#5 j.t.d. (general partnership)
Javno trgovačko društvo (j.t.d.) is when two or more persons join together for the permanent performance of activities under a joint company. Each company member is liable to the company’s creditors unlimitedly and jointly with all its assets. A company member cannot dispose of his share in the company without the consent of the other members.
Good for: You are sharing the knowledge with your partners, and you have an extra pair of hands when needed
Bad for: If you want to exit the company, you need agreement from other partners
#6 k.d. (limited partnership)
Komanditno društvo (k.d.) is a commercial company in which two or more persons join together to permanently perform activities under a joint company. A limited partnership requires at least one partner to be responsible for the company’s obligations unlimitedly and jointly with all its assets. This person is called a general partner.
Also, at least one is responsible for obligations of the company only up to the amount of a certain property contribution to the company. This person is a limited partner.
Good for: If you need a silent partner with assets, this is a great way to establish the company together
Bad for: As a general partner, you have a larger responsibility for risks
#7 obrt (trade business)
Obrt (trade business) is not a traditional company; instead, it is connected to a specific person and the type of “craft” in which they specialize. For example, locksmiths, hairstylists, and carpenters would all fall into this category. Certain types of obrt require professional qualifications, and others don’t.
While an obrt can have employees like a company, the business lives and dies with the person, unlike a company. The entity cannot go on without the individual who has registered their “craft” as an obrt. This also means that the owner carries the liability for the obrt personally. The owner doesn’t have protections like they would with limited liability companies like d.o.o. and j.d.o.o.
Since the obrt is not considered a traditional company, it does not require start-up capital like with a d.o.o. Obrt can even be temporarily paused for up to 1 year.
If residency is not a concern of yours, the obrt is a very favorable way of opening a legit business. Your tax obligation is much lower overall than with a d.o.o. or j.d.o.o, and you can choose between 3 tax models. There is also a lot less oversight as long as you make your contributions on time.
Good for: Individuals with a professional trade or craft
Bad for: Companies with revenue from multiple categories of business, Non-EU/EEU citizens that want to get residency through opening a company (as it requires an investment of 26.544,56 euros)
[Read: How to open and close an obrt in Croatia]
#8 OPG (family farm)
Obiteljsko poljoprivredno gospodarstvo – OPG (family farm) is an agricultural business that includes members of the same family or a household. It is based on using its own or leased production resources and family members’ skills, knowledge, and work.
The activities that an OPG may perform are strictly defined. They include agricultural activities such as plant breeding, cattle breeding, growing of annual or perennial crops, breeding of livestock and poultry, and similar.
Start-up capital isn’t needed to open an OPG. Members of OPG can be permanently or occasionally employed.
Good for: Families who own production resources or would like to open an agricultural family business
[Read: How to open and close OPG (family farm)]
#9 Predstavništvo (branch office)
A branch office in Croatia called predstavništvo can be established by a foreign person performing economic activity and a national or international business association. Like other registered Croatian companies, the branches are required by the Croatian Accounting Act and the International Accounting Standards to maintain records of their financial activities.
Additionally, they must open a bank account to conduct financial transactions and deposit the initial money. Foreign companies can open as many branches as needed, but each must be registered separately.
Good for: It is a great way to enter the market with less paperwork than if you established a company from scratch in Croatia
Bad for: Branch office opening is expensive, and if you as a company plan to open several new locations, it may be a pricey journey
#10 udruga (non-profit organization)
An udruga (union, non-profit organization) is a form of business operated by a group of individuals (usually volunteers) who want to form a legal organization to accomplish a non-profit purpose.
Their primary function is to protect human rights and freedoms, as well as to further environmental, humanitarian, informational, cultural, national, pronatalist, educational, social, professional, sporting, technical, medical, or scientific interests and goals.
To start an udruga, you must have a minimum of 3 members (founders).
Good for: Non-government organizations, charities, volunteering
Bad for: For-profit businesses
#1 Croatian businesses are recommended to have an accountant
The accountant will file your tax returns, communicate with the government, file your PDV reports and calculate the salary payments for all of your employees. They can also pay invoices on your behalf. The cost of an accountant can be range from 133 euros to 266 euros per month for a basic d.o.o. business.
The more activity your business has, and the more services you request (for example, paying your bills), the higher the cost will be. You may also need to pay for your end of year calculations on top of the monthly fee, which could cost at least 266 euros.
#2 Know what the PDV system means before you sign up
PDV is Croatia’s VAT (value added tax) system. It is a hefty tax added to the sale of most items. If you are registered with the PDV system, you are entitled to a refund on all PDV that your company pays to other companies. It also means you are required to charge PDV on all of your outgoing invoices, which balances out what you’ve paid in PDV. Sounds nice, doesn’t it, but don’t be fooled. Once in PDV system:
- Your accountant has to file PDV on your behalf (which raises your accountant’s fees they will charge you)
- Once you issue an invoice with PDV, you are then required to pay the invoiced PDV to the government regardless of whether or not that invoice has been paid yet. So, if any of your customers pay late, you can end up fronting the cost to the government. This was temporarily changed in response to the pandemicso that PDV wasn’t due until an invoice was paid, but there is discussion about making this change permanent. Fingers crossed!
- Once registered with PDV, you are required to be in the system for 5 years.
- If your company takes in 39.816,84 euros or more of revenue in a year, you are required to be in the PDV system.
- For service-based companies or companies with expensive products, you may find that customers are unwilling to pay the PDV and instead will forgo the purchase entirely or pay in cash (aka under the table).
#3 It can be expensive to change your business address
When you start a company, think carefully before you decide on your official registered address. Changing your company’s registered address later will require a notary and may require you to re-file your formation documents, which is pricey.
If you are changing your address within the same city where your company is registered AND your formation documents include the language that you can change the address, the only cost will be for the notary, which is about 27 euros.
However, if you are changing your business address to a different city OR your formation documents do not include the ability to change the address, then you’ll need to re-file the formation documents. The cost to do this is about 266 euros.
Most Croatians use the address of a home they or their family owns. As an expat, since you may not own a home, some accountants will allow you to use their address for your company and accept mail on your behalf for a monthly fee. The likelihood that their business will move will be lower than the chances you will move.
To avoid this insanity, make sure that only the city is listed in the formation documents and that your physical address is listed in an addendum. This way, only the addendum must be changed, rather than your articles of incorporation.
#4 You can’t claim everything as an expense
To claim a purchase as a business expense, the vendor must create an R1 invoice for your company that includes the formal company name, registered address and OIB. Make sure you keep all business receipts and give them to your accountant.
Here are some examples of common expenses:
- If you work from home, you cannot deduct your rent, water bill, electricity or internet unless the respective contracts are in your business’ name and are paid for by the business.
- If you buy printer ink at a store using your business debit card, you must request they generate an R1 invoice for you. Just having the receipt is not enough. The good thing is that once you register you business with a store, they will keep you on file for future purchases making it easier to get an official invoice.
You can get reimbursed by your company for personal business expenses like meals and mileage, but there are a lot of restrictions depending on the situation. Check with your accountant for details.
#5 Accepting cash increases your reporting liability
As of January 1, 2013, all businesses that accept cash payments OR online payments with credit cards are required to purchase and use a fiscalization software that automatically reports every cash transaction to the government in real time. Even accepting one cash or credit card payment makes you liable.
Fiscalization software isn’t cheap and can be a bit of a beast to deal with. It’s also strictly controlled, so do not risk exposure with the tax authority by evading this requirement. Here is everything you need to know about fiscalization.