Croatia

Ease of Doing Business Rank: 51

Overview

 

Geographic location

Croatia is a Central European country on the Adriatic Sea. Hungary lies to the northeast, Serbia to the east, Bosnia and Herzegovina and Montenegro to the southeast and Slovenia to the northwest.

Spoken language

The official language of Croatia is Croatian, spoken by 95% of the population as their first language.

Minority languages include Serbian, Italian, Hungarian, Czech, Slovak, French, Rusyn, Ukrainian, Romany, German and Slovene.

Approximately 80 percent of Croatians are multilingual. English is the most widely-spoke foreign language (81%), followed by German (49%) and Italian (24%).

Population

The 2019 population estimate is 4.07 million.

According to 2011 data, Zagreb is the largest city and capital (802,588        ), followed by Split (178,102, Rijeka (128,624) and Osijek (108,048). All other cities and towns have populations of less than 100,000.

Popular industries

The top industries in Croatia are tourism, shipbuilding, construction, petrochemicals, food processing, metal processing, manufacturing and fabrication and pharmaceuticals.

Education

The Times Higher Education World Rankings includes two Croatian universities in the top 1,000 in the world.

The Legatum Prosperity Index ranks Croatia’s education system 47th out of 149.

Popular entity types

The most common type of business entities in Croatia are the Limited Liability Company and Joint Stock Company.

The overwhelming majority of businesses are in the form of a Limited Liability Company.

Croatian incentives for business

Croatia offers investment incentives for manufacturing and processing activities, development and innovation activities, business support activities and high added value services.

Enterprises must fulfill employment quotas based on the amount of money invested. Aid calculations rely on an initial baseline of the greater of two amounts: either tangible and intangible assets or gross wage calculated over two years.

The percentage of aid ranges from 40% for large enterprises to 60% for small or micro enterprises. Equally, the requirements for job creation and maintaining the investment vary by enterprise size.

Additionally, Croatia offers many tax incentives based on enterprise size and individuals employed. These range from 50% to 100% CIT reduction. Regional subsidies exist in high unemployment areas to offset employment costs. They range between 10% and 30% per employee.

Companies providing education and training may qualify for a subsidy up to a maximum of 70% of the eligible costs. Those involved in development and innovation activities may qualify for a non-refundable grant for 20% of eligible high technology plant/machinery expenses. Croatia also offers additional subsidies for large scale investments in production equipment and facilities, factories and tourist facilities which generate employment.

The country also offers free leases on inactive property for up to ten years on substantial investments, providing the business provides employment and increases the value of the property.

Croatia also offers a foreign tax credit to offset taxes paid abroad.

History & Features

 

Main cities for business

Zagreb is the financial and business center of the country.

Popular historical & tourist attractions

Croatia offers many historical, architectural, cultural, and natural attractions. The capital city of Zagreb has some of the country’s best museums, galleries, restaurants and shopping as well as the medieval upper town district of Gornji Grad. This region is home to the Croatian Parliament, Church of St. Mark and the Tower of Lotrscak.

The country also has 10 UNESCO World Heritage Sites, including the Old City of Dubrovnik on the Dalmatian coast. The area includes well-preserved Pile Gate built in 1537, as well as Gothic, Renaissance and Baroque churches, monasteries, palaces and fountains within the town’s medieval ramparts.

Split is Croatia’s second biggest city and home to Diocletian’s Palace, completed by a Roman emperor in AD 305. This fortified palace includes four monumental gates, including one that originally protected the structure from the sea. The Old Town is also a pedestrian-only zone and another UNESCO World Heritage Site.

Croatia also offers plenty of celebrity-worthy areas such as Hvar Town. The Old Town includes a stunning harbor, hilltop fortress and access to some of the country’s best restaurants, hotels, marinas and beaches in the Dalmatian islands.

The country also includes many areas of outstanding natural beauty. Plitvice Lakes National Park includes woodlands, 16 lakes, waterfalls, many footpaths, as well as wolves, bears and feathered friends such as falcons, eagles and owls.

