Croatia (officially “the Republic of Croatia”) is a civil law jurisdiction, influenced to an extent by German and Austrian jurisprudence. The law is codified, and the legal system in principle does not follow the precedent rule. Croatia has been an EU member state since 1 July 2013.

The Croatian judicial system is composed of municipal and county courts (which hear both civil and criminal cases); misdemeanour, commercial and administrative courts; the High Criminal Court, the High Misdemeanour Court, the High Commercial Court and the High Administrative Court; and the Supreme Court of Croatia. Croatia (like some other jurisdictions in continental Europe) has in place a Constitutional Court (separate from the judicial branch), which has the authority, among other things, to decide on the conformity of laws and regulations with the constitution, and to hear challenges against specific decisions of other courts and state bodies that are claimed to be in violation of the constitution.

Croatia has only recently adopted its first FDI Act, which is set to come into force on 13 November 2025. This being said, the adoption of the Act is still to be followed by the establishment of one of the authorities in charge of FDI screening, as well as adoption of the implementing regulation detailing certain aspects and criteria for said screening. For further details on the relevant legislation available so far, please see 7.1 Applicable Regulator and Process Overview.

It should be noted that the Act does provide for retroactive application, meaning that the authorities will be authorised to screen transactions that have closed prior to the Act coming into force, within a period of three years from that date. Based on the public commentary, such retroactive screening would only be applied to investments that have a negative impact on national security and public order in Croatia, but no such caveat has been expressly introduced in the Act.

Croatia is a small economy with strong financial and trade links to the eurozone and is mostly open to foreign investment. Both foreign and domestic investors generally enjoy equal treatment, with specific exceptions described in more detail in 8.1 Other Regimes.

Croatia adopted the euro as its official currency on 1 January 2023, and the country’s inclusion in the eurozone has eliminated currency risks. Croatia’s GDP is characterised by the domination of tourism in the services sector, which accounted for almost 20% of its GDP. According to the forecasts of the European Commission, the initial GDP growth figures for 2024 have been revised upward to an expected 3.9%, while the figure for 2025 is 3.2%. The projected figure for 2026 is 2.9%. Furthermore, based on the Commission’s forecast, headline inflation is expected to decline to 3.4% in 2025, and to 2.0% in 2026.

The areas that have traditionally been dominant in terms of (foreign) investment in Croatia are tourism, telecommunications, healthcare and life sciences, but recent years have also brought about increased investment opportunities in the IT and clean energy sectors.

Croatia is a parliamentary democracy with legislative powers entrusted to the Croatian Parliament, the body of people’s representatives elected for a term of four years. Executive powers are vested with the government, which is responsible to the parliament. Judicial powers are vested in the judiciary, with the Supreme Court of Croatia ultimately ensuring uniform application of the law and the equality of all citizens. The President, who is elected for a term of five years, is the chief of state and represents Croatia at home and abroad. The Constitutional Court supervises the constitutionality of the country’s laws and protects the constitutional rights of its citizens.

In Croatia, M&A transactions are most commonly structured either as share deals or asset deals. In addition, mergers and de-mergers are also used for corporate restructuring transactions.

Share Deals

Share deals are typically more straightforward to implement and require registration with a single, appropriate registry. In practice, the transaction documents most often consist of a lengthier share purchase agreement, which sets out in detail all the terms of the transaction, and a separate, short-form transfer agreement for registration purposes. Share transfer issues are regulated under the Croatian Companies Act and Croatian Capital Markets Act. Share deals are also a more appropriate structure for acquisition of a minority interest. The downside of the share deal is that the acquirer acquires the company together with all its liabilities (noting that shareholders of Croatian joint stock companies (JSCs) and limited liability companies (LLCs) may generally benefit from the corporate veil protection mechanism).

A natural person or legal entity that has directly or indirectly (and solely or jointly) acquired more than 25% of the voting shares of a JSC seated in Croatia, and traded on a regulated market in Croatia or another EU member state (if not traded on a regulated market in Croatia), is required to publish a mandatory takeover bid and undertake the mandatory takeover procedure in accordance with the Croatian Act on Takeover of Joint Stock Companies (the “Croatian Takeover Act”).

In addition, when a natural person or a legal entity directly or indirectly reaches, exceeds or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of voting rights in a public issuer of shares, the relevant person/entity is required to simultaneously notify the issuer and the Croatian Financial Services Supervisory Agency of this fact.

Asset Deals

Asset deals are in principle less regulated under Croatian law than share deals (ie, unlike share deals, asset deals are in principle not regulated by the Croatian Companies Act). From a corporate law perspective, they tend to be preferred when an acquirer is not interested in buying the entire company together with its liabilities, but rather only particular assets of the company (or business/part of the business as a going concern). Asset deals are more complex to implement, as each asset needs to be transferred individually (and if the transfer of certain assets, such as real estate or vehicles, needs to be registered in a public registry, then each registration needs to be performed separately). On the other hand, the acquirer’s liability is limited to the value of the acquired assets.   

Other than the registration, disclosure and takeover requirements listed in 3.1 Transaction Structures, a transaction may be subject to merger control, as described in more detail in 6. Antitrust/Competition, and to an FDI screening process, as described in more detail in 7. Foreign Investment/National Security.

