In 2023, Croatia took two steps that brought it much closer to entrepreneurs from the DACH region: on 1 January it introduced the euro and joined the Schengen area. For tax purposes, Croatia relies on a clear split – 10% profit tax for companies with turnover below one million euros, 18% above. Company formation in Croatia can therefore use the low rate deliberately for a lean company.
10% below one million turnover
The rate depends not on profit but on turnover: if revenue in a year is below €1 million, profit tax is 10%; from that threshold, 18%. There are no municipal surcharges on profit. Anyone planning company formation in Croatia and staying below this threshold also benefits from a simplification rare in the EU: such companies may determine their profit on a cash basis, i.e. pay tax only once customers have actually paid.
Distributions to shareholders abroad are subject to 10% withholding tax, which can be reduced under the relevant double tax treaty. Taxes are administered by the Croatian Tax Administration (Porezna uprava).
Euro and Schengen
Since 1 January 2023, Croatia has paid in euros. For companies from the eurozone, exchange rate risks and conversion costs disappear, and prices and contracts can be agreed without currency clauses. With its Schengen accession, border controls with Slovenia and Hungary were lifted on the same day; goods and travel towards Austria and Germany have flowed without passport checks ever since.
For companies with customers in tourism, real estate or trade along the Adriatic, this is a tangible advantage over neighbouring countries outside the EU.
d.o.o. or j.d.o.o.
Croatia has two variants of the limited liability company. The classic d.o.o. is the usual choice for established businesses; the simplified j.d.o.o. is aimed at founders with very little start-up capital:
| Recommendedd.o.o. | j.d.o.o. | d.d. | |
|---|---|---|---|
| Legal form | limited liability company | simplified LLC | joint-stock company |
| Minimum capital | €2,500 | €1 | €25,000 |
| Ideal for | service providers, trade, tourism | micro start-ups | larger ventures, investors |
The d.o.o.’s share capital of €2,500 is paid into a bank account or deposited with the state financial agency FINA before registration and is then available for the business.
VAT: 25%
VAT, levied in Croatia as PDV, is among the highest in the EU at 25%. A company must register once its turnover exceeds €60,000 a year; below that, registration is voluntary. Up to turnover of €110,000 the company files quarterly returns, above that monthly ones.
For services to businesses in other EU countries, the reverse-charge mechanism usually applies; the high rate therefore mainly affects services to end customers in Croatia.
Income tax and digital nomads
For shareholders and employees resident in Croatia, income tax rates are set by municipalities within a legal range: between 15% and 23% for income up to €60,000 a year and between 25% and 33% above. Zagreb applies the maximum of 23% and 33%; municipalities without their own decision apply 20% and 30%.
For remote workers from outside the EU, EEA and Switzerland, Croatia has created a dedicated residence title: digital nomads may live in the country for up to 18 months, and their income from foreign employers or their own foreign company is exempt from Croatian income tax. In 2026 the title requires income of €3,622.50 a month. It does not apply to citizens of Germany, Austria or Switzerland, who as EU or EFTA citizens can settle freely anyway. The current requirements are published by the Croatian Ministry of the Interior.
Formation in five stages
Company formation in Croatia for a d.o.o. involves five stages:
- Personal identification number (OIB): shareholders and directors need an OIB, issued by the tax administration.
- Articles of association: notarised; for simple formations the state online system START is also available.
- Share capital: paid into a bank account or deposited with FINA.
- Registration: in the court register, which enters the company with its own OIB.
- Tax registration: with the tax administration and, from €60,000 of turnover, for VAT.
With complete documents, the company is usually registered within one to two weeks.
Accounting and obligations
The key obligations for bookkeeping, accounts, audit and VAT at a glance – so you know from the start what running your company involves.
| Obligation | Rule |
|---|---|
| Bookkeeping | Below €1 million turnover, profit may be determined on a cash basis |
| Tax return | Corporate tax return within four months of the end of the tax year |
| VAT: registration | From €60,000 annual turnover; rate 25% |
| VAT: returns | Quarterly up to €110,000 turnover, monthly above |
As of 2026. Bookkeeping and filings are usually handled by specialised accountants in the target country.
Is Croatia right for you?
Whether Croatia is right for you depends above all on turnover: companies that stay below the one-million threshold and have customers in the EU or on the Adriatic benefit most.
Suitable for
- Service providers with turnover below €1 million
- Tourism and real estate businesses on the Adriatic
- Entrepreneurs who value the euro and Schengen
- Small firms wanting to be taxed on a cash basis
Less suitable for
- High-turnover traders with thin margins
- Companies expecting 0% withholding tax
- Founders hoping to start without a Croatian tax number
- Groups focused on Asian markets
With 10% on all profits and no turnover limit, Bulgaria is the obvious alternative; to combine the euro with low tax in Central Europe, Slovakia with 10% up to €100,000 of revenue is also worth a look. The overview of all locations and the tax comparison put Croatia in context; the specific structure belongs in the initial call.
