Factsheet for measure
HR-2015-39/2591
–
Updated
– measures in Croatia
Tax incentives for technology investment
Porezne povlastice za tehnološke investicije
Background information
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:
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Creative services activities: activities in the field of architecture, design, media communication, promotion and other activities in the field of creative industry
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Activities of sustainable high value – added tourism services that provide the beneficiary after the expiration of the three – year period of implementation of the investment project with the operational tourism business for a minimum of six months during the calendar year
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Cn of production and manufacturing business processes.
Content of measure
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:
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€50,000 in addition to creating a minimum of 3 new jobs for micro entrepreneurs
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€150,000 in addition to creating a minimum of 5 new jobs for small, medium-sized and large entrepreneurs
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€50,000 in addition to creating a minimum of 10 new jobs for developing information and communication systems and software
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€3,000,000 in addition to creating a minimum of 15 new jobs for investment projects based on economic activation of inactive assets owned by the Republic of Croatia
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€500,000 for projects to invest in modernisation and increasing productivity of business processes.
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.
Updates
The following updates to this measure have been made after it came into effect.
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25 November 2024
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There is also a possibility of receiving support for justified training costs of newly employed employees related to the project. Eligible training costs are the lecturers' costs, for the hours during which the lecturers participated in the training; business expenses related to lecturers and participants that are directly related to the training project, such as travel expenses, costs of materials and consumables directly related to the project, and depreciation of tools and equipment if used exclusively for the training project. Accommodation costs are excluded. For the above costs, companies can be reimbursed for 50% of the total costs, which can be increased to a maximum of 70% in the following situations: i) An additional 10% if the training is carried out for workers with disabilities; ii) An additional 10% if the support is awarded to a medium-sized entrepreneur; and iii) An additional 20% if the support is awarded to a micro or small entrepreneur.
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25 September 2024
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From the beginning of 2023, a new regulation on investment encouragement came into force. It is the Regulation on investment promotion and investment support in the Republic of Croatia (OG 156/22). The Regulation is based on the Investment Promotion Act (OG 63/22). The Regulation prescribes the form and mandatory content of the Application for the use of investment support with related forms; the procedure for application, approval and use of grants, including criteria and method of calculating grants; and the mandatory content of the annual report on the implementation of the investment project and the use of grants. The Regulation also contains the documentation that must be submitted for the approval of the use of grants, i.e. the exercise of the right to the payment of approved grants. According to the Yearly Report on State Subsidies for 2022, total subsidies in the Republic of Croatia in 2022 were awarded in the amount of HRK 17,038.3 million (€ 2.26 million), and had a share in the gross domestic product of 3.38%. In the same year, the share of subsidies in state expenditures amounted to 10.08%, subsidies per employee amounted to HRK 10,517.67 (€ 1395,84), while subsidies per inhabitant amounted to HRK 4,368.79 (€ 579,73). Of the total subsidies awarded in 2022, 43% refers to grants in the agriculture and fisheries sector, while 57%, was allocated to the industry and services sector.
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Use of measure
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.
Target groups
Actors and funding
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Actors
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Funding
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National government
Local / regional government
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Local funds
National funds
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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No involvement as case not in social partner domain
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No involvement as case not in social partner domain
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Form
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Not applicable
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Not applicable
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Social partners' role in the
implementation, monitoring and assessment phase:
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Unknown
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Main level of involvement: Unknown
Involvement
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.
Views and reactions
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.
Sources
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25 September 2015: Zakon o poticanju ulaganja (The Act on Investment Promotion), OG 102/15
(narodne-novine.nn.hr)
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30 March 2016: Uredba o poticanju ulaganja (The Decree on Tax Incentives) OG 31/2016
(narodne-novine.nn.hr)
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08 March 2018: Izmjene i dopune Zakona o poticanju ulaganja (Amendments to the Act on Investment Promotion OG 25/18)
(narodne-novine.nn.hr)
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01 January 2019: Croatian Official Gazette 114/18, Amendments to the Act on Investment Promotion
(narodne-novine.nn.hr)
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02 December 2019: Croatian National Bank. Macroeconomic Developments and Outlook, Year IV, · Number 7, · December 2019
(www.hnb.hr)
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19 March 2020: Zakon o dopunama i izmjenama Zakona o poticanju ulaganja (Amendments to the Act on Investment Promotion - OG 32/20)
(narodne-novine.nn.hr)
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01 January 2022: Incentive Measures for Investment 2022
(investcroatia.gov.hr)
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28 January 2022: Incentive measures for investment
(investcroatia.gov.hr)
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27 May 2022: Zakon o poticanju ulaganja (The Act on Investment Incentives)
(narodne-novine.nn.hr)
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01 June 2022: Incentive measures for investment projects
(investcroatia.gov.hr)
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30 December 2022: The Regulation on investment promotion and investment support in the Republic of Croatia (Uredba o poticanju ulaganja)
(narodne-novine.nn.hr)
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12 October 2023: Amendments to income tax (Official Gazette, 137/15, 1/17, 2/18, 1/19, 1/20, 138/20, 114/22, 114/23, consolidated text))
(www.porezna-uprava.hr)
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30 November 2023: The Yearly Report on State Subsidies for 2022 (Godišnje izvještće o državnim potporama za 2022.)
(vlada.gov.hr)
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17 May 2024: Support for justified training costs (Potpore za opravdane troškove usavršavanja)
(kopun.hr)