The LLC and JSC are the most frequently used types of corporate vehicles in Croatia. Both forms provide a limited liability benefit to their shareholders.

LLCs

In practice, LLCs are the preferred and predominantly used corporate form for foreign investors setting up their operations in Croatia. An LLC can only be established as a private company. Ownership in the LLC is not represented by equity securities (ie, stock), but rather by business quotas that constitute a share in the share capital of the LLC. The LLC may have one or more founders (foreign or domestic), and its minimum share capital must amount to EUR2,500 (which is significantly less than what is required for a JSC). The overall corporate governance is in principle less complex, and the management is less independent of the shareholders than the management of a JSC. The mandatory corporate bodies of an LLC are the management board and the shareholders’ meeting, while the supervisory board is generally optional (with only a few exceptions, where even an LLC is required to have a supervisory board in place).   

JSCs

Shares in JSCs are represented by equity securities, that is, stock (nowadays predominantly issued as non-materialised stock, registered with the central securities depository and a registry of non-materialised securities operated by the Central Depository & Clearing Company Inc (Središnje klirinško depozitarno društvo; SKDD). The minimum share capital of a JSC is set at EUR25,000. A JSC may be either a private or a public company (any investor considering an IPO down the line may be more interested in establishing/acquiring a JSC, although Croatian corporate law rules also provide for the possibility of converting an LLC into a JSC). JSCs have a choice between establishing a one- or two-tier corporate governance system. In the two-tier governance system, the company’s corporate bodies are the management board (ie, the directors), the supervisory board (which is mandatory for JSCs) and the general assembly (consisting of shareholders), while in the one-tier system the company has executive directors, a board of directors and a general assembly.

In addition, foreign investors may also establish local branch offices, whose activities must be limited to those of its foreign founder and which are not regarded as separate entities from a corporate law perspective, but rather form part of the foreign founder (and accrue liabilities for the founder).   

From an FDI perspective, the local company’s form does not play a role. 

Croatian corporate laws provide for instances where qualified majorities are required to adopt certain shareholders’ resolutions, which may be viewed as one of the mechanisms of minority investor protection. For example, a qualified majority of at least 75% is required for amendments to the articles of association, mergers and de-mergers, an increase and decrease in share capital, and dissolution of the company, while a 95% majority is required for squeeze-out procedures. Furthermore, under a specific company’s articles of association, a qualified majority may also be required for issues for which a simple majority is required under the law.

In addition, minority shareholders are afforded certain rights, including but not limited to the right to convene the shareholders’ meeting/general assembly (the minimum shareholding required for this is 10% in an LLC and 5% in a JSC), and the right to claim damages from the management board/supervisory board on behalf of the company (by the 10% shareholding in an LLC) or to request that the company claim damages from the management board/supervisory board (by a 10% shareholding in a JSC). 

In addition to the disclosure and reporting obligations discussed in 3.1 Transaction Structures, and any obligations that may arise from the FDI screening regime, local companies are also required to report the following foreign investments or divestitures to the Croatian National Bank for statistical purposes:

• an initial investment resulting in at least 10% shareholding in the local company, regardless of the value of the investment;
• any subsequent investment in the local company increasing the share capital or any other capital component of the company, or the acquisition of additional shares in the company with a minimum value of EUR15,000;
• any investment resulting in a less than 10% shareholding in the local company, if the sum of all transactions in a single month exceeds EUR15,000;
• any withdrawal of investment resulting in the reduction of share capital or divestiture of shares of a minimum value of EUR15,000; and
• withdrawal of any investment that would result in a domestic person/entity holding a 100% share in the company.

In Croatia, the primary source of funding is still predominantly bank financing. Although access to capital markets exists, this type of financing is still not frequently utilised and, fairly recently, there was actually a trend towards a decrease in the number of JSCs (which have the possibility of going public and benefitting from equity financing).

Although new listings are rare, Croatia’s recent joining of the eurozone is expected to boost interest in the Croatian capital market, and in foreign investment in general. In recent years, the Croatian market saw the listing of the first “green” (sustainability-linked) bonds, valued at almost EUR40 million. In 2024, due to investor demand, the Republic of Croatia issued two bonds on the domestic market: one aimed at both retail and institutional investors and maturing in three years, valued at EUR750 million; and another aimed exclusively at institutional investors, maturing in ten years and valued at EUR1.25 billion. 

Recent capital markets developments in Croatia also include a strategic regional partnership with Slovakia, Romania, Hungary, Slovenia, Macedonia, Bulgaria and Poland to boost market efficiency, and a focus on digitalisation, particularly tokenisation and the use of AI, alongside initiatives to improve the capital market’s infrastructure and the public’s financial understanding.

The Croatian securities market is primarily regulated by the Croatian Capital Market Act, which has transposed various EU legal instruments, including the:

• Directive on Investor Compensation Schemes (Directive 97/9/EC of the European Parliament and of the Council);
• Directive 2016/1034/EU amending Directive 2014/65/EU on markets in financial instruments (the so-called “Quick Fix Directive”); and
• Directive 2011/61/EU (MiFID II), as amended.