Kornati National Park is on an archipelago of 89 islets, best accessed by boat. These islands are largely uninhabited and offer an unspoiled glimpse into Croatia’s pristine coastal habitat.

Conversely, Zlatni Rat Beach on a spit on Brac Island in the Adriatic Sea is a favored destination for swimming, sunbathing and water sports, plus it is easily accessible from Split.

History

The earliest traces of human presence on Croatian soil date back to the Paleolithic Age. By the 4th century BC, the northern region was colonized by the Celts.

Romans entered some regions as early as 168 BC. By 12 AD, they controlled the entire area. The Roman period ended with Avar and Croat (southern Poland) invasions in the 6th and 7th centuries and the destruction of almost all Roman towns.

Eventually, two dukedoms were formed in 818 AD, one under a Slavic ruler and the other under a Frank. Frankish rule ended two decades later. The Dalmatian dukedom received papal recognition as a sovereign state and trade and commerce grew during the 8th and early 9th centuries.

In 1091 AD, Hungary claimed the crown after the last of the ruling Slav died without an heir. The Hungarian king introduced feudalism which led to a rise of native nobility.

During the 12th to 16th centuries, the area was under constant threat by the Ottomans and the Republic of Venice for control of coastal areas. The ruling king sold the coastal region of Dalmatia to Venice in 1409.

In 1493, the Ottomans defeated the Croatians and in 1526 they defeated the Hungarians, killing the king who ruled both nations. The Croatian region passed to Austria, ruled by the Habsburgs. However, by the late 16th century Turkish forces overtook most of Croatia.

Ottoman expansion in Europe halted after an unsuccessful siege on Vienna in 1683. By the 18th century, the Ottoman Empire had been driven out of Hungary and Austria.

After the fall of the Venetian Republic in 1797, it was forced to hand over its territory in Croatia to Austria. By 1809, Napoleon occupied the territory. However, Austria resumed control after Napoleon’s defeat in 1815.

Croatian nationalism grew in the 19th century and revolution swept across Europe. By 1867, the Austrian Empire split. The coastal area of Dalmatia was ruled by Austria, and the remaining territory was ruled by Hungary.

World War I brought an end to the Habsburg Empire and Croatia became a part of the State of Slovenes, Croats and Serbs. In 1918, this became the Kingdom of Yugoslavia. However, the new constitution abolished the political and historical entities in Croatia which led to great unrest.

During World War II, Axis powers occupied Croatia and a fascist government began. By 1943, the Resistance and the Soviet Red Army had expelled the Axis forces and imposed a Communist regime. This remained in force until the death of the ruler Tito in 1980 and the dissolution of the Soviet Union in 1989.

In 1991, Croatians voted for independence. However Yugoslavian forced invaded, which led to a four year war. The UN recognized Croatia’s independence in 1992 and administered one region until 1998 when all lands returned to Croatia.

Today, the Republic of Croatia is governed under a democratic parliamentary republic. They are a member of the EU and have a mixed economic system.

Other relevant facts

According to 2011 census, most inhabitants identify as Croat (90.4%), followed by Serbian (4.36%) and other ethnicities (<2%).

The same census found most Croatians are Catholic (86.28%), followed by Orthodox Christian (4.44%), Muslim (1.47%) and Protestant (0.34%).

Additional Information for Business

According to Forbes’ 2019 Best Countries for Business, Croatia is the 52nd best country in the world for conducting business.

The 2019 Index of Economic Freedom rates Croatia 86th globally and states, “Significant remaining challenges include political volatility and a level of public-sector debt that makes government spending on health care and pensions fiscally unsustainable. There is a significant risk that the government will struggle to pass far-reaching reforms in other areas. Pervasive corruption undermines the rule of law, and protection of property rights is weak.”

World Bank’s “Doing Business” rankings rate Hungary 51st for ease of doing business in the world.

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