Investing in Croatia? Understand the Croatia Foreign Direct Investment Act

Effective as of: 13 November 2025

Croatia has officially entered the EU-wide foreign investment screening framework with the adoption of the Foreign Direct Investment Screening Act (Zakon o provjeri stranih ulaganja).

While Croatia is one of the last EU Member States to implement an FDI screening regime, this does not signal a hostile investment climate. Instead, it marks a structural shift: foreign investments that were once treated as purely private transactions may now fall under mandatory public-law review.

This article explains what the Act does, who it applies to, how the procedure works in practice, and why early local legal advice has become strategically important.

What are the key aspects of the Croatia Foreign Direct Investment Act?

The Act aims to protect national security and public order in Croatia, the EU, and its member states, and aligns Croatia with EU FDI Screening Regulation (EU) 2019/452.
It entered into force in November 2025 and applies to a broad definition of foreign investors, including non-EU/EEA individuals and entities, as well as EU companies ultimately controlled by non-EU actors.

Screening applies to Croatian “obliged entities” operating in security- or public-order-sensitive sectors (such as critical infrastructure) when an investment acquires 10% or more of shares or voting rights, confers control or decisive influence, or uses non-shareholding arrangements that grant control.

The process involves an application, review by the Ministry of Finance and the FDI Screening Commission, and a final decision typically within 120-150 days. Authorities may block non-approved transactions and initiate reviews of undeclared investments.

How the Croatia FDI Act Affects Everyday Founders and First-Time Investors

For most foreign founders starting out in Croatia, the typical entry point is a d.o.o. (limited liability company). It is the most common, flexible, and commercially practical form of company formation.

In many cases, founders plan to be the sole shareholder or to hold a majority stake from day one. Under the new Croatia Foreign Direct Investment (FDI) Act, this structure can now have procedural consequences, even for small, non-sensitive businesses.

If you:

• are the sole owner, or
• hold 10% or more of shares or voting rights, or
• plan to acquire such a stake at incorporation,

and the company falls within the scope of the Act, company formation may be postponed until the FDI screening procedure is completed.

When company formation is handled through a notary, the notary is legally obliged to notify the competent authority, and ensure that FDI obligations are addressed before registration proceeds.

As a result, the company cannot be entered into the Commercial Court register until the relevant procedure is completed or cleared.

At this stage, secondary regulations and detailed administrative guidance are still limited. In particular:

• It is not yet fully clear how the Act will be applied to small, non-essential companies run by foreign founders.
• The law is primarily designed to address security- and public-order-sensitive sectors, which are not the focus of most startups or service businesses.

Best practice: prepare before filing

The safest approach is to prepare upfront, rather than risk delays or re-filings later. This includes:

• identifying whether the investment structure triggers notification,
• collecting and preparing documents required under the Act, and
• ensuring consistency between company documents, ownership structure, and filings.

Importantly, the Act assigns the Minister of Finance the task of issuing a specific implementing ordinance, within 90 days of the Act’s entry into force, which will set out a detailed list of forms and supporting documents required for the application process.

Until this ordinance is formally adopted and published, practical requirements remain partially undefined. As a result, early preparation and careful structuring are especially important to avoid delays once filing becomes mandatory.

If you are planning to form a company in Croatia and want to ensure your ownership structure and documentation are FDI-compliant from the start, it is best to address these issues before notarisation and court filing.

At Mandracchio Capital, we assist foreign founders and investors with:

• assessing whether FDI screening is triggered,
• preparing documentation in line with current legal requirements and pending regulations, and
• coordinating the timing of FDI filings with company formation to avoid unnecessary delays.

Contact us to discuss your structure and preparation steps before initiating the company formation process.

Why This Law Matters to Foreign Investors

For foreign investors including those from the US and UK, the Croatia Foreign Direct Investment Act does not prohibit investment. The real challenge lies in anticipation, structuring, and timing.

The purpose of the Act is to establish a transparent and efficient system for screening foreign investments in order to protect:

• the security and public order of the Republic of Croatia,
• the European Union, and
• other EU Member States,

in line with Regulation (EU) 2019/452.

For investors considering Croatia permanent residence by investment, it is important to understand that investment-related residence planning and FDI screening are separate legal regimes.