Other important pieces of legislation include the Act on Open-End Investment Funds with a Public Offering, the Alternative Investment Funds Act, the Takeover Act, the Companies Act and a number of implementing regulations.

Authorities

The Croatian regulator in charge of the supervision of the securities market in Croatia is the Croatian Financial Services Supervisory Agency (Hrvatska agencija za nadzor financijskih usluga; HANFA). HANFA’s main tasks with respect to the securities market are the supervision of fair securities trading rules; supervision over the conduct of stock exchanges, authorised dealers, investment funds and other market participants; and issuing licences and mandating the measures necessary for proper functioning of the securities market.

The SKDD is authorised to manage the central depository of non-materialised securities, as well as to perform clearances and settlements with respect to transactions with securities executed on or outside of a regulated market or a multilateral trading facility (MTF).

Issuance of Securities

Securities in Croatia may generally only be placed on the market by way of public offering, and public offering requires preparation of a prospectus (subject to certain exceptions). The content of the prospectus is defined in detail by relevant laws and regulations. The prospectus must be approved by HANFA and subsequently published, subject again to certain exceptions to the publication rule.

Trading in Securities

Trading in securities as a permanent activity may be performed only by dealers authorised by HANFA or the Croatian National Bank, and such authorisation may only be given to investment companies and credit institutions.

Organised trading in securities, as well as matching the supply and demand of securities, may only be performed on a regulated market and on an MTF, based on the authorisation of HANFA. The operation of the regulated market in Croatia can be managed only by a stock exchange with its registered office in Croatia. The operation of MTFs may be managed by a stock exchange or an investment company subject to certain conditions. A regulated market consists of a regular market and an official market, which imposes more stringent listing requirements.

Croatian laws contain provisions prohibiting insider trading (for insiders as well as other persons who obtain this information without authorisation), market manipulation and providing false information.

Since Croatia’s accession to the EU on 1 July 2013, investment funds have been governed primarily by the Act on Open-End Investment Funds with a Public Offering and the Alternative Investment Funds Act. Investment funds may be established as open-end investment funds with a public offering (undertakings for the collective investment in transferable securities, or UCITS) or as alternative investment funds (AIFs), with the latter being either open-end or closed-end AIFs. Whereas closed-end AIFs may be established as JSCs or LLCs, open-end investment funds, established either as UCITS or open-end AIFs, are separate pools of assets without legal personality.

Under the wording of the FDI Act, no specific rules or exemptions apply to foreign investors structured as investment funds.

Croatia has a merger control regime that is governed by the Croatian Competition Act, and which prohibits any concentration of undertakings that may significantly restrict competition – in particular by strengthening an existing or creating a new dominant position in the relevant market. Croatian merger control rules follow the key principles of the EU merger control regime as governed by the EU Merger Regulation (139/2004). In addition, the Croatian Competition Act expressly provides that in the case of gaps or uncertainties in the interpretation of Croatian competition laws, the criteria set forth by the rules of EU competition laws will be applied as appropriate. The relevant authority is the Croatian Competition Agency (CCA). 

Definition of a Concentration

The regime applies to a concentration of undertakings, that is, the change of control of an undertaking on a lasting basis by merger by acquisition, or by merger by forming a new company; or by acquisition of direct/indirect control or the controlling influence of one or more undertakings over one or more other undertakings or parts thereof by way of acquisition of a majority shareholding or a majority of the voting rights; or by other means in accordance with the provisions of the Croatian Companies Act and other laws. The creation of a full-function joint venture is also considered as a concentration. The Croatian Competition Act exempts internal re-organisations from the duty to notify.

Merger Control

Thresholds

Under the Croatian Competition Act, a concentration (including an FDI) is notifiable to the CCA if the following thresholds are cumulatively met:

• the combined worldwide annual turnover of all the undertakings concerned was at least EUR132.72 million in the financial year preceding the concentration, and at least one undertaking that is party to the concentration has a seat or a branch office in Croatia; and
• the aggregate national turnover in Croatia in the preceding financial year of each of at least two of the undertakings concerned was at least EUR13.23 million.

As an expectation, transactions in the media sector must be notified regardless of whether the aforementioned thresholds have been reached, provided that the acquirer is also a media company. Also, if the acquisition of electronic communications operators does not meet the foregoing thresholds, the transaction will not need to be notified to the CCA, but will still need to be notified to and cleared by the Croatian Regulatory Authority for Network Industries (Hrvatska regulatorna agencija za mrežne djelatnosti; HAKOM) if the transaction involves operators with significant market power, or operators that are licensed to use the radio frequency spectrum over Croatian territory.

