9.4.

2013

IP PROJECT

CROATIA

IP Project | Croatian Team

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Content:
1. Environment: ....................................................................................................................................... 3 1.1. Geographical: ............................................................................................................................... 3 1.2. Political: ........................................................................................................................................ 3 1.3. Economy: ...................................................................................................................................... 4 Capital Gains .................................................................................................................................... 5 Residence ........................................................................................................................................ 5 Personal Credits and Deductions .................................................................................................... 6 Deduction of Tax at Source ............................................................................................................. 6 Social Security.................................................................................................................................. 6 1.4. Sociological ................................................................................................................................... 7 1.5. Technological:............................................................................................................................... 8 2. Service provider ................................................................................................................................... 9 3. Services and good practices ................................................................................................................ 9 4. Customers.......................................................................................................................................... 10 5. Delivery process (our perspective on digital platform) ..................................................................... 11 6. Relationship ....................................................................................................................................... 13 7. SWOT ................................................................................................................................................. 16

1. Environment:
1.1. Geographical:

Croatia is located in Central and Southeast Europe, bordering Hungary to the northeast, Serbia to the east, Bosnia and Herzegovina to the south-east, Montenegro to the south-east, the Adriatic Sea to the south-west and Slovenia to the northwest. It lies mostly between latitudes 42 and 47 N and longitudes 13 and 20 E. Part of the territory in the extreme south surrounding Dubrovnik is a practical exclave connected to the rest of the mainland by territorial waters, but separated on land by a short coastline strip belonging to Bosnia and Herzegovina around Neum. The territory covers 56,594 square kilometres (21,851 square miles), consisting of 56,414 square kilometres (21,782 square miles) of land and 128 square kilometres (49 square miles) of water. It is the 127th largest country in the world. Elevation ranges from the mountains of the Dinaric Alps with the highest point of the Dinara peak at 1,831 metres (6,007 feet) near the border with Bosnia and Herzegovina in the south to the shore of the Adriatic Sea which makes up its entire south-west border. Insular Croatia consists of over a thousand islands and islets varying in size, 48 of which are permanently inhabited. The largest islands are Cres and Krk, each of them having an area of around 405 square kilometres (156 square miles).

1.2. Political:
Croatia is a unitary democratic parliamentary republic. With the collapse of the ruling communist party in SFR Yugoslavia, Croatia adopted its present constitution in 1990 and organised its first multi-party elections. It declared independence on 8 October 1991 leading to the breakup of Yugoslavia and the country was internationally recognised by the United Nations in 1992

The President of the Republic is the head of state, directly elected to a five-year term and is limited by the Constitution to a maximum of two terms. In addition to being the commander in chief of the armed forces, the president has the procedural duty of appointing the prime minister with the consent of the parliament, and has some influence on foreign policy. The most recent presidential elections were held on 10 January 2010, when Ivo Josipovi won. He took the oath of office on 18 February 2010. The government is headed by the prime minister, who has four deputy prime ministers and 17 ministers in charge of particular sectors of activity. The executive branch is responsible
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for proposing legislation and a budget, executing the laws, and guiding the foreign and internal policies of the republic. Since 23 December 2011, the prime minister of the government has been Zoran Milanovi. The is a unicameral legislative body. A second chamber, the House of Counties, set up in 1993 pursuant to the 1990 Constitution, was abolished in 2001. The number of Sabor members can vary from 100 to 160; they are all elected by popular vote to serve four-year terms. The sessions of the Sabor take place from 15 January to 15 July, and from 15 September to 15 December. The two largest political parties in Croatia are the Croatian Democratic Union and the Social Democratic Party of Croatia. Croatia has a three-tiered judicial system, made up of the Supreme Court, County courts, and Municipal courts. The Constitutional Court rules on matters regarding the Constitution. In addition there are misdemeanour courts, commercial courts and administrative courts. Law enforcement in Croatia is the responsibility of the Croatian police force, which is under the control of the Ministry of the Interior. In recent years, the force has been undergoing a reform with assistance from international agencies, including the Organization for Security and Co-operation in Europe (OSCE) since its mission to Croatia began on 18 April 1996.

1.3. Economy:
Currency: Hrvatska kuna (HRK) Currency Dollar Euro Litas Kuna per one unit of foreign currency
5,813733 7,582271

2.1766

Inflation: 3.3%

Taxation in Croatia:

Individual Income Tax: Croatia's individual income tax rates for 2012 are progressive, from 12% to 40%.

Personal annual tax rates 2012 (HRK) Income (HRK) % 1-26,400 12 26,400-105,600 25 over 105,600 40

Corporate Tax: Croatia's corporate tax rate for 2012 is 20%. Certain small companies pay a lower corporate tax rate. Capital Gains Capital Gains: Capital gains of companies are added to the regular income and are taxable at 20% rate. Individuals: Pay 15%-40% for their capital gains. Residence A foreign company is resident if incorporated in Croatia or have its actual management in Croatia. An individual is resident when having a permanent residence in Croatia or when having a place of abode for more than 183 days in a tax year. Residents pay tax on their worldwide income. Non residents pay tax only on Croatia source income.

