A sole proprietorship (craft business) is a legally regulated form of business intended for individuals who wish to provide certain services or products. In Croatia, there are three main types of sole proprietorships:
- Free sole proprietorship (slobodni obrt) – no special qualifications are required to carry out this type of business;
- Tied sole proprietorship (vezani obrt) – opening this type requires proof of professional qualifications, a secondary vocational education, or a master craftsperson’s exam;
- Privileged sole proprietorship (povlašteni obrt) – this type requires a special permit or license issued by the competent ministry or authority, depending on the activity.
It is important to note that a lump-sum taxed sole proprietorship (paušalni obrt) in Croatia is not a separate category of sole proprietorship (like free, tied, or privileged), but rather a method of taxation. Lump-sum taxation can be applied to any type of sole proprietorship (free, tied, or privileged), provided that the business meets the criteria for lump-sum taxation under the Personal Income Tax Act.
Lump-sum taxation is available to sole proprietors whose annual revenue does not exceed a certain threshold (currently around 300,000 HRK per year) and who do not employ more than 10 employees. This option simplifies business operations, as lump-sum sole proprietors are only required to keep a basic turnover record and are not obliged to submit complex tax returns.
To register a sole proprietorship (craft business), you will need to submit several important documents, including:
- Proof of identity: a copy of an ID card or passport;
- Proof of compliance with health requirements (for certain activities, such as hospitality services);
- Proof of the right to use business premises: when a specific premises is required to carry out the activity (e.g. retail or hairdressing services);
- Proof of professional qualifications for tied sole proprietorships: a master craftsperson’s exam or relevant professional certification;
- Work permit for foreign nationals: for citizens from outside the European Economic Area.
Establishing a sole proprietorship (craft business) involves several fees:
- Administrative registration fee amounts to €33.18.
- Fee for issuing the craft license (obrtnica) costs approximately €26.54.
You can register your sole proprietorship either by visiting the competent office in person or via the e-Obrt service, which enables electronic submission of the application. This option is particularly convenient as it saves time and eliminates the need to visit an office in person.
After your sole proprietorship (craft business) is registered, you must notify the following authorities:
- Tax Administration (Porezna uprava): within eight days of starting your business;
- Croatian Pension Insurance Fund (HZMO) and Croatian Health Insurance Fund (HZZO): registration must be completed within 24 hours, and registration with HZMO automatically forwards the information to HZZO.