Procedure and clearance

Once the CCA receives a merger notification, it publishes a notice on its website inviting all interested parties to provide written opinions and objections about the notified concentration within a deadline set by the CCA (which cannot be less than eight or longer than 15 days). The CCA must conclude its Phase I investigation within 30 days from the date of receipt of the complete notification. The CCA will provide a written confirmation of complete notification, and the Phase I review period will start running from the date of such confirmation. If the CCA does not adopt a decision on the commencement of the Phase II investigation, the notified concentration will be presumed approved. In such case, the CCA will deliver a confirmation of the cleared concentration to the notifying party and will publish such confirmation on the CCA’s website. On the other hand, if the CCA finds that the concentration may give rise to an appreciable effect on competition in the relevant market, the CCA will take a decision on the commencement of the Phase II investigation. The Phase II process must generally be completed (either by an unconditional or conditional clearance decision, prohibition decision or a remedial decision after implementation of a prohibited concentration) within three months from the CCA’s decision on the commencement of Phase II proceedings, with the possibility for the CCA to extend this deadline for an additional three months.

Other Merger Control Regimes

Investments in Croatia may also meet the thresholds for review under other merger control regimes, including the EU merger control regime and national merger control regimes for special sectors such as the media, electronic communications, credit institutions, insurance and investment activities (as discussed in 8.1 Other Regimes).

When conducting a substantive review of a concentration, the CCA performs a counterfactual analysis comparing the competitive conditions that would result from the concentration with the conditions that would have prevailed without the concentration. The CCA assesses the effects of the concentration on the relevant market and the existence of possible barriers to entry, in particular when the concentration is creating a new, or strengthening an existing, dominant position of a party to the concentration.

When assessing the effects of the concentration on the relevant market, the CCA will take into account:

• the structure of the relevant market, existing and potential future competitors, the structure and choice of offer and demand, market trends, prices, risks and economic, legal and other barriers to entry;
• the market position, market shares, economic and financial power of undertakings in the relevant market, degree of competition and alternative sources of supply resulting from the concentration; and
• the effects of the concentration on other undertakings or consumers. 

The CCA has the power to impose all the necessary behavioural and structural measures required to restore effective competition in the relevant market, as well as the deadlines for implementation of the imposed measures. In particular, the CCA has the power to order the transfer or divestment of acquired shares or stock, as well as to prohibit or restrict the exercise of voting rights related to shares or stock in undertakings that are parties to the concentration, or to order the joint venture or other forms of acquisition of control to be dissolved.

Prohibition or Clearance With Conditions

The CCA has the power to prohibit (block) the concentration or clear the concentration with conditions attached. In the case of a conditional clearance, the parties may start implementing the concentration from the date of delivery of the CCA’s conditional clearance decision. If the parties do not satisfy the conditions imposed by the CCA, the CCA will annul or amend the conditional clearance decision (depending on the reason for non-compliance with the conditions imposed).

Imposition of Remedies

The CCA also has the power to impose structural and behavioural remedies after the concentration (ie, investment) has been implemented, in cases of implementation contrary to the CCA’s prohibition decision or if the concentration was implemented without filing a notification on the intended concentration to the CCA.

Imposition of Fines

In the case of implementation of a prohibited concentration, the CCA may also impose a fine of up to 10% of the undertaking’s worldwide annual turnover for the last financial year for which there are complete financial statements. In addition, failure to notify a concentration to the CCA, as well as the implementation of a concentration ahead of the CCA’s clearance, may be subject to a fine of up to 1% of the undertaking’s worldwide annual turnover for the last financial year.

Challenges to Decisions of the CCA

The CCA’s decisions on prohibition or conditional clearance of a concentration, as well as its decisions on the imposition of fines, are not subject to appeal, but may be challenged by administrative claims before the High Administrative Court of Croatia.

General Overview

The Croatian Act on Screening of Foreign Investments (the “FDI Act”) has been adopted by the Croatian Parliament only very recently (ie, on 24 October 2025) and came into force on 13 November 2025. The FDI Act provides a general framework for the FDI screening regime; however, details of the process are expected to be further regulated by the implementing regulation, which is yet to be adopted.

Under the FDI Act, the regulator in charge of the FDI screening process is the Commission for Screening of Foreign Investments (the “Commission”) and the Ministry of Finance. The Commission is authorised, inter alia, to analyse and assess the risk of negative effects of foreign investments, and to render opinions based on which the decision in the FDI screening process will be reached by the Ministry of Finance. Under the FDI Act, the Commission will be established on the basis of the Decision of the Croatian government, which is expected to provide details concerning the organisation and functioning of the Commission. As of the early January 2026, the process of establishing the Commission is ongoing.

Under the FDI Act, the foreign investor may be:

• any individual who is not a citizen of Croatia or another EU or European Economic Area (EEA) member state (including dual nationals who also hold third country citizenship) and stateless persons;
• any legal entity incorporated under the laws of a non-EU and non-EEA member state (including trusts and similar foreign legal forms);
• any investment migration intermediary (as regulated by Regulation (EU) 2024/1624);
• any legal entity established in Croatia or another EU or EEA member state that is directly or indirectly controlled by a foreign investor or by a public body of a third country; and
• any subsidiary or branch in Croatia or another EU or EEA member state that is directly or indirectly controlled by a foreign investor or by a public authority of a third country.

Process and Timeline

FDI screening filing is required in instances where a foreign investor (as defined under the FDI Act) acquires or increases/decreases its qualified holding (which is set as at least 10% of shares or voting rights or proprietary rights) or obtains control (which is relatively broadly defined) over the target subject to the Croatian FDI regime, as well as with respect to concessions and public-private partnerships involving foreign investors. 

