Legal Entity in Croatia vs. Native Teams’ EOR Solutions

The flat-rate craft model in Croatia has been attractive for many remote workers, especially with its promise of tax benefits, reduced expenses, and lower operational costs. However, the recent actions by the Croatian authorities have left many of these individuals facing uncertainties about their employment status and exposed to hefty repayments. 

As an all-in-one platform offering legal employment solutions, Native Teams understands the challenges of navigating the employment regulations in Croatia. Keep reading to discover a more cost-effective alternative to opening your own legal entity and navigating the complex tax regulations of the model.

Opening a legal entity in Croatia

In response to the challenges encountered with the flat-rate craft model, many remote workers in Croatia were left with no choice but to establish their own legal entities or find an alternative method to maintain work relationships with companies. 

Below, we’re exploring Croatia’s legal entity model and the most significant advantages and drawbacks for flat-rate craft owners opting for their own legal entities.  

Advantages of opening a legal entity in Croatia

Opening your own legal entity (such as d.o.o. or j.d.o.o.) in Croatia can provide a better legal structure and financial opportunities for your business. The following are the most significant advantages:

• Business legitimacy – By establishing a legal entity, individuals give their business a legal structure that enhances credibility and trust with both clients and authorities.
• Access to financial support – Having a legal entity opens doors to many financial services to provide capital for business expansion and development.
• Potential tax benefits – While there are many tax implications associated with opening a legal entity, there may also be opportunities for tax deductions and incentives that can minimise tax liabilities over time. 

Disadvantages of opening a legal entity in Croatia

While a legal entity in Croatia comes with its own set of benefits, there are also many challenges and disadvantages that require expert guidance and support:

• Difficult bureaucracy – Establishing a legal entity in Croatia imposes difficult administration and navigating through complex regulations, which can consume a lot of valuable time and resources.
• Business expenses – A legal entity in Croatia also imposes a variety of expenses, such as costs for opening the company, initial capital for liquidating the company, bookkeeping costs, bank fees, chamber of commerce fees, and others, which can impact the financial profitability of the business.
• Financial limitations – Both flat-rate crafts and legal entities in Croatia have a yearly earning limit of €40.000. Once this threshold is exceeded, individuals must enter the VAT system, with a standard VAT rate of 25%, which imposes additional financial burdens. 

What are the Native Teams’ EOR solutions?

Native Teams’ EOR solutions can help individuals who struggle with the challenges of flat-rate crafts in a fully compliant way. 

With Native Teams as your Employer of Record, you can get legally employed while still working for clients and companies of choice. By being legally employed through our legal entities, you’re also receiving an employment contract crafted per Croatia’s labour laws, as well as access to all the mandatory benefits specific to the country. 

With our EOR solutions, you can enjoy a fully compliant business framework without going through the hassles of Croatian legal and tax regulations. 

Advantages of Native Teams’ EOR solutions

Getting legally employed through Native Teams’ EOR solutions can open many opportunities for individuals who struggle with the recent flat-rate crafts regulations:

• No administration – Native Teams’ EOR solutions completely eliminate the burdens of administration, such as payroll management and tax filings, allowing you to focus on your business more efficiently.
• Tax optimisation – With our EOR solutions, you can take advantage of tax optimisation strategies and tax allowances, helping you minimise your tax liabilities while staying compliant with Croatian tax laws. 
• Increased net earnings – By reducing your administrative burdens and utilising tax incentives, you can increase your net income and maximise your earning potential.
• Local tax expertise – Native Teams’ local tax and legal teams will provide expert guidance and support to ensure that you’re compliant with local requirements and minimise the risks of costly mistakes. 
• Compliance with local laws – Native Teams’ EOR solutions are completely legal and fully compliant with Croatian laws, providing you with peace of mind while growing your business.

Who can benefit from our EOR solutions?

Our EOR solutions are created to meet the needs of individuals who need a legal structure for their business operations while staying compliant with Croatian laws.

I. Former flat-rate craft operators

Individuals who have previously operated under the flat-rate craft model can utilise Native Teams’ EOR solutions to secure “employed”  status while maintaining their flat-rate craft business. Our EOR solutions provide a legal framework which ensures that you can continue flat-rate craft operations while being in compliance with the most recent Croatian legislation. 

II. Croatian legal entity owners

Native Teams’ EOR solutions can also be beneficial for legal entity (d.o.o. and j.d.o.o.) owners and individuals with higher incomes.

Legal entity owners whose yearly earnings don’t exceed the VAT limit of €40.000 can compliantly obtain “employed” status while still keeping their legal entities. By being legally employed through Native Teams, your only financial responsibility is the minimum gross wage of €840.00 in Croatia, providing you with a cost-effective model to maximise your earnings and effectively manage tax compliance and administration.

Interested in our EOR solutions or need help getting started? 

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Cost comparison of a legal entity in Croatia vs Native Teams’ EOR solutions

Legal employment through EOR can be a more efficient and cost-effective alternative to owning and operating a legal entity to provide a compliant business structure. Below, you can find a comprehensive cost comparison for both options to help you make a more informed decision. 

Summing up 

As a global platform offering payments, employment, and tax management solutions, Native Teams provides a cost-effective alternative to tackle the regulatory challenges of flat-rate crafts and opening your own legal entity. 

Through our EOR solutions, individuals can obtain legal employment status while maintaining their independent business operations. Whether you’re a flat-rate craft or a legal entity owner, you can have peace of mind that you’re working in compliance with Croatian regulations and focus on your business without any administrative burdens.