The most common types of companies that people can open in Croatia are obrt, j.d.o.o. and d.o.o. On this site, we have already covered how to open and close an obrt, how to open and close a j.d.o.o. or d.o.o. company as well as the different types of obrt trade businesses.
In this post, we dig deeper into the main differences between obrt and društvo s ograničenom odgovornošću (d.o.o. or j.d.o.o.) so you can get a better understanding if one of these types of structures will work for your new venture in Croatia.
In this post we cover:
- Conditions and establishing costs
- Responsibilities and duties
- Book management and accounting
- Employment and salary
- Taxation of earnings
- A short list of advantages and disadvantages
Obrt is the simplest and cheapest type of company to launch and operate.
You can register obrt here:
- At Nadležni ured za registraciju obrta nearest to the headquarters of obrt (Competent office for registration of trades ) OR
- At nadležni ured Grada Zagreba – Gradski ured za gospodarstvo, or Odjel za upravno-pravne poslove (City Economy Office – general administration)
- Online via e-Građani (e-Citizen) START application – as long as you have a Croatian ID card and therefore security certificate
- Online via e-Obrt application
Obrt can be categorized in 2 groups:
- Paušalni obrt (Flat-rate trade business) – It is an ideal obrt type for beginners with small incomes. It is excluded from taxation, since incomes can’t exceed 300.000 kuna.
- Obrt (Trade business) – It is ideal for businesses whose incomes exceed 300.000 kuna. It is included in the taxation system.
Initial start-up capital isn’t required.
Here are all the costs:
- Costs of establishing obrt – ~ 500 kuna
- License (obrtnica) – 200 kuna
- Registration process
- ~ 270 kuna in Zagreb
- 250 kuna everywhere else
For more detailed information on what an obrt trade business is and its options, view this post.
For details on how to open and close an obrt, view this post.
To establish a j.d.o.o. (Jednostavno društvo s ograničenom odgovornošću ) you need only 10 kuna for the initial start-up capital investment. If you’re planning to enter the service industry where there is no investment in equipment, you should open a j.d.o.o.
Registration can be done by the public notary (javni bilježnik) and establishment costs are around 800 kuna. If you are not fluent in Croatian, an official translator is usually required at the notary for which there is an additional cost.
A j.d.o.o. can have only one director and a maximum of three owners.
For detailed information on how to open and close a j.d.o.o., view this post.
A d.o.o. (društvo s ograničenom odgovornošću) is the most common type of company for small entrepreneurs. The cost of establishment is approximately 5.000 kuna. The initial start-up capital is 20.000 kuna, which can be used by the owners immediately. Although, the start up capital can be 200.000 kuna if you are seeking to get a work and residence permit as the owner of the company.
A d.o.o. can have an unlimited number of directors and owners.
For more information on how to open and close a d.o.o., view this post.
The obrt’s owner is responsible for obrt’s duties, liabilities and associated personal property while owners of j.d.o.o. and d.o.o. have a limited responsibility and liability as it relates to the company’s property only.
J.d.o.o. and d.o.o. are required to manage all the business books according to the dual accountancy principle. Book entries are done when the bill is released and PDV has to be paid even if an invoice isn’t charged on time. A licensed accountant is recommended, either on staff or a third party.
Obrt can manage its business books according to the simple accountancy principle, which is simpler and cheaper. Owners can manage their books independently, on their own. Book entries are done when the bill is charged, which means that their receivables are only charged invoices.
If you’re the obrt’s owner, you’ll have to pay for all the contributions (pension, health insurance, employment, safety at work). That means that these contributions must be paid even if you don’t achieve any profit in a given month. You can see the latest contributions in this post.
The j.d.o.o. and d.o.o. are obligated to employ at least one employee (a director) whose bruto salary is at least the minimum wage set for directors. An employee also has an option to work part-time, but a director must be full time. You can see latest minimum wage for directors and employees here.
An obrt’s owners have the option to choose between 3 different types of taxes. They can pay an income tax, but it is possible to choose another taxation type if it’s more suitable for obrt’s management.
Obrt’s owners can choose between these 3 tax schemes:
- Porez na dohodak (an income tax) – Owner pays a progressive tax rate of on income (dohodak)
- Porez na dobit (a profit tax) – Owner pays taxes for the gained profit according to the 20% rate
- Paušalno oporezivanje – The flat rate is calculated according to the obrt’s profit and the income is completely excluded from the taxation
You can learn more about these taxation options in our detailed obrt guide.
J.d.o.o. and d.o.o. do not have the option to choose how they are taxed.
- Paušalni obrt can be quickly launched
- Low opening costs
- Self-management of books
- No initial capital is needed
- Easy to open and close
- Not required to have an employee
- Ability to pause the obrt, during which taxes are not due. Most commonly used for tourism businesses that pause during winter.
- Owner is personally liable for the business
- An income tax payment is higher than a profit tax payment
- A master exam or a professional qualification is usually required for obrt’s opening
- You may not take in more than 300.000 kuna of revenue annually
- Profit tax payment is lower than an income tax payment
- Owner isn’t personally responsible for the business
- Dual book management enables quality reporting
- No limit on revenue
- j.d.o.o. can be opened with only 10 kuna start-up capital
- Higher business costs
- A minimal initial capital of 20.000 kuna is mandatory for d.o.o. (unless you are seeking a work permit as the director, in which case it will be 200.000 kuna)
- Liquidation and closing process can be time-consuming and expensive, during which the director must continue to be paid full salary
- An accountant is recommended
- Must hire at least one employee, usually the director whom must have a full-time salary
- Not allowed to pause the business
Are there any advantages or disadvantages that we missed? Let us know in the comments.
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.