The FDI Act provides that the list of target entities subject to the FDI regime will be determined by different governmental authorities, instead of providing for criteria on the basis of which investors would need to self-assess as to whether investment into such entity would be considered as falling under the Croatian FDI regime. According to the feedback received from the Ministry of Finance, the FDI Act will not be fully applied until the list of target entities has been determined.

Screening must be performed before closing the transaction (or before being awarded a concession/signing a concession agreement or signing the public-private partnership agreement). The process can be summarised as follows:

• the process must be initiated by either the foreign investor or the target subject to the Croatian FDI regime, by filing of the application for the approval of foreign investment with the Ministry of Finance;
• the Ministry of Finance performs a preliminary administrative review (to determine that the filing is complete), which must generally be completed within 30 days of the filing (but may be extended to a maximum of 60 days);
• complete notification is then forwarded to the Commission and the National Contact Point for the purpose of notification of the EU Commission and other EU member states – alternatively, the Ministry of Finance may reject the approval of the investment at this stage if it finds that the foreign investor (or responsible individuals within the foreign investor) has been subject to sanctions and international measures, or if there is suspicion that these entities/persons meet the criteria for placement on the sanctions list;
• the Committee must prepare its report on the investment’s impact on security and public order within 90 days from the date of receiving a complete filing (noting that this deadline may be extended for an additional 30 days); and
• the final decision is rendered by the Ministry of Finance on the basis of the Commission’s report within the deadline of 120 days (which may be extended up to maximum of 150 days) from the date of receiving a complete application filing.

The rulings of the Ministry of Finance will not be subject to appeal, but they may be challenged by initiating an administrative dispute before the High Administrative Court of the Republic of Croatia.

See 7.1 Applicable Regulator and Process Overview. In addition, the criteria for identifying the targets subject to the FDI regime (to be performed by different governmental authorities for the purpose of preparing the list of targets subject to the FDI regime) will be determined under the implementing regulation, which is still to be adopted by the Croatian government.

The Croatian FDI Act does not provide for the possibility of remedies or commitments (in essence, the foreign investment may either be approved or denied). According to the feedback given by the competent Ministry during the public consultations process, the possibility of determining remedies and/or commitments in the course of the screening procedure has not been implemented, as it would not serve the purpose of the law whose aim is to protect the security and national order of Croatia and the EU.

Under the FDI Act, the Ministry of Finance is authorised to revoke approval and order divestment within nine months (which may be extended for up to six months in exceptional cases, and on the basis of a reasoned request). During the divestment period, the investor’s shareholder rights would be restricted. The described remedy is also applicable in case of failure to notify.

In addition to the foreign investment screening regime (described in 7. Foreign Investment/National Security), there are certain sectors in Croatia where additional industry-specific requirements and/or restrictions apply, such as the obligation to acquire prior approval from the competent regulatory bodies, or to notify the regulatory body before conducting certain activities. Those restrictions often apply only to non-EU and/or non-EEA-based investors. The competent authorities, as well as the sanctions threatened for non-compliance with specific requirements, vary from sector to sector. The most significant areas that have a special regime regulating FDI are real estate, gambling, media, transportation, fishery and construction.

Real Estate

Legal entities established in the EU and natural persons who are EU nationals have rights and obligations equal to domestic nationals/entities when it comes to acquisition of ownership of real estate in Croatia. Non-EU investors may acquire ownership subject to the requirement of reciprocity, and conditional on obtaining the approval of the Ministry of Justice and Public Administration. Failure to acquire approval from the Ministry of Justice and Public Administration will result in the legal transaction being null and void. Generally, restrictions apply only to the direct acquisition of real estate. However, based on information published by the Ministry of Justice and Public Administration, approval is also required in cases where the competent authority establishes that the sole intention behind the acquisition of shares in a local entity is the acquisition of the real estate owned by such entity. This is to be determined on a case-by-case basis.

In addition, non-EU investors cannot acquire ownership of agricultural land and state-owned forests (ie, there is no approval system available in these instances).

Gambling

In Croatia, games of chance can only be organised by an entity established in Croatia, which has a licence granted by the Croatian government and the Ministry of Finance. Although during the licensing process the Croatian entity must present various data regarding its shareholders, there are no hardcore restrictions regarding foreign (ie, non-Croatian) shareholders. However, where subsequent changes to the shareholding of the Croatian entity are intended, the Croatian entity must report such intention to the Ministry of Finance, which will conduct a special procedure to decide whether the change in shareholding would result in the cancellation of the licence. Based on the non-binding interpretations of the officials of the Ministry of Finance, the power to cancel the licence in case of a change in shareholding is completely subject to the discretion of the Ministry of Finance.

Organising games of chance in Croatia without a licence is subject to criminal sanctions (including imprisonment) as well as an administrative fine for the legal entity and responsible person within the legal entity.

