Croatia is known as a country with a stable and appreciated economy, an excellent workforce, and a multitude of business possibilities in areas like tourism, manufacture, arts, and many more. Regardless of your business ideas, you can easily establish a sole proprietorship in Croatia and enjoy the appreciated business climate of this country. Once your business develops, you can consider changing the business structure in a simple and fast manner.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Obrt is a term used for a sole proprietorship in Croatia which can be established under the rules of the Crafts Act. This is the simplest form of business a foreigner can set up in Croatia, respecting the conditions and the registration steps with the Croatian Trade Register.
A sole proprietorship can be registered fast and simple, bearing in mind a few formalities. Being self-employed is often the decision of small entrepreneurs from abroad looking to start operations in Croatia. Here are the most important requirements for establishing a sole trader in Croatia:
• Single entrepreneurs can only develop activities as sole traders, whether local or from abroad.
• The Crafts Act mentions the type of activities that can be established in Croatia.
• The personal information of the owners (name, nationality, residency) needs to be provided to the Croatian Craft Register.
• A proper business plan comprising details and costs of materials, equipment, and consumables needs to be drafted.
• The business startup costs include specific registration fees and rental office costs if it is the case.
Here are the documents you will need:
- The valid ID or the valid passport of the owner, in copies.
- The vocational qualifications are required for associated crafts businesses.
- The registration forms provided by the local business registration office in Croatia.
- The proof showing you can use the premises if required for the activities you intend to develop.
- The Decision on Entry in the Register of Craft Business in Croatia.
- Proof that all the fees for registering the sole trader have been paid.
The next thing to do is to apply and obtain the official stamp of the firm with the State Administration Office in Croatia and then open a commercial bank account.
Taxation system in Croatia
Placing the activities in Croatia through a sole proprietorship may represent a suitable form of doing business in a competitive and appealing market. It is good to know that sole traders are subject to low taxes, compared to medium and large companies in Croatia. For example, if a sole proprietorship registers profits of at least HRK 26,400/year (about EUR 3,500) a 12% income tax rate will apply.
Moreover, sole proprietorships in Croatia must register for VAT purposes, the rate being set at the moment to 25%, but with lower rates imposed on certain goods and services. A sole trader in Croatia can temporarily close the activities without having to pay such taxes. The good part is that the operations can be reestablished at any time the owners consider it.
Sole proprietors are obliged to submit the following documents (all in Croatian):
- A transaction book in which all transactions performed in either cash or non-cash transactions are recorded. The turnover book can be kept in written form or in electronic form.
- The PO-SD form is submitted to the tax administration no later than 15.01. for the previous year of operation in which all transactions within the year are added quarterly, and on the basis of them a refund or additional payment of taxes and surcharges is made.
- Decision on the amount of the cash maximum by which the craftsman determines the amount of the cash maximum above which he is obliged to deposit it on the account of the trade.
- Internal act on fiscalization which makes a decision on the rules of sequence of numerical account numbers, business premises, designations of business premises, and operators on toll devices. The internal act is passed regardless of whether the craftsman does business with cash or not.
Here are Excel spreadsheets you can use for accounting purposes (in Croatian)
Benefits of using Deel
Relying on Deel to manage the contractors you decide to hire will help you get your “sole proprietor” off on the right foot. Our experienced teams work towards providing you the most streamlined contractor experience. With Deel, you can:
- Have a centralized platform that takes care of all the documentation, such as contracts, invoices, and compliance documents.
- Manage payments in different currencies and withdraw with a payment method of your choice (SEPA, PayPal, Payoneer, or bank transfer).
- Get 24/7 access to customer support and a team of experts.