Doing Business 2019 Croatia Economy Profile Croatia Page 1 Doing Business 2019 Croatia Economy Profile of Croatia Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 Croatia About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Croatia Ease of Doing Business in DB 2019 Rank Region Europe & Central Asia 190 1 Croatia Income Category High income 58 DB 2019 Ease of doing business score Population 4,125,700 0 100 City Covered Zagreb 71.40 DB 2019 Ease of Doing Business Score 0 100 76.10: Czech Republic (Rank: 35) 72.56: Italy (Rank: 51) 72.34: Regional Average (Europe & Central Asia) 72.28: Hungary (Rank: 53) 71.40: Croatia (Rank: 58) 69.51: Albania (Rank: 63) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Croatia 1 1 25 28 38 51 55 61 59 85 89 82 Rank 109 123 136 159 163 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - Croatia 100.00 100 82.62 80.50 80 74.07 72.68 70.60 66.67 Score 60 55.70 55.00 56.20 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 Croatia Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Croatia Starting a Business - Croatia Standardized Company Legal form Limited Liability Company, D.O.O. Paid-in minimum capital requirement HRK 10,000 City Covered Zagreb Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Procedure – Men (number) 8 5.2 4.9 1 (New Zealand) Time – Men (days) 22.5 12.9 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 6.6 4.6 3.1 0.0 (Slovenia) Procedure – Women (number) 8 5.2 4.9 1 (New Zealand) Time – Women (days) 22.5 12.9 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 6.6 4.6 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 11.6 2.3 8.6 0.0 (117 Economies) Figure – Starting a Business in Croatia and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 91.58: Albania (Rank: 50) 90.02: Regional Average (Europe & Central Asia) 89.50: Italy (Rank: 67) 87.89: Hungary (Rank: 82) 83.56: Czech Republic (Rank: 115) 82.62: Croatia (Rank: 123) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 Croatia Figure – Starting a Business in Croatia – Procedure, Time and Cost Time (days) Cost (% of income per capita) 7 20 6 Cost (% of income per capita) 5 15 Time (days) 4 10 3 2 5 1 0 0 1 2 3 4 5 6 *7 *8 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 Croatia Details – Starting a Business in Croatia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Reserve the company's name 3 days HRK 10 Agency : Commercial Court, or public notary offices or hitro.hr offices Checking company name availability is free and can be done online. If the desired name is available, then clients can go through process of company name reservation. Name reservation is not mandatory, but it is proven to be necessary in practice to avoid rejections after the registration application is submitted. The Court Registry checks the company name reservation application within three days, and if it meets all legal criteria, proceeds with the reservation. The court fee for reservation of the company's name is 10 HRK. The reserved company name is visible on the sudreg.pravosudje.hr website and valid for 30 days. If the reserved company name is not used for company registration within 30 days, it is deleted from the registry. 2 The notary prepares the memorandum of association 1 day included in procedure Agency : Notary Public 3 The Public Notary prepares the documentation, which is then signed by the business founders and notarized. The documents necessary for the registration of a company are: 1. Articles of Association 2. Decision on Appointment of the Director 3. Statement on the Acceptance of the Appointment 4. The director's signature specimen 5. The founders' statement on non-existence of debts 6. The application of registration of the company 7. List of shareholders and managers 3 Register the company with the Commercial Court 2 weeks see procedure details Agency : Commercial Court Documents that are required are: 1. Form/application 2. Articles of association 3. Proof of deposit of paid-in capital (must be deposited using a temporary bank account) 4. Statement of declaration of the member of the association (according to article 48, members of the association should not have unsettled obligation to the Republic of Croatia) 5. Decision of the members of the association who will be appointed for the director, CEO, etc. 6. Declaration of the CEO and Directors that they accept the appointment and not punished for any criminal offenses. 7. Authorization of signatures of members of boards, directors, CEO 8. Name reservation form because that includes a number of the reservation and that would be the number of the application. 9. List made by board members that contains name, address, OIB (tax number) of members of the board 10. List of members of associations It typically takes 24 hours to register company with the Commercial court electronically. However, after electronic registration companies have to obtain hard copy of incorporation certificate, which is typically provided in 2 weeks. The certificate is needed to prepare company seal, open a bank account, and can be requested from different authorities (e.g., Tax Administration). Revised fees in 2015 by Chamber of Notaries are as follows: HRK 3400 + VAT + HRK 800 notary fee (drafting and notarizing the articles of association), HRK 700 + VAT + HRK 10 notary fee, per director (drafting application for registration) HRK 100 + 25% VAT + HRK 15 notary fee (drafting the statement of acceptance of appointment) HRK 30 + 25% VAT + HRK 10 notary fee (notarizing founders’ statements of non-existence of debts, only the certification of signature is necessary) HRK 30 + 25% VAT + HKR 10 notary fee (notarizing director signature specimen) HRK 400 (court fees) Page 8 Doing Business 2019 Croatia 4 Order official seal 1 day HRK 169 Agency : Seal maker Making a seal is not mandatory, but done in practice in most cases. Official seals can be ordered at special seal-making shops. Decision on incorporation of Company should be presented in order to have the seal made. The seal should be used on all official documents (including invoices, receipts and so on) issued by the company. Seals can also be ordered through FINA offices. If done through FINA, the entrepreneur can at the same time also apply for statistical registration. 