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Factsheet for measure HR-2015-39/2591 – measures in Croatia
Country | Croatia , applies nationwide |
Time period | Open ended, started on 25 September 2015 |
Context | Digital Transformation, Restructuring Support Instruments |
Type | Legislations or other statutory regulations |
Category |
Reorientation of business activities
– Change of production/Innovation |
Author | Predrag Bejakovic (IJF) |
Measure added | 23 June 2022 (updated 04 November 2022) |
Incentive measures for investment projects in the Republic of Croatia are regulated by the new Investment Promotion Act (OG 63/22) and relate to investment projects among other in development and innovation activities and activities of high value-added services.
Particular attention has been directed towards development and innovation activities which affect the development of new and significant improvement of existing products, production series and processes and production technologies. High value-added service activities are defined as:
Their investment must be higher than €50,000 for micro enterprises and higher than €150,000 for other companies and provided that a certain number of job positions (a minimum of three in a micro enterprise, and five for the other enterprises) are opened within three years from launching the investment. Furthermore, incentive measures can be used by enterprises registered in the Republic of Croatia investing in fixed assets the minimum amount of €50,000 together with creating at least 10 new jobs for ICT system and software development centers and €500,000 for investment projects in modernizing and increasing business process productivity.
For micro enterprises, the income tax rate is reduced to 50% of the statutory income tax rate for five years from the initial investment, provided that a minimum of three new jobs have been created. For larger investments of up to €1 million, the income tax rate is reduced to 50% of the statutory income tax rate for 10 years from the start of the investment, provided that the enterprise within one year from the beginning of the investment creates a minimum of five new jobs due to the investment project. The number of newly employed is 10 for ICT system and software development centers. For investments of between €1 and €3 million, the income tax rate is reduced to 75% of the statutory income tax rate for 10 years from the start of the investment, provided that enterprise creates a minimum of 10 new jobs due to the investment project, within one year from the beginning of the investment. For investments above €3 million, the income tax rate is reduced to 100% of the statutory income tax rate for 10 years from the start of the investment, provided that enterprise creates a minimum of 15 new jobs due to the investment project, within one year from the beginning of the investment.
Incentive measures may be used by entrepreneurs registered in Croatia who invest the following minimum amounts in fixed assets:
Initial investment aid is calculated as a percentage of the investment value and based on eligible costs of the investment. Investments in technological development and innovation activities are eligible for grants for the purchase of equipment/machinery for up to 20% of actual eligible costs of purchasing equipment and/or machinery, where the maximum amount is equivalent to €500,000, provided that the purchased equipment/machinery is classified as high-tech.
According to the previous Investment Promotion Act, effective from October 2015 until the end of November 2017, there has been a total of 658 applications for the use of grants for investment projects by small, medium and large enterprises. Of these, 123 applications relating to large enterprises, and 535 applications to small and medium-sized enterprises. According to the data by the Central Finance and Contracting Agency, currently there are 1141 contracted projects of which 609 are under implementation. Total projects value is more than HRK 46 billion (€6.1 billion), of which more than HRK 37 billion (€4.9 billion) are from non-refundable funds.
Workers | Businesses | Citizens |
---|---|---|
Employees in standard employment
|
Applies to all businesses | Does not apply to citizens |
Actors | Funding |
---|---|
National government
Local / regional government |
Local funds
National funds |
Social partners' role in designing the measure and form of involvement:
Trade unions | Employers' organisations | |
---|---|---|
Role | No involvement as case not in social partner domain | No involvement as case not in social partner domain |
Form | Not applicable | Not applicable |
Social partners' role in the implementation, monitoring and assessment phase:
As the case is not under social partners domain, they were not directly included, but such topic is analysed at national Social Economic Council which includes the representatives of employers and employees.
The Croatian Employers' Association (CEA) deems that there are also relatively complicated employment incentives that depend on the county unemployment rate, where higher unemployment rate enables higher incentive rate to eligible costs of jobs creation. The specified amount of the grant refers to the unemployed, who are registered as unemployed with Croatian Employment Service (CES) for at least 6 months, regardless of the length of the work experience and level of education, people older than 50 years registered as unemployed with CES and persons without work experience registered as unemployed with CES. Furthermore, the CEA underlines that legal provisions can help attract investors only to a certain point. Croatia has lengthy court proceedings and holds these court proceedings when it is necessary to protect the investments of investors due to legal insecurity. Moreover, regulations in Croatia often change. Until these issues are properly addressed, Croatia is likely to continue to encounter difficulty in attracting and sustaining investments. A favourable economic climate must be built on all levels, that is the government, the state, counties, cities and municipalities.
Citation
Eurofound (2022), Tax incentives for technology investment, measure HR-2015-39/2591 (measures in Croatia), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/HR-2015-39_2591.html
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