SETTING UP A BUSINESS IN CROATIA OR MONTENEGRO

When we started our venture, we were genuinely undecided about whether to begin our eco-tourism/property business in Croatia or Montenegro. After all, setting up a business in a non-EU country can be difficult, even if you speak the language. Bureaucracy can be a tricky thing to negotiate. After consulting the relevant local lawyers, I have, therefore, composed this brief guide so people can see exactly why we’ve plumped for the latter rather than the former.

How much will it cost me to start up a company?
Croatia - €3,000 of working capital plus legal and accountancy fees of c€1500/annum
Monte - €500 and accountancy fees of €480/annum

How long will it take to process all the paperwork?
Croatia – months
Monte – 3 days.

I also need a car as part of the business – can I buy one locally?
Croatia – yes, but only if you buy it through the company. And they’re bloody expensive. €1000 might just buy you a dilapidated, 30 year old Renault 4.
Monte – yes, but they’re quite expensive. €1000 might just buy you a dilapidated, 20 year old Renault 4. However, you can buy it without having to set up a company first.

What if I buy a car elsewhere? What’ll it cost import it?
Croatia – 110% import duty. And the car has to be less than five years old.
Monte - €100 for the new registration plate, 7 years old max.

If I want to set up a Tourism business, is there anything else I need to do?
Croatia – yes. You must employ a local person with a Tourism qualification, full time.
Monte – nope.

I’ve found this lovely spot for the business. Can I get permission to sensitively renovate this old stone house in a natural beauty spot right on the boundaries of a National Park?
Croatia – no. Nein. Ne. Non.
Monte – sure

Alright, so if I set up a company, presumably I’m then free to run my business?
Croatia – Nope. We might just decide to change the laws regarding foreign-owned companies, arbitrarily taking away your right to automatic residency. From January 2008 you’re only be able to stay in the country for 6 months in any year.
Monte – Yep.

So what you’re saying is that now, I can only have a business for half a year at a time, even if I’ve been established here for years? What if I want to run a business for longer than 6 months?
Croatia – You must pay a Croatian to run it for you in your absence. Or you can leave and go somewhere else.
Monte – You can, don’t be ridiculous. Why would any country have laws like that?

Excuse me. What about if I – a foreigner – have bought a house out here, retired here, have lived out here for years on a residency visa and don’t live anywhere else? Am I not allowed to stay like I have done for the last seven years?
Croatia – No, you’re not. You’ll have to find somewhere else to go six months of the year.
Monte – I just don’t understand the question.

Actually, say I just want to rent my house out to tourists without starting an actual company. I can do that, right?
Croatia – not if you’re a foreigner, you can’t. We’ll take your 3% purchase tax thanks very much, but don’t think that gives you the same rights as us. You will need a licence to rent out your house. Which as a foreigner you are not eligible to apply for.
Monte – of course.

But that’s just discrimination, isn’t it? OK, so let’s say I’m not renting my house out, but I’m having friends to stay. Surely that’s ok?
Croatia – sorry, but no. You and immediate family only. The only way you can have anyone else to stay is if you start up a Croatian company or pay 25% of your rental income to a Croatia-based agency. And that’s on top of 25% income tax…
Monte – You can have whoever you want, whenever you want to stay. It’s your house!

So if I jump through all the necessary hoops, and get all my paperwork in order, how much corporation/income tax will I have to pay at the end of the day?
Croatia – 25% and rising depending on income
Monte – 9% flat rate

If a soupçon of sarcasm has crept into my prose, I apologise. In the space of the last two weeks we’ve had one country welcome us with open arms whilst the other – with whom we thought we were best buds – gives us a hefty kick in the swingers. Read on for details…