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Croatia Corporate - Tax credits and incentives

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The Act on Investment Incentives provides the following relief and incentives for taxpayers.

Investment incentives

Investment incentives are usually organised as corporate tax credits applicable for up to ten years upon completion of various conditions.

General incentives apply for investors profit earned as a result of an investment under the following conditions:

Investment amount (EUR) Tax benefit rate (%) Period (years) Necessary to employ (employees)
150,000 to 1,000,000 50 10 5
1,000,000 to 3,000,000 75 10 10
More than 3,000,000 100 10 15

Furthermore, tax benefits are prescribed for micro entrepreneurs. A minimum investment of EUR 50,000 allows tax incentives in the form of a 50% decrease of the tax rate over a period of five years, with a minimum of three new jobs.

Tax benefits cannot exceed investment amount.

Incentives for investments in technological development and innovation activities, strategic business support activities, and high value-added services

Incentives are available for investments in technological development and innovation activities, strategic business support activities, and high value-added services. High value-added services relate to:

  • Creative services (activities in a field of architecture, design, marketing, art, etc.).
  • Touristic services (projects related to accommodation facilities with four or more stars; accommodation facilities in cultural and historic buildings; activities for developing health, congress, nautical, and cultural tourism; recreation centres and parks and environmental projects in tourism).
  • Managing, consulting, and educational services.
  • Industrial engineering services.

These investments allow an additional non-refundable monetary subsidy over the incentive for creating new jobs, as follows:

Investment type Additional non-refundable subsidy (%)
Technological development and innovation activities 50
Strategic business support activities and high value-added services 25

Additionally, a non-refundable money subsidy for the purchase of equipment in the amount of up to 20% of justified costs related to investment in technological development and innovation activities and strategic business support activities (maximum amount of up to EUR 500,000) can be granted to a company, provided that equipment bought is high technology equipment.

Incentives for investments into capital intensive and work intensive projects

An investment qualifies as capital intensive if the minimum amount of the investments is EUR 5 million and 50 new jobs are created. Those projects can benefit from additional non-refundable subsidies between 10% and 20% of recognised costs of new plants, objects, equipment, and other capital costs, depending on the unemployment rate of the county where located.

Work intensive projects are those with at least 100 new jobs created within a three-year period from the start of the investments project. Initial incentives can be increased by an additional 25% for up to 300 new jobs, 50% for a minimum of 300 new jobs, and up to 100% for 500 new jobs.

Employment incentives

Employment subsidies are incentives for creating new jobs and incentives for training required by the new jobs.

Newly created jobs should be kept for at least five years.

Unemployment rate (%) Non-refundable cash subsidy (%) Maximum costs per employee (EUR)
Up to 10 10 3,000
10 to 20 20 6,000
More than 20 30 9,000

Incentives for training required by new jobs are also increased, as given in the table below.

Entrepreneurs' size General training (% of non-refundable subsidy)
Large and when training is provided for employees with disability 50
Medium 60
Small and micro 70

Research and development (R&D) incentives

Registered scientific organisations, centres of scientific excellence, individual scientists, and groups of scientists are entitled to apply for the state subsidies and tax incentives for scientific research, basic research, and applied R&D research.

Depending on the type of research (e.g. scientific, basic, applied research, or technical feasibility) and size of entrepreneur (i.e. small, medium, or large entrepreneur, according to the Accounting Act), the percentage of the costs covered by state subsidy can vary between 25% and 100%. Additionally, the CIT base can be decreased (depending on the same criteria) by up to 150% of the amount of the costs covered by the state subsidy, where the CIT liability decrease is granted up to the amount of the percentage of the costs covered by state subsidy.

Foreign tax credit

If a domestic taxpayer has paid tax abroad on profit derived abroad, the tax paid can be included in its CIT return, up to the CIT rate in Croatia. The amount of paid tax abroad, which can be offset with the domestic tax, is calculated in the following way:

  • The domestic tax rate is charged on the revenues/profit derived from abroad, and the result represents the highest amount of tax that can be offset with the domestic tax.

In practice, it means that if the amount of tax paid abroad was charged at a rate equal or lower than 18%, only the actual amount of foreign tax paid can be offset with the domestic tax.

Last Reviewed - 29 November 2017

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