After publishing our Starting a Business in Croatia Handbook, we received a consistent set of follow-up questions from non-EU nationals founders about the areas that cause the most friction once a company is actually up and running.

Company formation is only the first step. In practice, doing business in Croatia raises deeper questions around structure, residency, taxation, employment obligations, banking, and compliance that are often overlooked at the start.

This article focuses on the seven topics founders most often underestimate when doing business in Croatia as a non-EU national, based on real cases, regulatory practice, and the issues that surface after incorporation, not before.

Croatia Is Open to Business, But It Is Rule-Driven

Croatia allows foreign ownership and welcomes international capital, but for non-EU nationals, business activity is closely linked to residency status.

You cannot actively run a Croatian company without holding the correct legal basis to stay and work in Croatia. Short stays may be covered by a visa or visa-free entry, but ongoing management requires a temporary residence permit tied to business activity.

In practice, this means that doing business in Croatia as a non-EU national is not just a commercial decision, it is also an immigration one. Company law, labour law, and residence rules are applied together, not separately.

“I assumed company formation and residency were separate steps, like in the US. In Croatia, they’re not. Once I understood that immigration rules drive everything else, the process finally made sense.”
— Michael R., United States

Choosing the Wrong Structure Is the Most Expensive Mistake

For non-EU founders, structure mistakes often trigger immigration problems, not just tax inefficiencies.

If you intend to actively manage a company, you will generally need:

  • a temporary residence permit for business purposes, and
  • a company structure that satisfies investment and employment thresholds set by Croatian authorities.

In traditional setups, this has often meant:

For founders pursuing residence through business, this effectively becomes a residency by investment or residency-by-business pathway, even if it is not formally labeled as such.

While rules evolve and practice varies, authorities historically assess:

  • whether the investment is substantive,
  • whether local employment is created, and
  • whether the company has real economic activity.

This is why forming a company “on paper only” rarely works for residence purposes and why correcting structure later is costly.

For a deeper overview of the available legal structures, see our guide to 4 types of business: Company formation in Croatia

“We initially set up a company that looked fine on paper, but it didn’t support residency at all. Fixing the structure later cost more than getting it right from the start.”
— Daniel H., United Kingdom

Administration Moves at Its Own Speed

Administrative complexity increases significantly when immigration is involved.

Non-EU founders often deal with multiple authorities simultaneously:

  • the Commercial Court (company registration),
  • the Ministry of the Interior (MUP) (residence permits),
  • the Tax Administration, and
  • in some cases, foreign investment screening bodies.

Each authority operates on its own timeline, and approvals are often sequential, not parallel. Delays are not unusual, especially when documents must be reviewed for both corporate and immigration compliance.

This is why founders should never assume that forming a company automatically grants the right to stay or work in Croatia.

Directors, Salaries, Contributions: Where Costs Actually Come From

For non-EU directors, salary and contributions are not just a tax issue, they are often a residency condition.

When applying for a temporary residence permit based on business activity, authorities typically assess:

  • whether the director receives a lawful salary,
  • whether mandatory pension and health contributions are paid, and
  • whether employment conditions align with Croatian labour standards.

These obligations apply regardless of profitability. Even early-stage companies must comply.

This is one reason why some non-EU founders underestimate the fixed monthly cost of doing business in Croatia. Contributions fund:

  • pension insurance,
  • health insurance, and
  • unemployment coverage.

They are mandatory and closely monitored.

Tax Reality

Tax compliance in Croatia operates on two levels for non-EU founders:

  1. Corporate taxation (corporate income tax, PDV where applicable)
  2. Personal taxation and social security, tied to director status and residence

Misalignment between immigration status and tax filings is a common red flag.

Authorities expect consistency between:

  • declared business activity,
  • residence basis, and
  • tax and contribution payments.

This is why “optimising taxes” without considering immigration consequences often backfires.

“Trying to optimise taxes without thinking about residency backfired quickly. The system expects consistency across everything: salary, filings, and permits. A recommendation to consult Mandracchio Capital helped us correct course before the situation escalated.”
— Andrew K., United States

Banking, Cash, and Moving Money

Foreign founders should also be aware that source of funds scrutiny has increased.

Banks and authorities may review:

  • initial investment funds,
  • shareholder loans, and
  • cross-border transfers

This scrutiny has intensified following the introduction of foreign investment screening rules, which may apply even to indirect or non-traditional investment structures.

For certain sectors or ownership profiles, prior notification or approval may be required before completing an investment.

Not Everything Is a Deductible Expense

One of the most common surprises for non-EU founders doing business in Croatia is how narrowly business expenses are interpreted.

In principle, costs must be directly connected to business activity. In practice, they must also meet formal invoice requirements, intent alone is not enough.

