% PDV on purchases in Croatia, you’ll have absolutely nothing left.
#9 Make it cheaper to run a business
There is so much opportunity in Croatia. There are tons of gaps in the market just waiting to be filled. I honestly wish there were 10 of me so I could pursue all of my business ideas.
Even with all the potential in Croatia, owning a business can be a money pit. In most cases, you’ve got to work extraordinarily hard just to keep the business in the black. Being prosperous is much harder to achieve.
In the end, the cost and risk deter people from ever opening a business. Fewer entrepreneurs means fewer jobs and more people relying on the government to make ends meet.
There are 3 changes that could certainly help make it easier and cheaper to own a business in Croatia.
- Make it cheaper to open one. Croatia currently allows citizens to open companies inexpensively using the START program, which is a good step in the right direction. Everyone else has to go to a notary and shell out around 400 or more euros.
- Change the requirement on foreign ownership. If you are a non-EU national and wish to open a company and gain residence in Croatia, you must hire 3 full-time Croatians. Not all businesses need 3 full-time workers. Some only need 1, some none at all. I understanding the desire to create jobs for Croatians, but this steep requirement serves as a deterrent from foreign investment.
- Reduce doprinosi. When your company pays a freelancer or an employee, you must pay doprinosi (contributions) on top of the net salary, which includes pension, taxes and health insurance. This can add an additional 40% on top of the salaried amount. As a result, companies hire fewer people and some will pay their people in cash under the table. Lowering doprinosi, specifically the taxes portion, would make it more affordable for companies to hire help, and therefore grow their businesses.
What’s next for Croatia
Croatia is magnificent in a lot of ways, but there are a lot of holes in the boat. I’m concerned about the Euro. I’m concerned about Croatia continuing to only care about tourism and babies. I’m concerned that the trend of focusing on short-term greed versus long-term prosperity will continue. I’m concerned that the natural resources will be trampled and destroyed by over-tourism.
A lot needs to be done.
Please note: Information provided by Expat in Croatia is only for the purposes of guidance. It does not constitute legal or financial advice in any form. Croatian laws and bureaucratic rules often change, and each personal case is individual, so different rules may apply. For legal advice, contact us to consult with a licensed Croatian lawyer. For financial advice, contact us to consult with a licensed Croatian tax advisor or accountant.