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Incentive measures for investment projects

Incentive measures for investment projects in the Republic of Croatia are regulated by the Act on Investment Promotion (OG, No. 102/15, 25/18, 114/18, 32/20) and pertain to investment projects in:

  • manufacturing and processing activities,
  • development and innovation activities,
  • business support activities,
  • high added value services.

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 3 new jobs for microenterprises
  • € 150,000 together with creating at least 5 new jobs for small, medium and large enterprises
  • € 50,000 together with creating at least 10 new jobs for ICT system and software development centers
  • € 500,000 for investment projects in modernising and increasing business process productivity

Classification of enterprises is done in accordance with the GBER.

Enterprise category* Number of employees and Annual turnover or Annual balance sheet
Large ≥ 250 > 50 million € or > 43 million €
Medium < 250 ≤ 50 million € or ≤ 43 million €
Small < 50 ≤ 10 million € or ≤ 10 million €
Micro < 10 ≤ 2 million € or ≤ 2 million €

* when classifying enterprises one should also consider affiliated enterprises

The amount of aid shall be calculated as a percentage of investment value, which is determined on the basis of eligible investment cost. Eligible investment costs are:

  • tangible (value of  land/buildings and plant/machinery) and intangible assets (patent rights, licences, know-how), or
  • gross wage calculated over a period of two years

The minimum period for maintaining the investment and newly created jobs linked to investment is five years for large enterprises, and three years for small and medium-sized enterprises, but no less than the period of use of the incentive measures.

Profit tax incentives

Investment amount (€ mil.) Number of newly employed Period of employment (years) Profit tax rate reduction Period (years)
0,15 -1
(>0,05 for micro and ICT system and software development centers)
5 (3 for micro, 10 for ICT system and software development centers) 3 (SME’s), 5 (large) 50% 10 (5 for micro)
1-3 10 3 (SME’s), 5 (large) 75% 10
>3 15 3 (SME’s), 5 (large) 100% 10

Employment Incentives

COUNTY UNEMPLOYMENT RATE INCENTIVE RATE IN RELATION TO ELIGIBLE COSTS OF JOBS CREATION INCREASE FOR DEVELOPMENT AND INNOVATION ACTIVITIES** INCREASE FOR BUSINESS SUPPORT ACTIVITIES*** AND HIGH ADDED VALUE ACTIVITIES****
<10% 10% (max. 3,000  €)* +50% (1,500 €)* +25% (750 €)*
4% (max. 1,200 €) +50% (600 €) +25% (300 €)
10-20% 20% (max. 6,000  €)* +50% (3,000 €)* +25% (1,500 €)*
8% (max. 2,400 €) +50% (1,200) +25% (600 €)
>20% 30% (max. 9,000  €)* +50% (4,500 €)* +25% (2,250 €)*
12% (max. 3,600 €) +50% (1,800) +25% (900 €)

* 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, persons older than 50 years registered as unemployed with CES and persons without work experience registered as unemployed with CES. For other categories of workers, the incentive rate is 40% of the above-specified amount. (Investment Promotion Directive, OG 31/16, 2/19)
** Development and innovation activities – activities that affect the development of new and significantly improving existing products, production series, manufacturing processes and / or production technologies
*** Business support services:
1. Customers / Clients relationship centers – all types of call centers, multimedia contact centers and other types of contact and service centers focused on technical support and problem solving for customers/clients.
2. Centers of outsourced business activities – focused on outsourcing and pooling of business activities, such as finance, accounting, marketing, product design, audio-visual activities, human resources development and development of information technology.
3. Logistics and Distribution Centres – aimed at establishing and building high-technology logistics and distribution centers providing intermodal transportation, warehousing, packaging and handling in order to significantly improve logistics and distribution activities within the business process and delivery of goods.
4. ICT System and Software Development Centres: development and application of information systems, outsourcing of IT management operating systems, development of telecommunications network operation centers and development and application of new software solutions.
**** High Added Value Activities:
1. Creative service activities: activities in the field of architecture, design, different forms of media communication, advertising, publishing, culture, creative industry and other activities in the field of fine arts
2. Hospitality and tourism activities – hospitality and tourism accommodation facilities categorised as at least four stars, such as hotel, aparthotel, tourist resort and camps; heritage hotels, diffused hotels, other types of accommodation facilities created by the renovation of cultural and historical structures, with the mandatory submission of conservation requirements of reconstruction; supporting services of the aforementioned types of accommodations which include; health tourism, congress tourism, nautical tourism, golf tourism, cultural tourism, entertainment and/or recreation centres and parks, ecological tourism projects and other innovative projects in tourism with high added value as well as nautical tourism projects with categories of four or more anchors; amusement and theme park projects.
3. Industrial engineering services.

For investment in development and innovation activities, a non-repayable grant shall be approved for the purchase of plant/machinery amounting to 20% of the actual eligible costs for purchasing plant/machinery, in the maximum amount of EUR 500,000 in equivalent HRK value, provided that the purchased plant/machinery represents high technology equipment.

