It’s simple – don’t.
Just kidding, congratulations on your entrepreneurial spirit and get ready for a whole lot of bureaucracy and paperwork.
First things first – by obrt I mean “sole proprietorship” (The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts, says Entrepreneur). I’m well aware that obrt can mean craft or trade (portor translates it as “crafts business”, which is ok), but in my humble opinion “craft” can be somewhat misleading because it mostly refers to skilled professions, mostly manual, and “trade” is too wide. So, just to make things clear, I mean “sole proprietorship” when I say obrt, but obrt is way shorter, so I’ll use that,
Part 1 – Incentives for Self-Employment
First thing you need to do is check if you qualify for any of the incentive programs by HZZ (Hrvatski zavod za zapošljavanje, Public Employment Service). A series of active labour market policy measures have been implemented, aimed at unemployed persons who are disadvantaged in the labour market, and at employers that need assistance with preservation of jobs.
The HZZ has also implemented active labour market policies which stimulate employment, self-employment, specialization, education, training, occupational training, participation in public works programmes of specific target groups, preservation of jobs with employers in difficulties and seasonal workers.
Check mjere.hr to see if you qualify for any of the measures.
Obrt is within the self-employment category, so I’ll guide you through the process.
You have to apply for the measures BEFORE opening your business, so keep that in mind. There are no exceptions, I do mean before – you can apply for the measures on the 14th and then open an obrt on the 15th, but it can’t be the other way around. This is because you’re automatically removed from the unemployed register as soon as you open an obrt, and the main criterion you need to fulfil is being listed in the HZZ’s records as an unemployed person.
Now, let the paperwork nightmare commence.
First, you need to fill out the 15-page business plan available here: here You need to describe your idea (into detail), prove that you’ve done your research and that your business will be viable, state what your expenses are going to be and how much profit you estimate you’re going to make.
Two things to keep in mind here:
1) You won’t just get the money and spend it on whatever you want, you actually need to plan your entire year ahead. The estimate needs to include exact costs and offers you’ve found online. Let’s say you want to buy a laptop – you need to find it online, put the exact price in the cost estimate and then when your year has passed, you need to have proof that you did in fact buy that laptop. The allowed price fluctuation is around 500 kn, so if you stated that you intend to buy a 5,000 kn laptop and you end up buying an 8,000 kn model, it won’t work and you’ll have to pay back the difference. Do your research well.
2) The amount does not cover VAT, so whatever you intend to buy, you’re going to have to pay a fraction of its price, which, if you intend to buy a 15,000 kn machine, is not a negligible amount.
When it comes to eligible costs, they include insurance contributions for 11 months, which is great and it means that you’ll only have to worry about how you’re going to pay your taxes for a month. They include machines, IT equipment, tools, book-keeping services, trainings, website creation, office furniture etc. Of course, all of the above has to be connected to your main activity, so you can’t buy a combine harvester if you’re a tourist guide. Everything you do buy has to be new, and, unfortunately, a mobile phone does not constitute an eligible cost.
Ineligible costs include VAT, raw material, reparations, subletting, etc.
See all eligible and ineligible costs and other documents and forms you need here.
The maximum amount you can get is 35,000 kn, but you can apply for less. Great news is that you can get an additional 45,000 kn if you decide to take on an employee and provide professional training. The 45,000 kn amount should be used for your employee’s pay check.
There are a few additional forms you need to provide, as well as a CV, and a letter of recommendation if you already have a future business partner or an associate.
Consider visiting your local enterprise office (in Zagreb it’s http://plaviured.hr/) to find out more information.
Part 2 – Opening your Sole Proprietorship (obrt)
Part 2 is in no way easier nor does it include filling in fewer forms.
Before you start, you might consider finding out more on crafts businesses / sole proprietorships here, find locations where you can register here and read all the legal stuff here.
First thing is coming up with a name. It actually doesn’t need to be a unique or original one (although it doesn’t hurt), but there can be numerous sole proprietorships with the same name, as long as the owners and addresses are different.
The name consists of Name + activity + owner, for example
Tradukt, za prevoditeljske usluge, vl. Ivan Horvat.
Then, you choose your main activities and up to 17 other side activities that you need to classify based on the list here and the description of activities here.
Sole proprietorships can be free, tied, and privileged proprietorship according to profession; tied and privileged proprietorships are those only master craftsmen can register (for example photographers, carpenters, etc.). All the necessary forms can be found here here .
Then, one thing I didn’t do, but you can, because it makes your life simpler, is register via e-Craft.
portor.hr has a helpful guide; you need:
• copy of ID card
• copy of passport, Certificate of Registered Residence in the Republic of Croatia or copy of ID card if the person is permanent resident of the Republic of Croatia
• proof of meeting the special health conditions if provided for by the law
• evidence proving the right to use the premises if premises are required for running a crafts business
• for associated crafts businesses: proof on vocational qualifications, Master Craftsmen’s Certificate, Vocational Certificate (if the person filing an application does not meet the special condition on vocational qualifications, adequate secondary school qualification, or master craftsman’s exam he can run associated crafts business provided such a person hires a full time employee meeting the stipulated conditions)
• fill out the forms available at the state administration office or downloaded the forms (available at the link here )
• make payments for crafts business registration and for the costs of issuing the Trade Licence (the number of account and amounts available at the state administration office, but rougly 250 kn)
Then, you collect the Decision on Entry in the Register of Craft Business at the State Administration Office (if the application is filed by e-Crafts the Decision will be sent to the citizen’s personal mailbox) which you need to make an official stamp (which costs 160-180 kn).
You’ll need the official stamp and the copy of the Decision on Entry for all further steps, so keep it with you at all times.
Next, you open a giro account in a commercial bank (costs 100-150 kn, lasts for an hour). You can use the account for personal services as well (even though it’s a business account) if you decide to make your business a “paušalni obrt” (with a flat rate VAT).
You’re almost there! You have eight days to do the following:
You first need to register at the Croatian Institute of Pension Insurance (HZMO) (www.mirovinsko.hr) with M-11 Form and M-1 P Form.
Then you’ll get a document there which you take to the Croatian Health Insurance Institute (HZZO) (www.hzzo.hr/en/) with Form 1 and Form 2.
And finally!
You need to register with Tax Administration (Tax Administration Branch competent for the registered address of the business) for the purpose of entering the craft business into the Register of Taxpayers. Type in this RPO Form an take it to the Tax Administration. Consider registering a “paušalni obrt” because it means that you’ll have a flat-rate VAT scheme (if you earn less than 230,000 kn a year). Read more about it here. The flat-rate scheme makes book keeping simpler because you don’t need an accountant, you just need to keep a turnover document in a table like this here.
And that’s it! I know it looks complicated, and it really is :D, but it’ll be fine, I promise.
I hope you won’t run into too many uhljebs along the way.
Good luck!
