The right to profit tax reduction or exemption
The right to profit tax reduction or exemption pursuant to the Investment Promotion Act pursuant to the Investment Promotion Act, the entrepreneurs have the opportunity to acquire the status of investment aid beneficiaries, which implies the right to profit tax reduction for a max. period of 10 years. Unlike non-refundable EU funds, tax incentives means that no money is paid into the beneficiary’s account, but that the beneficiary is entitled to profit tax reduction.
The aim and purpose of encouraging investment is to stimulate economic growth and build a competitive, transparent and attractive system of investment aid for legal or natural persons registered in the Republic of Croatia which are subject to profit tax and which participate in trade of goods and services in Croatia.
Allowed activities for which tax incentives are granted:
- Production and processing,
- Development and innovation,
- Business support,
- High-value services.
Furthermore, it is necessary to reach one or more of the following goals:
- Introduction of new equipment and modern technologies,
- Higher employment rate and employee training,
- Development of higher value-added products and services,
- Increasing entrepreneurial competitiveness,
- Balanced regional development of the Republic of Croatia,
- Economic activation of inactive assets owned by the Republic of Croatia,
- Productivity growth of economic entities in the Republic of Croatia.
The minimum investment for realisation of tax incentives measures is:
- € 150,000.00 in addition to creating a minimum of 5 new jobs pertaining to the investment project, or
- € 50,000.00 in addition to creating a minimum of 3 new jobs for micro entrepreneurs, or
- € 50,000.00 in addition to creating a minimum of 10 new jobs for centres for the development of information and communication systems and software
- € 500,000.00 for projects for investing in modernisation and increasing productivity of business processes
The initial investment means investment in tangible and intangible assets pertaining to the incorporation of a new business unit, expansion of the capacities of the existing business unit, product diversification of the existing business unit or the fundamental change in the total production process of the existing business unit.
Maximum aid intensity
The maximum aid intensity amounts to 45 % of the total investment for micro and small businesses, 35% for medium-sized enterprises and 25 % for large enterprises.
Depending on the investment amount, the size of the entrepreneur and the number of new jobs that will be created as a result of the investment, the aid beneficiary may obtain the reduction of profit tax by 50%, 75% or 100%.
Requirements for acquiring the status of an aid beneficiary
Main requirements for acquiring the status of an aid beneficiary:
|Investment amount||Number of newly employed||Profit tax rate reduction (%)||Max. incentives use period (years)||Min. period for investment and new jobs preservation (years)|
|EUR 50,000 and more||3 or more||50%||5||3|
|EUR 150,000 – EUR 1,000,000||5 or more||50%||10||3|
|EUR 1,000,000 – EUR 3,000,000||10 or more||75%||10||3|
|more than EUR 3,000,000||15 or more||100%||10||3|
For more information visit the website of the Croatian Ministry of Economy and Sustainable Development.