Incentive measures for investment projects

Incentive measures for investment projects in the Republic of Croatia are regulated by the Investment Promotion Act (OG 102/15, 25/18, 114/18, 32/20 and 20/21) and relate to investment projects in:

  • production and manufacturing activities,
  • development and innovation activities,
  • business support activities and
  • activities of high value-added services.

Aid cannot be granted for export-related activities towards third countries or the Member States, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or other current costs related to the export activity; sector of processing and marketing of agricultural products, where the amount of the aid is fixed on the basis of the price or quantity of such products purchased from primary producers or put on the market by the undertakings concerned or where the aid is conditional on being partly or entirely passed on to primary producers; fishery, aquaculture and primary agricultural production sector; steel, coal, synthetic fibres and transport sector as well as the related infrastructure; energy generation, distribution and infrastructure; broadband infrastructure; research infrastructure; shipbuilding sector; financial and insurance sector; the health, welfare and education sector; trade sector; construction and real estate sectors; and sectors of water management, waste management and environmental remediation.

Grants include aid for:

  1. Micro-entrepreneurs,
  2. Small, medium-sized and large enterprises,
  3. Eligible costs arising from new jobs related to investment projects,
  4. Eligible training costs related to investment projects,
  5. Aid for:
    1. development and innovation activities,
    2. business support activities, and
    3. high value-added service activities.
  6. Capital costs of the investment project,
  7. Labour-intensive investment projects,
  8. Investment projects stemming from economic activation of inactive assets owned by the Republic of Croatia,
  9. Modernisation of business processes – automation, robotisation and digitalization of production and manufacturing processes.

Incentive measures may be used by entrepreneurs registered in the Republic of Croatia who invest the following minimum amounts in fixed assets:

  • € 50,000 in addition to creating a minimum of 3 new jobs for micro entrepreneurs,
  • € 150,000 in addition to creating a minimum of 5 new jobs for small, medium-sized and large entrepreneurs,
  • € 50,000 in addition to creating a minimum of 10 new jobs for centres developing information and communication systems and software,
  • € 500,000 for projects to invest in modernisation and increasing productivity of business processes

Classification of undertakings according to Annex I of Commission Regulation (EU) no. 651/2014 of 17 June 2014

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, account should also be taken of affiliated and partner companies.

Initial investment aid is calculated as a percentage of the investment value and based on eligible costs of the investment. Eligible investment costs are:

  • Tangible (value of property/buildings and equipment/machinery) and intangible assets (rights to patents, licenses, know-how), or
  • 2 years of gross salary

The minimum period for maintaining the investment and newly created jobs linked to investment for a specific investment is 5 years for large enterprises and 3 years for micro, small and medium-sized enterprises, but not less than the period for utilising the incentive measures.

Profit tax incentives
Investment amount (€ mil.) Number of newly employed Period of preservation of new jobs (years) Profit tax rate reduction Period (years)
0,15 -1
(>0,05 for micro and for centres
developing information and communication systems and software)
5 (3 for micro, 10 for centres developing information and communication systems and software) 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 amount of support is calculated as a percentage of eligible costs for creating a new job and refers to those persons registered in the unemployment register for a duration of at least 6 months, regardless of length of service and level of education, persons over 50 registered in the unemployment register and persons without employment length of service registered in the unemployment records of the Croatian Employment Service, and persons whose employment contract has been terminated due to the opening of bankruptcy proceedings. In all, 40% of the aid amount will be granted for the employment of other categories of workers.

** Development and innovation activities:

  • Activities that affect the development of new and significant improvement of existing products, production series and processes and production technologies.

*** Business support activities:

  • Customer relationship centres – all forms of call centres, multimedia contact centres and other types of customer contact centres focused on technical support and customer problem solving.
  • Centres of special business activities: focused on separation and concentration of business activities, such as finance, accounting, marketing, product design, audio-visual activity, human resources development and information technology development.
  • Logistics and distribution centres: aimed at establishing and building high-tech logistics-distribution centres that provides services for intermodal transport of goods, storage of goods, packaging and handling of goods to significantly improve logistics and distribution operations within business processes and delivery of goods.
  • Centres for development of information and communication systems and software: development and application of information systems, segregation of information systems management, development of telecommunication and network operating centres and development and application of new software solutions.

**** High value-added service activities:

  • Creative service activities: activities in the field of architecture, design, various forms of media communication, advertising, publishing, culture, creative industry and other activities in the field of the arts.
  • The activities associated with catering and tourist services are:
    • Projects for catering and tourist facilities providing accommodation, minimum 4-star category and types such as hotel, aparthotel, tourist settlement and camps,
    • Projects of catering and tourist facilities – heritage hotel, diffuse hotel and other types of accommodation facilities created by the restoration of cultural and historical heritage, with mandatory delivery of conservation conditions for restoration purposes,
    • Projects of accompanying contents of all previously mentioned types of accommodation facilities, which include health, congress, nautical, cultural, golf, sports-recreational, entertainment-thematic and tourist-ecological content, as well as other innovative contents in high value-added tourism,
    • Nautical tourism projects, four-anchor or more category,
    • Amusement and theme park projects.
  • Industrial engineering service activities.
Aid for development and innovation activities

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/machinery, where the maximum amount in Croatian kuna (HRK) is equivalent to € 500,000.00, provided that the purchased equipment/machinery is classified as high-tech.