Croatia Tax Deductions

Losses are carried forward for 5 years. There is no carry back of losses. Depreciation is deducted using the straight line method for tangible and intangible assets. The depreciation rate for buildings is 5%,for machinery 25% and 50% for computers, software and cellolar phones. There is no company consolidation for tax purpose, each company has to file separately.

Thin capitalisation rules relate to interest expenses. Interest paid to a shareholder having 25% or more of the voting rights and his loan to equity ratio exceeds 4:1 is not deductible. Transfer pricing rules in Croatia are in accordance with the OECD guidelines.

Personal Credits and Deductions For Croatian residents there is a basic deduction of HRK 21,600 per year. The sum is increased for a dependent spouse and dependent children, ranging from HRK for the first child and HRK 21,600 for the third child. Deductions are also permitted for payments to Croatian pension plans, insurance and cost of purchase of the first residence up to HRK 12,000 per year. 2% of donations are deductible, subject to a ceiling. For companies, dividend income is tax exempt. Deduction of Tax at Source In Croatia tax is deducted at source from the following payments to non residents: Dividend- 0%. Interest- 15%. Royalties- 15%. Branch remittance to head office- 0%. Social Security The contributions by the employer and the employee are subject to ceiling defined by law. Employer: 17.2% of the gross salary. Employee: 20% of the gross salary. (pension).

Other: High income country (World Bank)

GDP (PPP) - Total - Per capita GDP (nominal) - Total - Per capita

2011 estimate $80.334 billion $18,191 2011 estimate $63.842 billion $14,457

1.4. Sociological
Population: Population: Growth rate: Birth rate: Death rate: Life expectancy: male: female: Fertility rate: Infant mortality rate: Net migration rate: Age structure 0-14 years: 15-64 years: 65-over: Sex ratio At birth: Under 15: 15-64 years: 65-over: Nationality Nationality: Major ethnic: Minor ethnic: Language Croatian at national level; Czech, Hungarian, Italian, Ruthenian, Serbian and Slovakian are in official use in some local government areas Croatian, languages of the minorities
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4 290 612 (31 March 2011) 7.6 per 1,000 pop. (2011) 9.4 per 1,000 pop. (2011) 11.6 per 1,000 pop. (2011) 71.1 years (2001) 78.1 years (2001) 1.45 children born/woman (2010) 6.06 deaths/1,000 infants (2012 est.) -0.3 migrant(s)/1,000 pop. (2009)

15.3% (2009) 67.5% (2009) 17.3% (2009) 1.06 male(s)/female 1.06 male(s)/female 0.99 male(s)/female 0.64 male(s)/female noun: Croatian(s) adjective: Croatian Croats (90.4%) (2011) Serbs (4.36%) (2011) and others <2% individually (2011)

Official:

Spoken:

Education:
Level education: Population Unemployeed Phd and Masters 159.577 22.728 Bacc. 108.694 16.615 High School 1.517.00 208.161

Since the Bologna process, the levels of expertise in high education are:

Bachelor of Science and Bachelor of Arts (prvostupnik) Master of Science and Master of Arts (magistar) Doctor of Science and Doctor of Arts (doktor)

1.5. Technological:

By September 2011, Croatia had completed more than 1,100 kilometres (680 miles) of motorways, connecting Zagreb to most other regions and following various European routes and four Pan-European corridors. The busiest motorways are the A1, connecting Zagreb to Split and the A3, passing eastwest through northwest Croatia and Slavonia. A widespread network of state roads in Croatia acts as motorway feeder roads while connecting all major settlements in the country. The high quality and safety levels of the Croatian motorway network were tested and confirmed by several EuroTAP and EuroTest programs. Croatia has an extensive rail network spanning 2,722 kilometres (1,691 miles), including 985 kilometres (612 miles) of electrified railways and 254 kilometres (158 miles) of double track railways. Avioni- There are international airports in Zagreb, Zadar, Split, Dubrovnik, Rijeka, Osijek and Pula. As of January 2011, Croatia complies with International Civil Aviation Organization aviation safety standards and the Federal Aviation Administration upgraded it to Category 1 rating. The busiest cargo seaport in Croatia is the Port of Rijeka and the busiest passenger ports are Split and Zadar There are 610 kilometres (380 miles) of crude oil pipelines in Croatia, connecting the Port of Rijeka oil terminal with refineries in Rijeka and Sisak, as well as several transhipment terminals. The system has a capacity of 20 million tonnes per year
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Croatian production of energy sources covers 85% of nationwide natural gas demand and 19% of oil demand. In 2008, 47.6% of Croatia's primary energy production structure comprised use of natural gas (47.7%), crude oil (18.0%), fuel wood (8.4%), hydro power (25.4%) and other renewable energy sources (0.5%). In 2009, net total electrical power production in Croatia reached 12,725 GWh and Croatia imported 28.5% of its electric power energy needs. The bulk of Croatian imports are supplied by the Krko Nuclear Power Plant, 50% owned by Hrvatska elektroprivreda, providing 15% of Croatia's electricity.

