“Smart investors should think about investing in Croatia” — Financial Times Investment guide December, 2014 Dear Investors, It is my great pleasure to present you with the second edition of the Investment Guide to Croatia. This publication is designed to guide current and prospective investors through all stages of the investment process in the Republic of Croatia. Through this Investment Guide we would like to showcase Croatia; the country with vast business potential and many competitive advantages. Since the end of 2011, a comprehensive set of measures and legislative amendments has been implemented by the Government of the Republic of Croatia in order to create an attractive legal framework and business conditions as well as to improve the overall business environment. Cost competitiveness, a highly educated, skilled and innovative workforce, an excellent geostrategic location, the most modern infrastructure in the region and a member nation of the European Union - one of the largest free trade areas in the world - are just some of the advantages that qualify Croatia as an ideal destination for expanding your business activities, growing your market share and improving profitability. Established by the Government of the Republic of Croatia, the Agency for Investments and Competitiveness has already been utilised by many multinational companies and investors and offers free of charge, full-service assistance. We are ready to provide you with efficient, active and professional step-by-step guidance. Our tailor made professional services will guide and support you through all phases of the investment cycle, from the initial inquiry through to successful completion of your investment. We take your business seriously and are always at your service. Invest in Croatia – be a part of the new growth! Yours sincerely, Damir Novinić Managing Director 0.0. 1. About Croatia ..................................................................................................................................... 8 1.1. Basic Indicators ........................................................................................................................... 9 Table of contents 1.2. Strategic location ...................................................................................................................... 10 1.3. Infrastructure ............................................................................................................................ 11 1.4. Trade Exchange ........................................................................................................................ 12 1.5. Foreign Direct Investments ....................................................................................................... 13 Share of foreign direct investments in Croatia by activity .............................................................. 13 Share of foreign direct investments in Croatia by country (cumulative from 1993 to Q2 2014) ............ 13 2. Investment locations ....................................................................................................................... 14 2.1. Business Zones in Croatia ........................................................................................................ 15 2.2. Land Acquisition ....................................................................................................................... 15 2.3. Construction Permits ................................................................................................................ 16 2.3.1. Compatibility with Physical Plans ....................................................................................... 16 2.3.1.1. Location information ..................................................................................................... 17 2.3.2. Location Permit .................................................................................................................. 17 2.3.3. Special conditions and Main Design verification ................................................................ 17 2.3.3.1. Notification on the Main Design creation requirements ................................................ 17 2.3.3.2. Special conditions determination and the Main Design verification ............................. 18 2.3.4. Building Permit .................................................................................................................. 18 2.3.4.1. e-Building Permit ......................................................................................................... 18 2.3.5. Use Permit ......................................................................................................................... 19 3. Human capital .................................................................................................................................. 20 3.1. Education System ..................................................................................................................... 21 3.2. Available Labour Force ............................................................................................................. 22 4. Costs of doing business .................................................................................................................. 24 4.1. Salaries ..................................................................................................................................... 25 4.2. Utilities ...................................................................................................................................... 27 4.2.1. Electricity ........................................................................................................................... 28 4.2.2. Natural Gas ....................................................................................................................... 28 4.2.3. Water ................................................................................................................................. 29 5. Legal environment ........................................................................................................................... 30 5.1. Foreign Investors’ Status ........................................................................................................... 31 5.2. Intellectual Property Rights ....................................................................................................... 31 5.3. Establishing a Company ........................................................................................................... 31 5.3.1. Setting up a Branch Office ................................................................................................. 33 5.3.2. Opening a Representative Office ....................................................................................... 33 5.4. Employment of Foreign Citizens ................................................................................................ 33 5.4.1. Work Registration Certificate ............................................................................................. 35 5.4.2. Posted Worker ................................................................................................................... 35 6. Tax system ....................................................................................................................................... 36 6.1. Profit tax .................................................................................................................................... 37 6.2. Income Tax and Surtax .............................................................................................................. 37 6.3. Value Added Tax (VAT) ............................................................................................................. 38 6.4. Real Estate Transfer Tax ............................................................................................................ 39 7. Investment incentives ...................................................................................................................... 40 8. Strategic investment projects ......................................................................................................... 46 9. Agency for investments and competitiveness ................................................................................ 48 1.1. Land area Currency About Basic Indicators 56 594 km2 Kuna (HRK) Population (2013) Average Exchange Rate (2013) Croatia 4.256 m 1 EUR = 7.5735 01 Political System 1 USD = 5.7059 Parliamentary International Telephone Code democracy 00 385 1.1. Basic Indicators Territorial Organization Internet Country Code 1.2. Strategic location 1.3. Infrastructure 20 counties & .hr Time Zone 1.4. Trade Exchange the City of Zagreb Capital 1.5. Foreign Direct Investments Central European Share of foreign direct investments in Croatia by activity Zagreb Time (CET) Share of foreign direct investments in Croatia by country Official Language Climate (cumulative from 1993 to Q2 2014) Croatian Continental & Mediterranean SOURCE: CNB, CBS Main Macroeconomic 2007 2008 2009 2010 2011 2012 2013 Indicators GDP 43 935 48 135 45 093 45 022 44 737 43 959 43 591 (million EUR, current prices) GDP growth rate 5.2 2.1 -7.4 -1.7 -0.3 -2.2 -0.9 (constant prices) % GDP per capita, 9 904 10 856 10 181 10 191 10 453 10 300 10 242 current prices (EUR) Import of goods and services 46.3 46.5 38.2 38.1 40.9 41.1 42.5 (% GDP) Export of goods and services 39.0