An obrt (“craft”) business is an independent and permanent trade established by the person whose aim is to earn income or a profit through production, traffic or services. A person is allowed to perform any kind of economic activity which isn’t forbidden by the law.
It is possible to open an obrt as an individual or as a joint trade where ownership is shared with partners. Obrt can perform its business activities permanently (within a whole calendar year) or seasonally (for 6 months or more).
In this post, we will cover:
- Types of trade businesses
- How to define the type of trade business
- Collective Ownership
There are three types of obrt in Croatia:
- Slobodni obrt (free trade business/craft)
- Vezani obrt (“tied” trade business/craft)
- Povlašteni obrt (preferential trade business/craft)
These types of obrt are defined according to whether a professional competence is needed to establish obrt or not. Some occupations require professional competence and some not.
Occupations that belong to vezani and povlašteni obrt are defined in Pravilnik o vezanim i povlaštenim obrtima (Rulebook on “tied” and preferential trade businesses) which is available here. Other occupations that aren’t listed in this rulebook belong to the slobodni obrt.
We’re going to introduce the above-mentioned types to get you familiar with their characteristics and differences.
If you wish to open a business in Croatia and do not need to gain residency through the business, then an obrt is a great option due to its low taxes, requirements and oversight.
Slobodni obrt (“free” trade business) isn’t restricted to a particular professional competence. This means that you don’t need a professional qualification or a master exam to establish this type of business. To open a slobodni obrt, you only need to fulfill the general requirements for registration.
General requirements are:
- You don’t have a ban or a restraining order to open the desired business (brought by the Sud časti Hrvatske obrtničke komore or the Croatian court)
- You fulfill all the health conditions, if needed
Examples: Window washing, building cleaning, ironing, consultancy
Vezani obrt (“tied” or related trade business) requires a professional qualification or a master exam for its registration, in addition to meeting the general requirements.
Vezani can be performed by the person who is an inventor. In that case, he/she has achieved patent rights for the specific product or service. On the other hand, vezani can also be established by the person who has the appropriate high school education relevant to the business.
Examples: Body massage, photography, beer production, tour guiding
Povlašteni obrt (preferential trade business) can be exclusively registered based on a specific privilege/preference.
That privilege is defined by the competent ministry or any other appropriate authority, depending on the industry/business.
Examples: Marine fishing, stone extraction, security services
Almost all trade types can be registered as an obrt. The full list of available trades can be found here in both English and Croatian.
The first step is to define the class of your future business according to the Nacionalna klasifikacija djelatnosti – NKD (National Classification of Occupations). The list of all occupations from NKD can be found here both in English and Croatian.
Examine the NKD and find the group that is the most related to your business. For example, if you are going to do sea fishing, search for morski ribolov (marine fishing). It is listed under the group 3.11. This group represents your main occupation of obrt. If you are going to clean buildings, your group is 81.21 Osnovno čišćenje zgrada (General cleaning of buildings).
The second step is to examine the Pravilnik o vezanim i povlaštenim obrtima (Rulebook on “tied” and preferential trade businesses). If the group that you’ve found in NKD is listed in Pravilnik, then you need a professional education to perform your business activity. Pravilnik is available here.
See if the number of the group that you found within the NKD rulebook is listed in Pravilnik. This is the fastest way. Make a double check according to the name of the group as well.
For example, 3.11. Morski ribolov (marine fishing) is listed in the table that includes the list of povlašteni obrt. It requires a professional qualification according to the Program of professional qualification exams.
On the other hand, 81.21 Osnovno čišćenje zgrada (General cleaning of buildings) isn’t mentioned in Pravilnik. This means that you don’t need any professional qualifications for this occupation and that you can open obrt anytime.
Types of professional qualifications
Every occupation listed in the Pravilnik has a column “Složenost zanimanja” (occupation complexity). This column defines the professional qualification that is required for certain occupations.
Here are all possible types of professional qualifications:
1 – Stručna osposobljenost prema Programu ispita o stručnoj osposobljenosti (professional qualification according to the Program of professional qualification exams)
1*- Stručna osposobljenost određena posebnim propisom (professional qualification determined by a special regulation)
2 – Niža stručna sprema (lower education)
3 – Srednja stručna sprema u trogodišnjem trajanju (three-year secondary education)
3+ – Osposobljavanje za trgovačko poslovanje (training for commercial business)
4 – Srednja stručna sprema u četverogodišnjem trajanju i srednja školska sprema (KV, SSS i SŠS) (four-year secondary education and secondary education)
4++ – Osposobljavanje za trgovačko poslovanje i poznavanje robe (training for trade business and knowledge of goods)
5 – Majstorski ispit (master exam)
5* – Trgovac (merchant)
In addition to the three types of trade businesses, there are three ways they can be taxed:
- Paušalno oporezivanje (flat-rate tax)
- Porez na dohodak (income tax)
- Porez na dobit (profit tax)
These taxation schemes are explained in brief detail below. The owner of the obrt must decide on a method of tax at the time of opening the business.
Porez na dohodak
The owners are obliged to pay porez na dohodak (an income tax). Dohodak is the difference between charged incomes and paid expenses. Taxation is progressive and the latest tax brackets can be found here.
Porez na dobit
Porez na dobit (a profit tax) is calculated and paid according to your earnings and the latest tax brackets that can be found here.
The owner can change to this type of taxation if it’s more suitable.
Paušalno oporezivanje (Paušalni obrt)
The owners can open Paušalni obrt which means that they will pay for income taxes according to the flat rate principle. This is called paušalno oporezivanje and this type of taxation is common for small obrt with small incomes. The flat rate is calculated according to the profit and the income is completely excluded from the taxation.
The latest tax brackets can be found here.
All of these types of obrt can also be registered by two or more owners who will work together under the same name.
If two or more persons want to launch vezani obrt, only one of them has to achieve a professional qualification or a master exam.