While certain investments may support a residence application over time, the Foreign Direct Investment Act focuses exclusively on security and public-order review, not immigration status. As a result, an investment structure that appears suitable for residency purposes may still trigger mandatory FDI screening and regulatory approval.

Who Is Exposed Under the FDI Act?

Foreign investors should assess their exposure and prepare if they fall into any of the following categories:

1. Individuals or legal entities from outside the European Union / European Economic Area (EU/EEA)
   (commonly referred to as “third-country investors” under EU law).
2. EU/EEA-based entities that are directly or indirectly controlled by a non-EU/EEA investor, including through holding companies, SPVs, trusts, or multi-layer ownership structures.
3. Direct or indirect investments in Croatian companies that operate (or will be incorporated) in strategic or sensitive sectors, where the investment may affect national security or public order.

In practical terms, the Croatia Foreign Direct Investment Act looks beyond formal legal labels and focuses on economic reality including ultimate ownership, control rights, and actual influence over the business. Using an EU-based vehicle does not automatically exclude an investment from screening if control ultimately rests with a third-country investor.

When Does an Investment Trigger Screening?

A screening application must be submitted when a foreign investment results in:

• the acquisition of 10% or more of shares, stocks, or voting rights, or
• the acquisition of control, whether directly or indirectly.

There is no minimum transaction value under the Croatia Foreign Direct Investment Act. Even relatively small transactions may trigger review once influence thresholds are crossed.

Many foreign investors are surprised by this. Under Croatia’s FDI Act, influence matters more than money. The State is less concerned with how much capital is invested, and more with whether the investor can influence operations, access sensitive data, or affect strategic decisions.

What “Control” Means in Practice (Not Just Shareholding)

The Act does not limit the concept of control to shareholding percentages. Even without a majority stake, veto rights, board appointment rights, shareholder agreements, or strategic arrangements may still be regarded as conferring decisive influence.

As a result, screening risk cannot be assessed by looking at the cap table alone. A proper analysis must examine the full structure of rights and obligations attached to the investment.

Which Companies Are Actually Screened?

Instead of a public blacklist, the Croatia Foreign Direct Investment Act operates on a designation principle.

Competent authorities:

• identify obliged entities within six months of the implementing regulation,
• update the list regularly, and
• formally notify each designated company.

The register of obliged entities is not public: There is no public database investors can rely on to self-assess exposure. A company not subject to screening today may be designated tomorrow without any change to the statute. This makes substance-based legal due diligence essential.

What Types of Transactions Are Covered?

The Croatia Foreign Direct Investment Act applies to a wide range of arrangements, including:

• companies and share acquisitions,
• concessions,
• public-private partnerships,
• free zones, and
• concentrations regulated under competition law.

The FDI Act doesn’t cover state-owned land, and more importantly, non-EU foreigners cannot personally own forest or agricultural land in Croatia due to separate national restrictions.

How the Screening Process Really Work

All screening applications must be submitted to the Ministry of Finance.

Applications must be filed before:

• acquisition or change of a qualifying share,
• acquisition of control,
• court register filings,
• concession or PPP approvals, or
• registration with the Central Depository & Clearing Company (SKDD).

The Commission for the Screening of Foreign Investments issues an opinion, after which the Ministry of Finance adopts the final decision.

Why You Cannot Rely on Silence or Informal Comfort

Croatia’s system does not allow voluntary ex-ante notification or pre-clearance.

At the same time, the Ministry of Finance may initiate screening ex officio, including for unreported transactions or where risks emerge later.

This means not filing does not equal safety. In fact, it may remove the investor’s ability to control the narrative if scrutiny occurs later.

Timing Risk: How Long Deals Can Be Delayed

Once a complete application is submitted:

• Commission opinion: within 90 days
• Ministry decision: within 120 days, extendable to 150 days

These timelines are now hard-law deadlines, not policy guidance. For M&A transactions, they must be reflected directly in SPAs, long-stop dates, and funding schedules.

What Happens If Things Go Wrong

Approval is not permanent.

The Ministry of Finance may reassess and revoke approval if the investor’s conduct later conflicts with the Croatia Foreign Direct Investment Act’s objectives.