Media

Entities seated in EU/EEA member states may conduct publishing activities, as well as publish electronic publications and video sharing platforms in Croatia, only on a temporary or sporadic basis, in reliance on the EU freedom of services principle. As an exception, the publisher of an electronic publication seated in another EU/EEA member state may be allowed to permanently provide its services in Croatia, subject to being registered locally with the court (ie, if it has a local branch office established) or other appropriate registry (ie, if it has a representative or correspondent office in Croatia), and if it has an editor’s office in Croatia.

Non-EU/EEA investors may not perform publishing activities, or provide electronic publication and video sharing platforms in Croatia, without having a local presence. Non-compliance with the foregoing provisions is sanctionable by an administrative fine for the legal entity and the responsible person within said entity.

Road, Air and Inland Water and Maritime Transport

As a general rule, domestic and EU incorporated entities can provide road, air, and inland and maritime cabotage within the borders of the Republic of Croatia under the same conditions, in accordance with the EU rules. By contrast, non-EU entities are generally prohibited from providing road, air or inland water and maritime cabotage, unless international agreements provide differently or if special approval from the Ministry of the Sea, Transport and Infrastructure is obtained. However, some differences may occur between regulations of different types of transportation in Croatia. Providing cabotage without special approval from the Ministry of the Sea, Transport and Infrastructure is sanctionable by an administrative fine for the legal entity and the responsible person within the legal entity.

Fishery Activities

Commercial freshwater and marine fishery activities are not allowed in Croatia for non-Croatian legal entities or natural persons, unless otherwise provided in an international agreement. This applies regardless of the fact that foreign entities may own a ship registered with the Croatian Ship Register. Performance of commercial freshwater fishing activities by a foreign legal entity or natural person is sanctionable by an administrative fine for the legal entity, responsible person within the legal entity and natural person.

Construction, Architectural and Engineering Services

Legal entities from EU/EEA/WTO member states, authorised to undertake construction, physical planning and construction-related architectural and engineering services in their home jurisdictions, may on a temporary or sporadic basis perform such activities in Croatia if they meet the requirements established by the law, and only after notifying the Ministry of Physical Planning, Construction and State Assets. These activities may be performed on a permanent basis through a local branch or subsidiary incorporated in Croatia.

Under the condition of reciprocity, entities from non-EU/EEA/WTO member states, authorised to undertake the aforementioned activities in their home jurisdictions, may provide such activities on a temporary or occasional basis if they meet the requirements prescribed by law, and after notifying the relevant ministry. Such entities are required to incorporate a company in Croatia to carry out such activities on a permanent basis.

Non-compliance with the aforementioned provisions is sanctionable by an administrative fine for the legal entity and the responsible person within said entity.

Corporate Profit Tax

Taxpayers

Business activities in Croatia are subject to corporate profit tax. Corporate profit taxpayers include:

• Croatian resident companies and other legal entities engaged in economic activity for the purpose of earning profit;
• domestic permanent establishments of non-resident entrepreneurs (eg, local branch offices of foreign founders); and
• individuals who meet certain statutory criteria.

Obligations

The taxpayer has the obligation to make monthly advance payments of corporate profit tax based on the previous year’s tax return. The monthly payments may be adjusted by the Croatian Tax Authority. Upon a company’s request and subject to the Tax Authority’s approval, a company may set its business/financial year differently to the calendar year.

Calculation of tax

The tax base of corporate profit tax is the profit generated in a fiscal year, calculated in accordance with applicable accounting regulations and then adjusted pursuant to profit tax legislation. The tax base of resident taxpayers is the profit earned worldwide, while the tax base of permanent establishments of non-resident entrepreneurs is the profit earned in Croatia. Profit earned in the sale, liquidation, change of legal form and split off/de-merger of a taxpayer is also included in the profit tax base. The tax return must be submitted to the Tax Administration within four months from the end of the financial year. Any shortfalls at the end of the year must be self-assessed and paid. On the other hand, in the case of a surplus, the Tax Authority returns the payments on request or carries the surplus into the next taxable period.

The corporate profit tax rate varies depending on the ascertained tax base. In case of earned income below EUR1 million, the tax rate is set at 10%. On the other hand, if the income exceeds EUR1 million (a minimum of EUR1,000,000.01), the corporate profit tax rate is 18%.

Additional Taxes

In addition to corporate profit tax, companies doing business in Croatia may be subject to VAT and may, depending on the circumstances, also be subject to various other taxes and parafiscal levies (monument annuity, tourist community fee, Croatian Chamber of Commerce membership fee, etc).

Croatian corporate profit tax laws require the calculation and withholding of tax on dividends, profit, interests and royalties relating to copyright and other intellectual property (IP) rights (eg, patents, trade marks, designs, know-how, etc) paid to foreign (ie, non-Croatian) legal entities.

Withholding Tax Rates

As a general rule, the withholding tax rate is set at 15% for all taxable transactions except payment of dividends and profit, for which the applicable withholding tax rate is 10%. As a measure for fighting tax evasion and avoidance, Croatian corporate profit tax law has also introduced a punitive withholding tax rate of 25% for all taxable transactions, including payment of compensation for services such as market research, tax and business consulting, and auditing services, when paid to persons having their headquarters, place of effective management or supervision of business in countries placed on the EU list of non-cooperative jurisdictions for tax purposes (eg, Russia, Guam, Panama), unless otherwise provided in individual double taxation treaties.

