Croatia: Foreign Investments

The Constitution, the Company Law, the Corporate Profit Tax Law and the new Law on the Promotion of Investment, along with other legislative provisions, regulate foreign investment in Croatia, which is highly welcome.
The Company Law guarantees foreign investors the same rights and legal status and imposes the same obligations within an enterprise as for domestic investors, subject to the condition that they establish a permanent entity.
Foreign investors are entitled to certain rights that are not extended to domestic investors. For example, the Constitution protects foreign investors by stipulating that rights acquired through capital investment cannot be removed by legislation. It also ensures the free repatriation of profits and the free repatriation of capital on divestment.
The Investment Incentives Act, introduced in 2000 with the aim to stimulate economic growth and development, provides a broad regulatory framework covering incentives for foreign and domestic investors. The provisions on investment incentives have also been incorporated into the Profit Tax Law.
An amendment to the investment promotion act following the necessity to put the legislation in line with European rule has come into force at the beginning of the year. The major change is that also already existing companies may benefit from incentives which provide a specific corporate income tax scale for a period of ten years provided that the investment ensures the employment of a certain number of people. The amount to be invested in order to benefit from the incentives is 300.000 euro.
Taxpayers engaged in business in an area under special state care and providing permanent employment for more than five persons, when more than 50% of the employees have permanent residence status for at least nine months in a region under special state care, will be entitled to a corporate income tax reduction of up to 75% for ten years starting from 2005, depending on the category of the region.