5 Apply for statistical registration number 1 day no charge Agency : Croatian Bureau of Statistics (cro. Državni zavod za statistiku) Applying for a statistical file number can be done at the Croatian Bureau of Statistics or through the One Stop Shop service, used by HITRO.HR officers. The Croatian Bureau of Statistics defines the activity of the company per the European code so there will be 2 numbers issued from the bureau (one for the type of company and one for the activity). The following documents should be submitted: 1) Copy of the Commercial Court’s Decision on the entry into Court Registry; 2) Copy of the Personal Identification Number (OIB) for the company; In HITRO.HR office, the RPS form is to be completed. Submitting RPS request is required to obtain a Notification of Classification pursuant to the National Classification of Activities of the State Institute of Statistics (assignment of business identification number and the principal activity code). After receiving a decision on the registration of the Company, HITRO.HR will automatically obtain notification of the State Institute of Statistics electronically, within one business day. 6 Open a bank account 1 day no charge Agency : Bank When establishing a company, the founders have to open a temporary account right after signing and the authentication of the articles of incorporation. This account is formally opened on behalf of the founders as a future company's account for the purpose of payment of start-up capital (proof of payment of at least a minimum amount is required for the registration with the Court Register). When the Court inscribes the newly founded company into the Court Register and issues a ruling, the bank transforms the existing temporary account into the company's transaction account. Documents required to open a company bank account are: 1. Ruling on registration of a Company, 2. Statistical registration number of a Company, 3. Personal identification number (OIB) of a Company In case of Ltd. Company establishment client signs: the Contract, signature cards, a statement of the beneficial owner and the related parties, and must provide a copy of personal data, extract from the Court Register and Information on classification of the business entity pursuant to the National Classification of Activities. 7 Register for VAT and employee income tax withdrawals 1 day (simultaneous no charge Agency : Tax Authority (Porezna Uprava) with previous Upon registering with the Commercial Court Register and fulfilling its obligations procedure) with the State Bureau of Statistics, the company must register with the competent tax authority. Once a company is registered at the State Bureau of Statistics, company data is sent electronically to the tax authority, which levies the annual company tax. The company must register for VAT at the Tax Office, however, only after its first invoice (within 15 days of issuance). Once the company is registered for VAT, all tax payments can be processed through an electronic system, e-VAT. If the company’s total taxable annual income exceeds HRK 300,000, it must register itself as an entity in the VAT system with the competent tax authority, based on the company's registered seat. Starting from January 01, 2009 a revision of the existing Croatian Law on Companies came into force (published in the Official Gazette no. 146/2008). The change involves inducing "OIB" (personal identification number), that replaces tax number for legal entities. Personal identification number is defined as identification mark of personal identification number that users of that number use in their official evidences and with change of dates. Page 9 Doing Business 2019 Croatia 8 Register with the Croatian Institute for Pension Insurance (HZMO) and Less than one day no charge Croatian Institute for Health Insurance (HZZO) (online procedure, Agency : Croatian Institute for Pension Insurance (HZMO) and Croatian Institute simultaneous with for Health Insurance (HZZO) previous procedure) The Company must register with the Croatian Institute for Pension Insurance within 24 hours from the start of its business operation. The Company must also register each of its employees with the Croatian Institute for Pension Insurance within 24 hours. Company with 3 or more employees will be obligated from 1 April 2014 to register/deregister employees at Croatian Institute for Pension Insurance exclusively online. Currently the procedure may be completed before the competent HZZO office. Croatian Institute for Pension Insurance and Croatian Health Insurance Fund are electronically connected, thus it is only needed for company to register with Croatian Institute for Pension Insurance and registration will be done automatically with Croatian Health Insurance Fund. The following documents should be submitted: • Decision about the registration into the Court Registry. • Notice of classification from the National Institute for Statistics Application (to the Croatian Health Insurance Fund). • Proof of place of residence and the work contract. All persons employed for the first time and age 40 are obliged to register in the second pillar of retirement insurance. A person has to choose the obligatory pension fund within 3 months of the date of employment. If the fund is not chosen after that period, REGOS (the Central Register of the Insured) itself chooses the obligatory pension fund that the person will register in. All persons employed for the first time and between ages 40 and 50 can, if they desire, register with the second pillar of retirement insurance. A person has to choose the obligatory pension fund within 6 months of the date of employment. Takes place simultaneously with previous procedure. Page 10 Doing Business 2019 Croatia Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 11 Doing Business 2019 Croatia Dealing with Construction Permits - Croatia Standardized Warehouse Estimated value of warehouse HRK 4,304,880.70 City Covered Zagreb Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 22 16.0 12.7 None in 2017/18 Time (days) 146 170.1 153.1 None in 2017/18 Cost (% of warehouse value) 10.9 4.0 1.5 None in 2017/18 Building quality control index (0-15) 12.0 12.0 