Exemptions

Specifically with regard to interest, withholding tax will not be levied on interest paid:

• for commodity loans for the procurement of goods used for the performance of a business activity of the taxpayer;
• for loans given by a foreign bank or other financial institution; and
• to foreign legal persons that hold bonds (both state and corporate).

The withholding rates set by Croatian law may be further reduced or even eliminated subject to either double taxation treaties (Croatia currently has 70 double taxation treaties in force) or special rules provided for the taxation of dividend, profit, interest and royalty payments made between affiliated companies in different EU member states. In both cases, a minimum percentage of share/stock ownership requirement and a holding period requirement may apply.

The General Anti-avoidance Rule

As a means of battling tax fraud/evasion (including the prevention of treaty shopping), Croatia has also implemented a general anti-avoidance rule under which certain tax benefits, available either through a treaty or domestic law (eg, withholding tax exemption or reduction), will not be extended to the taxpayer if the Croatian authorities determine that the taxpayer created arrangements (eg, business transactions, activities, schemes, agreements, obligations or events) or a series of arrangements, without valid commercial reasons reflecting the economic reality (or in other words, if the arrangements were created for the purpose of tax fraud or tax evasion).

Manoeuvring space for tax mitigation is fairly limited due to various anti-evasion regimes implemented in Croatia and the scrutiny by the Croatian Tax Administration. In this regard, strategies utilising intercompany debt are restricted, as interest is subject to the market interest rate rule, the thin capitalisation rule and the interest limitation rule. Furthermore, strategies utilising intercompany services and licence fees are subject to OECD transfer pricing rules and are heavily scrutinised by the Croatian Tax Authority.

Among the tax mitigation strategies currently used by companies in Croatia is the carry-forward of tax losses, where the accumulated tax losses may be utilised within five years following the year in which the losses were incurred and set off against taxable profits. In addition, Croatian companies may also reduce the tax rate or tax base by utilising generous tax incentives for capital expenditures (eg, construction costs for factories and acquisition costs for manufacturing equipment) and R&D expenditures (the development and significant improvement of products, manufacturing processes, manufacturing technologies, etc). Lastly, Croatian companies are also able to defer taxation on a step-up in value of depreciable assets, but only in relation to intragroup restructuring.

Considering that the anti-evasion regimes applicable in Croatia create very complex terrain for tax planning, such analyses are created on a case-by-case basis and in close co-operation with tax advisers and experts.

Capital gains derived from the sale of financial assets – for example, shares (a business quota in Croatian LLCs), stock, financial market instruments, derivatives, etc – is taxed as income of both resident and non-resident individuals (ie, the disposal of financial assets by legal entities is not subject to capital gains tax). The applicable tax rate is set at 12%. The tax basis is calculated as the difference between the capital gains and capital losses occurring within the same calendar year. The taxpayer is under an obligation to pay capital gains tax until the end of February in the previous year.

There are a number of exceptions related to the payment of capital gains tax. Most notably, capital gains tax will not be paid in case of:

• the transfer of financial instruments between spouses and immediate family;
• the inheritance of financial instruments; and
• the disposal of financial instruments more than two years from the day on which the financial instrument was acquired.

In addition to any general anti-avoidance rule (the denial of tax benefits for arrangements that do not have economic substance) and the punitive withholding tax rate for non-cooperative jurisdictions (both described in 9.2 Withholding Taxes on Dividends, Interest, Etc), Croatia is also following the anti-avoidance trends at the European and global levels. In this regard, Croatia has implemented the anti-hybrid mismatching rules of the Anti-Tax Avoidance Directive (ATAD) 2, as well as introducing the BEPS Multilateral Instrument (MLI) measures. In addition, Croatian law has been populated with the provisions originating in the OECD’s Transfer Pricing Guidelines. Finally, Croatia has also implemented Directive on Administrative Cooperation (DAC) 6, creating stronger ties between the Croatian Tax Authority and its European counterparts, thus facilitating anti-tax evasion activities and diligence.

The Employment Act and Other Sources

In Croatia, employment and labour matters are primarily governed by the Employment Act, complemented by the Croatian Constitution, International Labour Organization conventions, additional statutes (eg, the Work Safety Act, Minimum Wage Act, Prevention of Discrimination Act and Gender Equality Act), collective labour agreements (CLAs), shop agreements with works councils, company policies and individual employment contracts. The Employment Act ensures employees’ minimum rights, overriding any agreement or policy that falls below these standards. In cases of conflict, the document favouring employees will prevail.

Collective Bargaining Bodies

Collective bargaining, works council and labour union arrangements are less common in Croatia compared to other EU countries. No universal CLA applies nationwide, but a CLA for trade is applicable to almost all enterprises engaged in wholesale and retail, and is consequently very widespread. Collective bargaining is prevalent in the public sector, specific industries (construction, accommodation, catering, forest products), and large private enterprises with historical union ties.

