Running a business in Croatia is tricky. There are some facets that are similar to other countries, but there are many aspects that are specific to Croatia. Familiarity with these nuances will determine whether or not your business is successful or not.
Across this site, I’ve waxed on ad nauseum about the horrors of operating a business in Croatia. While it is possible to run a profitable business in this country, the chances of success are diminished if you don’t know what you are getting into before taking the leap.
Without further ado, our latest installment…
#1 There is a minimum wage
Croatia defines a minimum wage every year for employees as well as the directors of businesses. The minimum wage is higher for directors than it is for employees. If you own a company, you are required to pay yourself a salary.
The minimum wage is regulated for both bruto and neto salaries. Neto salary is the net amount an employee receives in their personal bank account every month in exchange for working. Bruto salary is the neto salary plus pension and taxes. Taxes vary by jurisdiction.
#2 Electricity can cost more for businesses
If you operate a business with a physical location, you may be charged more for electricity than an individual person would in a private home. The amount you are charged depends on how much electricity you use. The more electricity your business needs, the more you will be charged per kilowatt hour (kW/h).
You can explore the available tariff models on the web site for HEP, the state electricity company.
#3 Health insurance costs more for businesses
All Croatian employers are required by law to pay contributions to the state for basic obvezno health coverage for their employees.
The current monthly rate for health insurance is 548 kuna for an individual who is not employed by a Croatian company, with some exceptions. For employees of Croatian companies, the monthly rate for health insurance is calculated differently and it is always higher considering the minimum wage.
The cost of health insurance for employed people is calculated as a percentage of their bruto salary. Health insurance is 16,5% of the bruto amount.
#4 It costs money to get change
If you plan to open a business such as a bar or fast food restaurant, you may frequently need small bills and coins. It’s not as simple as just going to the bank and exchanging it. You can do it that way if your need for change is rare, but if you need 10.000 kuna in coins and bills every few days, then you need to pay for that privilege.
For frequent exchanges, you must set up an account with FINA and sign a contract. You will then be charged 1% for all exchanges.
#5 Loaning your company money can be a little tricky
If you’re just starting your company, it’s not unusual to loan your company money each month so that you can meet monthly expenses. When loaning your own company money, there are a few things you must know to ensure it is done correctly and cost effectively.
Use a personal bank account
If you deposit cash into your business bank account as a loan, you can be charged up to 100 kuna regardless of how much you deposit. A cost effective alternative is to transfer the money from your personal Croatian bank account into the Croatian bank account for your business. If you do it this way, then you may only pay 2 to 4 kuna for the deposit instead.
If the funds you are using for the loan to your Croatian business are coming from your foreign bank account, pull it out at an ATM, deposit it into your personal Croatian bank account, then make the transfer. Note that deposits under 1000 EUR do not trigger a second look by the tax authority.
Use the right description
On every bank transaction, there must be a description called “opis plaćanja”. When making a loan to a company, you must put in the description “pozajmica vlasnika”, which means “owner’s loan”. This tells both your accountant and the tax authority that this was a loan and is not revenue.
If you are a business owner and think we’ve missed something, let us know in the comments. We’d love to hear from you.
Please note: All information provided by Expat in Croatia is only for the purposes of guidance. It does not constitute legal or financial advice in any form. For legal advice, you must consult with a licensed Croatian lawyer. For financial advice, you must consult with a licensed Croatian tax advisor or accountant. We can recommend one if you contact us.