Guidance

Overseas business risk: Croatia

Updated 14 August 2023

1. General overview

Croatia is located at the crossroads of Central and Southeast Europe on the Adriatic Sea. It is both a NATO and European Union member and has recently joined the Schengen Area and the Eurozone (as of 1 January 2023). It has an educated labour force, English is widely spoken (Croatia ranks 11th globally for proficiency of English) and the political environment is stable. Key risks and challenges for businesses are bureaucracy, corruption and dispute resolution.

2. Political

Croatia gained its independence from Yugoslavia in 1991 and joined the European Union in July 2013. Croatia’s EU membership has been beneficial to the country’s economic stability and has diversified the economy. It has also provided significant financial input through EU funds and new business opportunities which are yet to be fully exploited. Croatia plays an important role in the economic and political stability of Southeast Europe.

Croatia’s legal framework is based on a continental European model and its constitution guarantees free transfer of capital and free profit repatriation to investors. Croatian laws guarantee equal rights for domestic and foreign private and legal entities. Since July 2020, the centre-right coalition Government has been led by Prime Minister Andrej Plenković. New parliamentary and presidential elections will be held in 2024.

3. Economic

According to the World Bank, the impact of COVID-19 saw the Croatian economy contract by 8.7% in 2020. However the Croatian economy strongly bounced back, and in 2022 its economy grew by 6.2%, one of the highest GDP growths in the EU. Inflation in 2022 was 10.7%, mainly due to high energy costs.

Despite diversification, the Croatian economy continues to be heavily dependent on tourism which contributes to approx. 20% of GDP. Structural imbalances continue to hinder economic growth. IT is Croatia’s fastest growing sector and accounted for 5.2% of GDP in 2021. Major reforms to make public administration and judiciary leaner and more efficient remain overdue.

Croatia’s main trading partners are its immediate neighbours: Austria, Germany, Italy and Slovenia. Around 50% of Croatia’s trade is with the Eurozone countries (source of 75% of Foreign Direct Investment in Croatia).

In 2022, Croatia was the UK’s 76th largest trading partner, accounting for 0.1% of total UK trade. Total UK exports to Croatia amounted to £422 million in 2022, an increase of 43.5% compared to 2021. Total UK imports from Croatia amounted to £1.3 billion, an increase of 120.9% compared to 2021 (largely consisting of tourism).

Croatia adopted the euro as its national currency on the 1st of January 2023. The transition to euro has gone smoothly with relatively low impact on already high inflationary pressures. Croatia’s banking sector, which is mostly foreign owned, is stable and well capitalised.

In July 2022 Croatia started official negotiations to become an OECD member. Croatia’s bid for OECD membership enjoys bipartisan domestic support.

Croatia has made starting a business easier by abolishing the requirements to reserve the company name and obtain director signatures for company registration, and by reducing the paid-in minimum capital requirements. Croatia also made construction permits less costly by reducing the water contribution for warehouse construction. Croatia made it easier to transfer property by decreasing the real estate transfer tax and by reducing the time needed to register property title transfers. Croatia made accessing credit information more difficult by ending the distribution of individual credit data.

In the period 2021-2027, Croatia will receive a total of €22 billion from the combined MMF and EU Next Generation Fund. Croatia will also receive grants of €5.9 million from the Recovery and Resilience Fund.

4. Business and human rights

Human Rights in Croatia are protected by the Constitution and International treaties which Croatia has ratified. Ongoing challenges include securing LGBT rights, access to abortion, and the treatment of minorities and illegal migrants. The US State Department lists Croatia as Tier 2 for human trafficking.

Freedom House ranks Croatia 55th in the world and classes it as “free”, with a score of 84% (above the EU average of 80%).

A notable recent development is the increased number of foreign workers, primarily from South Asia. These workers are filling rolls in labour-intensive sectors such as tourism, hospitality, construction and agriculture. There have been a few reported cases of xenophobic abuse.

Croatian employees have the right to join trade unions of their choice without prior authorisation and union representatives are protected against anti-union discrimination. The right to strike is recognised by law.

The gender balance within leading economic and political positions continues to be improved and institutional mechanisms for gender equality are being enhanced. The number of women at executive positions remains steady at 18%. With 60.7 out of 100 points, Croatia ranks 19th in the EU in the Gender Equality Index, 7.8 points below the EU average. Minority representation in public administration remains below 5%.

Despite the legal framework, tax evasion remains a challenge. Successive Croatian Governments have attempted to tackle the issue through “naming and shaming” businesses that are not declaring salaries according to the law. These efforts have had limited impact.

5. Bribery and corruption

It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anyone anywhere in the world.

A commercial organisation carrying on business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Although foreign investors are legally entitled to national treatment, Croatia’s challenges with the legal system and a lack of transparency within both the private and public sectors have presented the greatest difficulties to investors.

Transparency in developing legislation and regulations is often hampered by inefficient public administration and a lack of intra-governmental coordination. The significant backlog of cases has made dispute resolution through courts an undesirable option for companies. Due to long timeframes involved in obtaining judgments in court, companies often try to resolve disputes without seeking judicial remedies.

According to Transparency International’s Corruption Perception Index (2022) Croatia is ranked 57 out of 180 countries (three places higher than in 2018).

In June 2023, the Financial Action Task Force (FATF) placed Croatia on the “grey-list” of countries with shortcomings in combatting money laundering or terrorist financing. Croatia has committed to implement an Action Plan to resolve the identified strategic deficiencies swiftly, within agreed timeframes. See the FATF’s website for more information.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Croatia and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our bribery and corruption page.

6. Terrorism threat

There is a low threat from terrorism.

Read the information provided on FCDO travel advice.

7. Protective security advice

Croatia has a low crime rate compared to average EU levels. Violent crime is rare. Croatia’s main security challenges are corruption, organised crime migration and cybercrime.

Read the information provided on FCDO travel advice.

8. Intellectual property

Intellectual Property Rights are territorial and only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, you should consider registering your IP rights in your export markets.

For information on registering your trademark or patent in Croatia you should contact the State Intellectual Property Office of the Republic of Croatia (DZIV).

Read the information provided on our intellectual property page.

9. Organised crime

Organised criminals in Croatia have strong links to wider Eastern European criminal groups and are involved in cigarettes, drug smuggling and people smuggling. In 2022, Croatian Police records reported 227 cases of organised crimes (16.6% decline), 741 cases of economic crimes, and 372 cases of cybercrimes. The COVID-19 pandemic enhanced threats from cyber-attacks.

We are not aware of businesses and individuals unconnected with organised criminal groups being targeted by serious organised crime. Businesses should carefully check the background of any potential partners in advance.

Read the information on our organised crime page.

10. Contact

Contact the Department for Business and Trade (DBT) team in Croatia for further information.