2. Service provider
One of the most important tasks of the Chamber is the improvement of economic cooperation with foreign countries. This is achieved through various activities aimed at increasing the exchange of goods and services, and also at making improvements in all other forms of economic co-operation with business actors abroad. Competitive advantages: valuable informations, flexibility, awarness of competitors, better market research, HRM Culture: Open to new knowlledge and ways of doing things which can help them improve their business. What we need better infrastructure, better education regarding international management, better work culture, more stratigic planing, improving products

3. Services and good practices

In Your opinion, what are the most important activities of CCC in supporting the Croatian SME exporters? Provision of information about export market Presentation of Croatian exporters abroad Fostering the cooperation between Croatian SMEs and foreign business partners Education programs about doing business in foreign markets Legalization of documents in foreign trade operations (ATA carnets, permits, certificates of origin, etc.) Publications and practical guidelines on exporting Other 17 (47.22%) 16 (44.44%) 21 (58.33%) 9 (25.00%) 6 (16.67%) 14 (38.89%) 3 (8.33%)
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Extent of CCofC's activities that prepare SME's for EU market

Education about EU Funds in the internationalization of SME's Financial supports Publications Conferences Seminars Workshops

0
Full Extensive

3
Low

10

Somewhat

Very low

4. Customers
Main objection of our toolkit is to full fill all the needs of all SMEs. Regarding the size and their range of activities there are different needs for different categories. Needs that we perceive as important are the following: Bureaucracy information all needed information that all SMEs need for entering the foreign market Obtaining information about all SMEs that want to share their information with other SMEs from all over the world, throuigh the toolkit of CofC, that is a middle man for interacting with those SMEs from other countries The SMEs should be categorized by their range of activities, so that all enterprises from that range and size are aware of their competitors. Legal information about laws, regulations and taxes realated to the work of SMEs and about all the papers necessary for the foreign market. Communication need for an open line of communication between all SMEs and the CofC, so it can provide more information for export.
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Networking more networking means more chances for gatherings and distribution of certain informations about products, services and strategies, that are crucial for all SMEs to succeed. Potential buyers first and foremost, big buyers that are going to be attracted by the new laws in the EU and all the benefits that follow.

5. Delivery process (our perspective on digital platform)

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6. Relationship

News related to EU publishing media

other newsletter conferences brochures press website e-mail 0 2 4 6 8 10 12 14 14 16 18 20 2 18 10 2 6 11

CCofC's website updates regarding EU

Full

Extensive

Somewhat

Low

Very low 0 2 4 6 8 10 12

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Do you agree that Croatian Chamber of Commerce (CCC) implements program guidelines for the development of entrepreneurship vital for the SMEs expansion into foreign markets? I do not agree at all I do not agree Neither agree nor disagree I agree I completely agree 13 (36.11%) 5 (13.89%) 11 (30.56%) 5 (13.89%) 2 (5.56%)

In Your opinion, what are the most important activities of CCC in supporting the Croatian SME exporters? Provision of information about export market Presentation of Croatian exporters abroad Fostering the cooperation between Croatian SMEs and foreign business partners Education programs about doing business in foreign markets Legalization of documents in foreign trade operations (ATA carnets, permits, certificates of origin, etc.) Publications and practical guidelines on exporting Other 17 (47.22%) 16 (44.44%) 21 (58.33%) 9 (25.00%) 6 (16.67%) 14 (38.89%) 3 (8.33%)

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CCC foreign subsidiaries can assistyour business in foreign markets in the following segments? Monitoring the foreign business environment and informing the interested stakeholders Provision of assistance in foreign market entry and helping with export procedures Subsidy for trade show attendance Finding potential partners and organizing business meetings Other 15 (41.67%) 16 (44.44%) 16 (44.44%) 21 (58.33%) 4 (11.11%)

Do you believe that the support and assistance provided by the Croatian Chamber of Commerce (CCC) are crucial for your business? I do not agree at all I do not agree Neither agree nor disagree I agree I completely agree 9 (25.00%) 11 (30.56%) 9 (25.00%) 4 (11.11%) 3 (8.33%)

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7. SWOT
STRENGHTS WEAKNESSES

Valuable information Flexibility Awareness of competitors Better market research Human resources

OPPORTUNITIES Quality seminars Clusters EU market Laws Subsidies and incentives International networking Market openness

Human resources Poor infrastructure Absence of important skills Bad work culture Lack of planning Undeveloped product or service Lack of adaptation to new trends THREATS

Laws Egress from CEFTA and entering EU Competitors More expensive inputs Rapid technological advances Political peace and stability

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