Remedies may include:

• mandatory divestment within strict deadlines, and
• restriction of shareholder rights during divestment.

These measures affect asset value, governance, and exit strategy, not just compliance.

Retroactive Risk for Existing Investors

The Act applies to investments made before its entry into force.

Authorities may conduct retroactive screening within three years from 13 November 2025. While explanatory materials suggest focus on high-risk investments, the Act itself does not define scope, procedure, or assessment criteria.

Planning Your Investment Under the Croatia Foreign Direct Investment Act

Before 2025, many foreign investors completed minority investments without screening, relied on private-law documentation, faced no post-closing ownership intervention.

That environment has changed.

Croatia is not anti-investment but unprepared investment is now riskier. The core risk under the Croatia Foreign Direct Investment Act is misjudging exposure, not paperwork.

Local counsel helps investors:

• anticipate whether a target is likely to be designated as an obliged entity,
• structure ownership and control rights defensibly,
• manage ex officio call-ins and retroactive exposure, and
• align deal mechanics, timing, and financing with regulatory reality.

At Mandracchio Capital, we support foreign investors and founders with deal protection, risk mitigation, and long-term legal certainty, including cases where company formation in Croatia is used as the entry point for investment or market access. Our role is to ensure that corporate structure, shareholder arrangements, and regulatory exposure are assessed together, not in isolation, before capital is committed.

Before committing capital or signing transaction documents, it is worth discussing how the FDI screening framework may apply to your specific structure and timeline. Contact us to discuss your investment plan and regulatory exposure.

Frequently Asked Questions

What is the Croatia Foreign Direct Investment Act?

The Croatia Foreign Direct Investment Act establishes a national screening mechanism for foreign investments that may affect Croatia’s national security or public order. It implements EU Regulation (EU) 2019/452 and aligns Croatia with the EU-wide foreign investment screening framework.

What is the purpose of the Croatia Foreign Direct Investment Act?

The Croatia Foreign Direct Investment Act is designed to protect national security and public order in Croatia, the European Union, and other EU member states.
It allows Croatian authorities to review and, where necessary, restrict foreign investments that could pose risks to critical infrastructure, strategic industries, or public interests.

Who is considered a foreign investor under the Act? Who is Affected?

The definition is broad and includes:

Individuals from non-EU / non-EEA countries, Legal entities established outside the EU/EEA, EU or EEA companies that are ultimately controlled by non-EU actors, including foreign public authorities.

Control is assessed based on ownership, voting rights, and decisive influence, not just formal registration location.

When does an investment trigger mandatory screening?

Screening is required when a foreign investor acquires 10% or more of shares or voting rights, gains control, or enters arrangements that confer decisive influence over a Croatian company designated as an obliged entity. There is no minimum transaction value.

What types of businesses are subject to screening?

The Act applies to Croatian companies and entities operating in strategic or sensitive sectors such as energy, transport, healthcare, defence, media, digital infrastructure, ICT, and financial infrastructure. Obliged entities are identified by competent authorities and notified directly.

What needs screening under the Croatia Foreign Direct Investment Act?

• Acquisitions of 10% or more of shares or voting rights in an obliged entity
• Any transaction conferring control or decisive influence, even below the 10% threshold
• Indirect acquisitions, including holding-company or multi-layer ownership structures
• Non-shareholding arrangements (shareholders’ agreements, veto rights, governance rights, management control) that effectively grant control
• Greenfield investments (new operations) and brownfield investments (acquisitions or expansions of existing companies)

Is there a public list of companies subject to the Act?

No. There is no public list or database for investors to self-check. Competent authorities designate obliged entities based on their activities and inform them directly. The list may change over time, which is why legal assessment before a transaction is important.

How long does the screening process take?

Once a complete application is submitted, the Screening Commission issues an opinion within 90 days. The Ministry of Finance then issues its decision within 120 days, which may be extended to 150 days in more complex cases.

Does the law apply to indirect or non-traditional investments?

Yes. The screening regime covers:

• Direct investments (greenfield projects)
• Indirect investments (brownfield acquisitions, holding-company structures)
• Multi-layer ownership structures where control is exercised indirectly