Incentives for education and training:

The amount cannot exceed the maximum intensities as follows:

up to 50% of eligible training costs ** + 10% for the training of workers with disabilities * + 10% if the aid is granted to a medium-sized enterprise * + 20% if the aid is granted to a small and micro entrepreneur *

* May not exceed 70% of the eligible training costs, nor 50% of the grant amount for creating new jobs directly related to the investment
** Eligible training costs are the costs for the lecturer, for the hours spent by lecturers in training, operating costs related to lecturers and trainees, and directly related to the training project, such as travel costs, costs of materials and consumables directly related to the project, depreciation of tools and equipment, if used exclusively for the training project, costs of consulting services for the training project, staff costs associated with trainees and general indirect costs (administrative costs, rent, overheads) for the hours trainees undergo training. Accommodation costs are excluded. Support grants shall not be granted for training provided by undertakings to ensure compliance with mandatory national training standards.

Incentive measures for the capital costs of the investment project

Conditions for exercising the right to implement incentive measures for capital costs of an investment project: where the investment in fixed assets amount to at least € 5 million, subject to the creation of a minimum of 50 new jobs.

County Unemployment Rate Incentives for Capital Expenses
10-20% Grant amounting to 10% of eligible investment costs for:
• Cost of building a new factory or industrial plant,
• Cost of purchasing new machines (production equipment),
(where the maximum amount is € 500,000.00, provided that the share of investment in machinery/equipment is at least 40% of the total investment value, and at least 50% of purchased machinery/equipment must be high-tech)
>20% Grant amounting to 20% of eligible investment costs for:

  • Cost of building a new factory or industrial plant,
  • Costs of purchasing new machines (production equipment),

(where the maximum amount is € 1 million, provided that the share of investment in machinery/equipment is at least 40% of the total investment value, and at least 50% of the purchased machinery/equipment must be high-tech)

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%
Aid for investment projects based on economic activation of inactive assets owned by the Republic of Croatia

Inactive property in terms of this Act consists of land and/or buildings owned by the Republic of Croatia and managed by the Ministry of Physical Planning, Construction and State Property, where such property has not been put into function and which does not perform any specific economic activity. In terms of this Act, inactive property with unresolved property rights, property on which there is any type of registered lien and property that is designated as having the status of agricultural, forest or tourist land is not deemed as inactive property owned by the Republic of Croatia.

INVESTMENT AMOUNT (€ MIL.) NUMBER OF NEWLY EMPLOYED OBLIGATORY INVESTMENT INTO INACTIVE PROPERTY GRANTED FOR LEASE SUPPORT THE PROCEDURE FOR OBTAINING A LEASE
3 15 Increase in the value of inactive assets by 50% within 3 years of leasing the property with respect to the estimated value of the property at the time of the lease Free lease of inactive assets for up to 10 years* from the commencement time of the investment for investment located in lower developed local self-government units (I-IV) – without any additional conditions
for investment located in higher developed local self-government units (V-VIII) – after three rounds of public tender for sale of the inactive property

*After the lease expiration or reaching maximum aid intensity, the aid beneficiary may enter into an Agreement with the Ministry of Physical Planning, Construction and State Property in order to purchase the property.

Aid for modernisation of business processes – automation, robotisation and digitization of production and manufacturing processes

This aid refers solely to investment projects in production and manufacturing industries, i.e., for investment projects in production and manufacturing activities.
The minimum amount of investment in fixed assets is EUR 500,000, provided that the initial condition in terms of numbers of workers is maintained throughout the period of utilising the aid, and not less than the minimum period of preserving the investment project for which aid for modernizing business processes is intended.

INVESTMENT AMOUNT (€ MIL.) DIFFERENCES IN PRODUCTIVITY LEVEL PER WORKER AFTER 3 YEARS AID FOR MODERNISATION * OF BUSINESS PROCESSES

(REDUCTION OF PROFIT TAX RATE)

0.5 – 1 >10%

In relation to the level of productivity per worker in a one-year period prior to registering the investment project

50%
1 – 3 75%
> 3 100%

* Modernisation, meaning a fundamental change in production and manufacturing, implies transferring fixed assets such as equipment/machinery into ownership of investment aid beneficiaries, where such assets are categorized as a technologically more advanced generation of high-tech equipment/machinery (fixed assets) compared to the long-term assets being modernised, such as specialized robots, robotic systems and robotic stations, equipment/machinery for automation and self-control of production processes, automatic production management systems and equipment/machinery for digitization of production and production processes. Also, modernisation, meaning a fundamental change in the production and processing, implies transferring long-term intangible assets to the ownership of investment aid beneficiaries, where such assets are categorized as a technologically advanced generation of high-tech intangible fixed assets compared to fixed assets being modernised such as: the latest generation of automated management software production processes in the manufacturing industry, software for the digitization of production processes and production, software for the development of self-controlling systems, logic controllers and automated production process lines and software for machine learning, artificial intelligence development and system visualization.

According to the application procedure for the use of incentive measures pursuant to the Investment Promotion Act, an entrepreneur wishing to acquire the status of Holder of Incentive Measures is obliged to submit an application for the use of incentive measures using the form as prescribed by the Ministry of Economy and Sustainable Development.