Successfully investing in Croatia

The Republic of Croatia has a large investment potential. Key sectors are: car industry, ICT sector, pharma­ceu­ti­cal industry, food industry, metal industry, energy sector , agriculture and tourism. This is mainly attributable to the geographical location of Croatia in Southeastern Europe. Access to the Adriatic Sea along the long coast­line, a very well-developed motorway and rail network, as well as good flight connections offer potential inves­tors the opportunity, on the one hand to invest in the tourism industry on the coastline and on the other hand to build production facilities in the country's interior. The widely popular issue of renewable energies is far from being exhausted yet and is certainly interesting for entrepreneurs having expertise in this area.

 

The north-western region of the country offers the largest competitive advantages because Croatia's capital city Zagreb – the Croatian economic hub – is located in this region. Other two relevant regions include Central and Eastern Croatia as well as the Adriatic Coast. The central-eastern part offers good investment oppor­tu­ni­ties for agriculture and the coastal region mainly for tourism.

 

Other factors that attract foreign investors include natural resources, well-developed financial services and high-quality telecommunications infrastructure. Also, Croatia has attractive tax incentives, double taxation agreements with many countries and is part of the EU's single customs area.

The bureaucratic system is the hurdle that businesses are faced with in Croatia. The biggest challenges for a German entrepreneur seeking to do business in Croatia will surely be bureaucracy and the particularly pro­nounced formalism. Depending on the area of entrepreneur's activity, it is necessary to obtain various appro­vals, permits and consents to operate a business in Croatia. It should be noted that the procedure of issuing the above documents often takes longer than expected. The Croatian authorities and courts often contend with the directly applicable EU regulations; therefore, if a German entrepreneur wants to invoke the EU regulation, this will certainly involve a greater deal of persuasive effort on his/her part than would be the case in a com­pa­rable situation in the Federal Republic of Germany.

 

However, a major positive change in the recent years has been the successful digitization of  the public and private sectors which now can provide quick information that can be of thegreat help to investors.

Croatia was not immune to the rising inflation caused by the COVID crisis and war in the Ukraine, but it should be noted that Croatia’s energy supply sources are multifarious and do not depend on Russian oil and gas.

 

Also Croatia has its own fertilizer production that is less exposed to the current negative situation in Europe.

 

Croatia's government adopted various measures to mitigate the impact of rising energy prices. This measures include a reduction of the VAT rate on gas and other energy products and direct subventions to small and medium-sized enterprises (SMEs). 

Although the applicable laws and regulations are the same throughout the Republic of Croatia, there are cases where the implementation and interpretation of laws varies depending on the location and region. 

 

Therefore, the local circumstances should be examined in advance, if possible, in order to avoid any unex­pec­ted situations. If differences do exist, they will be mainly visible in the fact that the authorities will set different requirements for starting your business, even though the requirements are laid down in the laws or in the imple­menting regulations. In that regard, it is recommended to seek prior advice from experienced local specialists in areas such as law and taxes. 

 

Basically, however, it should be noted that the differences in the implementation of applicable laws are slowly becoming less significant, which is good news for potential investors. Major contributing factor for that is the digitalisation and improvement of the efficiency of public administrations, and improvement of digital connec­tivity and infrastructure in more rural areas.  

Despite the COVID crisis and the war in Europe, Croatia's economic potential has not been shaken. 

 

Access to funds from EU, ie from the so-called Mechanism for Recovery and Resilience Facility (RRF) and im­ple­men­tation of the National Recovery and Resilience Plan (NRRP), under which Croatia can draw out tens of billions of euros in grants and soft loans over the next four years is great oportunity for investment in the private sector. A stimulating investment environment will lead not only to the growth of domestic but also foreign investment.