Unions with at least five members in a company may appoint a union trustee. Establishment of a works council, which can be initiated by a union or 20% of employees in companies with at least 20 staff, is a workforce prerogative. If there is a works council or a union trustee, specific collective engagement requirements, ranging from providing information and prior consultation to pre-approvals, will apply with regard to a number of actions including, for example, dismissals, introducing employment policies or personal data processing activities.

Compensation for employees in Croatia commonly encompasses several elements, notably including the base salary, mandatory health and social/pension insurance, and additional compensation elements.

Additional compensation elements, such as performance bonuses, 13th salary, allowances, Christmas or vacation bonuses, jubilee awards, equity compensation (eg, stock options) and non-cash perks (eg, a company car) are in principle subject to a company’s discretion unless an applicable CLA mandates any such elements and/or minimum amounts of such elements. The base salary is paid in cash on a monthly basis in an amount set by the contract, policy or applicable CLA, and in any case no less than the statutory minimum national wage (currently set at EUR1,050 gross monthly for full-time employment in 2026).

In Croatia, employee compensation generally remains unaffected by acquisition, change-of-control or other investment transactions, regardless of whether the transaction is structured as a share deal or an asset deal. That said, the acquiring party would usually assess, before transaction closing, whether any adjustments to the current compensation framework at the target will be necessary in the course of integration, as well as the legal prerequisites for any such adjustments.

The legal implications of an M&A transaction for employees vary depending on the type of transaction, and notably, whether the transaction is structured as a share deal or an asset deal.

Under a Share Deal

As a general rule, change of control (direct or indirect) by way of a share deal will not impact the employees of the target company, as the identity of the employer entity and the employment contracts with the employer entity remain unchanged.

Under an Asset Deal

By contrast, an asset deal (if structured as the transfer of a business as a going concern) will often trigger the application of the Acquired Rights Directive (ARD)/Transfer of Undertakings (Protection of Employment) (TUPE)-equivalent rules, under which all employment contracts pertaining to the transferring (part of a) business would transfer to the acquiring entity automatically by operation of law, together with works council and applicable CLAs. Employees are not entitled to object to the transfer, but the works council (or, if there is no works council, a union trustee if one is appointed) must be consulted in advance of the envisaged business transfer.

Currently, Croatia is in the process of setting up its FDI screening regime (see 1.2 Regulatory Framework for FDI and 7.1 Applicable Regulator and Process Overview). While the underlying FDI Act has been adopted, the implementing regulations (which are expected to regulate the screening process in more detail) still need to be put in place. Therefore, it remains to be seen how intellectual property will be treated by Croatian authorities in future instances of FDI screening. Considering the expanding consciousness regarding IP in Croatia, as well as the worldwide shift in the significance of the IP portfolios of companies, it may be that IP will play an important role in future FDI screening procedures in Croatia.

Croatia is historically a jurisdiction that recognises and protects various types of IP. Croatian IP legislation is currently comprised of several pieces of legislation that regulate copyright and related rights, patents, trade marks, industrial designs, geographical indications and designations of the origin of products, plant varieties, topographies of semiconductor products and business secrets. Croatian legislation is entirely harmonised with the relevant EU legislation, although Croatia is still outside the EU patent system. In addition, Croatia is a member of the World Intellectual Property Organization (WIPO) and a party to major international treaties relating to IP, including the Bern Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property.

On the other hand, due to Croatia being a relatively small jurisdiction, disputes regarding IP are rare. As a result, a number of areas of IP law do not have any relevant and established case law (eg, in the area of patents and topographies of semiconductor products), while in other more active areas such as copyright and related rights and trade marks, the Croatian courts are still struggling to establish uniform application of the law. In this regard, considering that Croatian legislation is silent on the issue of AI-generated works, it remains to be seen whether Croatian courts will grant copyright protection over AI-generated works, noting, however, that there is a strong opinion among Croatian legal scholars against this option.

Consequently, from the perspective of foreign investors, it is paramount to pre-emptively screen any IP portfolios in the case of intended acquisitions in order to establish the title of the rights holders. It is therefore worth noting the following.

• Property rights in copyright works created by employees in connection with the employment relationship are automatically assigned to the employer, unless otherwise provided in the contract between the employer and the employee and/or the employer’s regulations. On the other hand, moral rights over copyright works are non-assignable and can only be partially limited by contract.
• Rights over inventions created by employees during the performance of work or in connection with their employment will be vested with the employer, while the employee will have a right to an award as established in a contract or a collective bargaining agreement – or failing this, an appropriate award as established by a court.

The General Data Protection Regulation (GDPR) is the prime source of rules governing the processing of data of individuals in Croatia. The GDPR is particularly important in the context of FDI due to its extraterritorial scope of application, with the GDPR also being applicable to investors that are not established in the EU but process the data of individuals who are located in the EU for the purpose of offering goods or services, or monitoring the behaviour of individuals within the EU.

In addition to the GDPR, Croatia also adopted the Act on Implementation of the GDPR, which regulates special cases of processing personal data, such as the prohibition of processing genetic data in relation to insurance contracts, the processing of biometric data and the processing of video surveillance data, with each of the special cases having a separate territorial scope of application.