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Features of the Business Environment in the Republic of Croatia
#1 Croatian businesses are advised to have an accountant
An accountant will file your tax returns, communicate with the government, submit VAT reports and calculate payroll for all your employees. They can also pay bills on your behalf. The cost of an accountant’s services can range from 133 euros to 266 euros per month for a basic d.o.o. business.
The more active your business is and the more services you request (such as bill payment), the higher the cost will be. You may also have to pay for year-end accounting in addition to the monthly fee, which can cost at least 266 euros.
#2 Know what the PDV system means before you register
PDV is the Croatian VAT (value-added tax) system. It is a significant tax added to the sale of most goods. If you are registered in the PDV system, you are entitled to a refund of all PDV that your company pays to other companies. This also means that you are required to charge PDV on all outgoing invoices, which offsets the amount you paid in PDV. Sounds great, doesn’t it? But don’t be fooled. After registering with the PDV system:
Your accountant must file the PDV on your behalf (which increases the cost of your accountant’s services, which they will charge you for)
Once you issue an invoice with PDV, you are required to pay the PDV amount on that invoice to the government, regardless of whether the invoice has been paid or not. Thus, if one of your clients pays an invoice late, you may pay the amount to the government in advance. Due to the pandemic, this rule was temporarily changed so that VAT would not be paid until the invoice was paid, but the possibility of making this change permanent is currently being discussed. Fingers crossed!
Once you’ve registered with the PDV, you’re required to remain in the system for 5 years.
If your company has annual revenue of 39,816.84 euros or more, you are required to be in the PDV system.
For companies that provide services or sell high-priced goods, you may encounter situations where customers are unwilling to pay PDV and instead either cancel the purchase entirely or pay in cash (so-called “under the table”).
#3 Changing your registered address can be expensive
When you set up a company, think carefully before choosing an official registered address. Changing your registered address later will require notarization and resubmission of your incorporation documents, which can be quite expensive.
If you are changing your address within the same city where your company is registered, and your founding documents state that you may change the address, the only cost will be the notary fee, which is approximately 27 euros.
However, if you change your company’s address to a different city OR if your articles of incorporation do not allow for a change of address, you will need to resubmit your articles of incorporation. This costs approximately 266 euros.
Most Croatians use the address of a home that belongs to them or their family. If you’re an expat and don’t own your own home, some accountants will let you use their address for your company and accept mail on your behalf for a monthly fee. The likelihood that their business will move is lower than the likelihood that you will move.
To avoid this hassle, make sure that only the city is specified in the articles of incorporation, and that your physical address is listed in an appendix. That way, you’ll only need to update the appendix, not the articles of incorporation.