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.
Types of Trade Businesses
There are three types of obrt in Croatia:
- Slobodni obrt (free craft)
- Vezani obrt (“tied” craft)
- Povlašteni obrt (preferential craft)
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.
1. Slobodni obrt
Slobodni obrt 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
2. Vezani obrt
Vezani obrt 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 or operating
3. Povlašteni obrt
Povlašteni obrt 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, Retail shops, Restaurants, Caffe bars
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.
In addition to the three types of trade businesses, there are three ways they can be taxed. These taxation schemes are explained in brief detail below. The owner of the obrt must decided on 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 charged according to 12%, 25%, and 40% rates.
Porez na dobit
A profit is the difference between all the incomes and expenses. The owner can traverse to this type of taxation if he/she concludes it’s more suitable. Porez na dobit (a profit tax) is calculated and paid according to the 20% rate.
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.
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.
Is this type of structure the right choice for your business? Let us know of any questions you have about opening a trade business in the comments.
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