Incentives for education and training:
The eligible costs for the purpose of training may include trainers’ personnel costs, for the hours during which the trainers participate in the training; trainers’ and trainees’ operating costs directly relating to the training project such as travel expenses, materials and supplies directly related to the project, depreciation of tools and equipment, to the extent that they are used exclusively for the training project. Accommodation costs are excluded.; costs of advisory services linked to the training project; trainees’ personnel costs and general indirect costs (administrative costs, rent, overheads) for the hours during which the trainees participate in the training.

Incentives will not be awarded for the training conducted to ensure compliance with the mandatory training prescribed by national norms.

The aid intensity shall not exceed 50 % of the eligible costs. It may be increased, up to a maximum aid intensity of 70 % of the eligible costs, as follows:
(a) by 10 percentage points if the training is given to workers with disabilities or disadvantaged workers;
(b) by 10 percentage points if the aid is granted to medium-sized enterprises and by 20 percentage points if the aid is granted to small enterprises.

Incentive measures for the capital costs of the investment project

Eligibility: over € 5 million and more than 50 new jobs

County Unemployment Rate Incentives for Capital Expenses
10-20% Cash grant in the amount of 10% of the eligible costs of investments for:

  • construction of the new factory, production facility or tourist facility,
  • buying of new machines, i.e. production equipment,

(max amount up to 0.5 million EUR with the condition that the part of the investment in the machines / equipment equals at least 40% of the investment and that at least 50% of those machines/equipment are of high technology)

>20% Cash grant in the amount of 20% of the eligible costs of investments for:

  • construction of the new factory, production facility or tourist facility,
  • buying of new machines, i.e. production equipment,

(max amount up to 1 million EUR with the condition that the part of the investment in the machines / equipment equals at least 40% of the investment and that at least 50% of those machines/equipment are of high technology)

Incentive measures for labour-intensive investment projects

Number of newly created jobs Increase of Support for creating new jobs
100 and higher 25%
300 and higher 50%
500 and higher 100%

Incentive Measures for Investment Projects through Economic Activation of Inactive Property Owned by the Republic Of Croatia

Inactive property is land and/or buildings owned by the Republic of Croatia managed by the Ministry of Physical Planning, Construction and State Property, which is not in function and on which no economic activities are performed. Inactive property owned by the Republic of Croatia having unresolved property relations, property on which there is any type of registered burden and property that has the status of agricultural, forestry or tourist land is not considered as an inactive property within the meaning of this Act.

INVESTMENT AMOUNT (€ MIL.) NEWLY EMPLOYED OBLIGATORY INVESTMENT INTO INACTIVE PROPERTY GRANTED FOR LEASE INCENTIVE PROCEDURE FOR GETTING THE LEASE
3 15 50% increase in the value of the property within 3 years in relation to the estimated value of the inactive property at the time of starting the lease free lease of inactive property for up to 10 years* from the start of the investment for investment located in lower developed local self-government units (I-IV) – without any additional preconditions
for investment located in higher developed local self-government units (V-VIII) – after three rounds of public tender for sale of inactive property

*After the expiration of the free lease or after reaching the maximum aid intensity, the beneficiary of the incentive measure can conclude the agreement on the purchase of inactive property with the Ministry of Physical Planning, Construction and State Property

Support for the Modernisation of Business Processes – Automation, Robotisation and Digitalisation of Production and Manufacturing Processes

Only for investment projects in the manufacturing industry, that is, for investment projects in production and processing activities.
The minimum amount of investment in fixed assets is EUR 500,000, provided that the initial balance of employees is maintained throughout the use of the aid, and not less than the minimum period of preservation of the investment project in question for which the aid is intended to be used to modernise business processes.

INVESTMENT AMOUNT (€ MIL.) DIFFERENCES IN LEVELS OF PRODUCTIVITY PER EMPLOYEE AFTER 3 YEARS AID TO MODERNISE * BUSINESS PROCESSES

(REDUCTION OF PROFIT TAX RATE)

0.5 – 1 >10%

relative to the level of productivity per employee in the one year period prior to the filing of the investment project

50%
1 – 3 75%
> 3 100%

*Modernisation is, a profound change in the production and processing process which involves the entry of long-term assets of equipment/machines into the ownership of investment support beneficiaries, which is categorised as a more technologically advanced generation of long-term high-tech assets relative to long-term assets being modernised such as specialised robots, robotic systems and robotic stations, automation and production process self-management equipment and machines, automated production management systems, and machinery/equipment for the digitisation of production and manufacturing processes.
It also entails the entry of long-term fixed assets into the ownership of investment aid beneficiaries, which is categorised as a more technologically advanced generation of long-term high-tech intangible assets relative to long-term assets being modernised, such as the latest generation of automated management software for manufacturing processes in the production and manufacturing industry, software in the function of digitisation of production and manufacturing processes, software for the development of self-managing systems, logic controllers and automated lines of production processes and software for machine learning, artificial intelligence development and system visualisation.

According to the procedure for applying for incentive measures under the Act on Investment Promotion (NN 102/15, 25/18, 114/18, 32/20) an enterprise intending to acquire the status of a beneficiary of incentive measures must file an Application for the use of incentives using the prescribed forms either to the Ministry of Economy and Sustainable Development before the beginning of the investment.

Incentives application forms

Incentives application forms – .docx files