To deduct an expense in Croatia:

  • The invoice must be an R1 invoice
  • It must include:
    • the company’s full legal name
    • registered business address
    • OIB (Croatian tax number)

Without these elements, the expense is usually not deductible, even if it was clearly business-related.

“In my home country, business intent was enough. In Croatia, the invoice format matters more than the reason you spent the money.”
— Laura T., Canada

Commonly Misunderstood Expenses

Foreign founders frequently assume that expenses accepted in their home country will be treated the same way in Croatia. That is often not the case.

Areas that cause the most confusion include:

  • Home office costs
    Rent, utilities, internet, and electricity are generally not deductible unless the contracts are in the company’s name and the arrangement is formally documented.
  • Foreign SaaS and software tools
    Subscriptions to foreign platforms are deductible only if invoices include correct Croatian company details and OIB. Many international providers do not issue compliant invoices by default.
  • Mixed-use expenses
    Phones, laptops, vehicles, and travel used partly for personal purposes face strict limitations. Partial deductions may be possible, but only with clear documentation.

For non-EU founders, inconsistencies between declared expenses, company activity, and residence status can also raise compliance questions.
Never assume an expense is deductible simply because it is “business-related.” Always confirm with your accountant before booking or claiming it.

This is one of the simplest ways to avoid unnecessary risk while doing business in Croatia.

Doing Business in Croatia Without Structure Is a Risk You Don’t Need

Doing business in Croatia is not about shortcuts. It’s about alignment:

  • Between business structure and residence
  • Between tax planning and operations
  • Between expectations and administrative reality

At Mandracchio Capital, we work with non-EU founders who want to build in Croatia with certainty, not trial and error. Our role is to structure companies that work legally, financially, and strategically before problems arise.

If you’re considering doing business in Croatia and want clarity before committing, a structured review early on can save months and thousands later.

Your Legal Partner for Doing Business in Croatia

At Mandracchio Capital, we support international clients looking to build, move, or expand their businesses in Croatia with clarity and regulatory confidence. With 500+ projects supervised, over €500 million in company value established, and a network of 100+ expert advisors, we act as a reliable partner for HNIs, investment funds, corporations, and senior executives, coordinating trusted Croatian lawyers and tax consultants to ensure your company setup, compliance, and documentation are handled correctly so your business enters Croatia with precision.

FAQs: Doing Business in Croatia as a Non-EU National

Can I get residency in Croatia by starting a business?

Croatia does not offer a formal “golden visa” or automatic residency by investment.
However, non-EU nationals may qualify for temporary residence based on business activity if the company is properly structured, active, and meets legal and economic requirements. Authorities assess substance, not just incorporation.

Is company formation alone enough to live and work in Croatia?

No.
Forming a company does not automatically grant the right to stay or work in Croatia. To actively manage or run the business, non-EU founders typically need a temporary residence permit tied to business activity, along with compliance on salary, contributions, and employment rules.

What business structure is most commonly used by non-EU founders?

Most non-EU founders use a d.o.o. (limited liability company) because it is the most widely accepted structure for:

  • active business operations
  • hiring employees
  • supporting residence applications

Other structures exist, but not all are suitable for residency or long-term operations.

Do I need to hire Croatian employees to qualify for residence?

In traditional business-based residence setups, authorities often assess whether the company creates local economic value, which may include local employment.
Requirements can vary based on structure, timing, and regulatory practice, which is why planning before incorporation is critical.

How long does it take to set up a company and residence permit?

Timelines vary, but non-EU founders should expect sequential processes, not instant results.

In practice:

  • company formation may take several weeks
  • banking and compliance can add time
  • residence permits are processed separately and may take additional months

Delays are common when immigration and corporate approvals overlap.

Do I have to pay myself a salary as a company director?

Yes, in most cases.
Directors are generally required to receive at least a minimum lawful salary, and mandatory pension and health contributions must be paid. These obligations apply even if the company is not yet profitable.

Is Croatia a low-tax country for business owners?

Croatia is not a tax haven.
Corporate tax, VAT (PDV), and social contributions apply, and authorities expect consistency between declared business activity, residence basis, and tax filings. Aggressive tax optimisation without considering immigration consequences often causes problems.

Are business expenses easy to deduct in Croatia?

No.
Expenses are deductible only if they meet strict formal requirements, including proper R1 invoices with the company’s legal name, address, and OIB. Many costs that are deductible in other countries are restricted or treated differently in Croatia.

Does Croatia screen foreign investments?

Yes.
Croatia has implemented foreign direct investment (FDI) screening rules aligned with EU regulations. Certain investments, sectors, or ownership structures may require notification or approval, even if the transaction value is low.

Is professional legal help really necessary?

For non-EU founders, yes.
Doing business in Croatia involves overlapping company law, immigration law, tax, and compliance rules. Most issues arise not from ineligibility, but from poor structure or incorrect assumptions at the start. Early professional guidance often prevents costly corrections later.