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Croatia and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 69.02: Regional Average (Europe & Central Asia) 67.39: Italy (Rank: 104) 66.71: Hungary (Rank: 110) 57.01: Albania (Rank: 151) 56.20: Czech Republic (Rank: 156) 55.70: Croatia (Rank: 159) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in Croatia – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 8 140 7 Cost (% of warehouse value) 120 6 100 Time (days) 5 80 4 60 3 40 2 20 1 0 0 1 *2 *3 *4 *5 *6 7 *8 *9 * 10 * 11 * 12 13 14 * 15 * 16 17 * 18 19 * 20 21 22 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2019 Croatia Figure – Dealing with Construction Permits in Croatia and comparator economies – Measure of Quality 15 13.0 13.0 12.0 12.0 11.0 Index score 10 8.0 5 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Details – Dealing with Construction Permits in Croatia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain geomechanics study (soil study) 15 days HRK 25,000 Agency : Private agency To test the soil for the underground a geomechanic engineer needs to prepare the soil study. The architect needs to indicate to the engineer that the project needs 3 holes and give the position of these 3 holes to the engineer. The engineer will test these 3 holes. It is a technical document. 2 Hire a geodetic engineer to produce a geodetic study 15 days HRK 10,000 Agency : Private agency BuildCo needs to hire an external geodetic engineer. Geodetic engineer obtains all needed documentation from Cadaster and Land Registry (parcel measures, a list of land owners adjacent to the future construction site, etc.), and produces a geodetic study. Geodetic study is then verified by the Cadaster, and becomes the part of the main project. After receiving the occupancy permit, geodetic engineer is also responsible for dealing with registering the building with Cadaster office. 3 Obtain notification on conditions from the Inspectorate for Fire at the 15 days no charge Ministry of Interior Affairs Agency : Inspectorate for Fire at the Ministry of Interior Affairs BuildCo must obtain technical conditions in order to develop the main project which complies with all necessary requirements of the Inspectorate for Fire at the Ministry of Interior Affairs. Technical conditions are issued based on the preliminary project design drawings and other documents. 4 Obtain notification on conditions from National Croatian Electric Grid 15 days no charge Agency : HEP Distribution System Operator - Elektra Zagreb BuildCo must obtain technical conditions in order to develop the main project which complies with all necessary requirements of the National Croatian Electric Grid (HEP). Technical conditions are issued based on the preliminary project design drawings and other documents. 5 Obtain notification on conditions from waste collection department 15 days no charge Agency : Waste collection department BuildCo must obtain technical conditions in order to develop the main project which complies with all necessary requirements of the waste collection department. Technical conditions are issued based on the preliminary project design drawings and other documents. 6 Obtain notification on conditions from the Local Water Authority 15 days no charge Agency : Zagreb Holding d.o.o. - Water and sewerage BuildCo must obtain technical conditions in order to develop the main project which complies with all necessary requirements of the local water authority. Technical conditions are issued based on the preliminary project design drawings and other documents. 7 Receive clearance from the waste collection department 30 days no charge Agency : Waste Collection Department BuildCo must obtain a clearance to ensure that the building has been constructed in accordance with the conditions that were outlined for the building. 8 Receive clearance from the Sanitary Inspectorate 24 days HRK 70 Agency : Sanitary Inspectorate BuildCo needs to acquire a clearance from Sanitary Inspection to prove that the building has been constructed in accordance with the conditions that were outlined for the building, especially regarding health protection laws and regulations. This inspection also includes a noise inspection clearance. Sanitary inspection representative will be present at the final inspection, before the occupancy permit is issued, to check the building’s compliance with sanitary standards. Page 13 Doing Business 2019 Croatia 9 Receive clearance from the National Croatian Electric Grid 15 days no charge Agency : HEP Distribution System Operator - Elektra Zagreb BuildCo must obtain clearance from the HEP Distribution System Operator. Each municipality/city has a HEP Distribution System Operator local office which issues this clearance, free of charge. In the case of Zagreb, that is HEP - Elektra Zagreb. This clearance observes certain technical, economic, and other power connection and network proficiencies of the construction. Receive clearance from the Local Water Authority 14 days no charge 10 Agency : Zagreb Holding d.o.o. - Water and sewerage BuildCo must obtain preliminary approvals for water supply and sewerage from Zagreb Holding d.o.o. - Water and sewerage. Two clearances are issued - one for water supply and another one for sewerage. Even though these clearances are issued by separate departments of the same entity, customers use a single document and a single point of contact to acquire both clearances. Zagreb Holding d.o.o. - Water and sewerage looks at the main project and its compliance with technical aspects of water and sewerage networks’ standards and procedures. Receive clearance from the Inspectorate for Fire at the Ministry of Interior 25 days HRK 350 11 Affairs Agency : Inspectorate for Fire at the Ministry of Interior Affairs Inspectorate for Fire at the Ministry of Interior Affairs is issuing a clearance to ensure that the building has been constructed in accordance with the conditions that were outlined for the building. A request for this clearance must include fire protection study (if it is required by any regulation), one copy of the main project, and evidence of payment of administrative fees. After the main project is inspected for the fire protection, the Ministry of internal affairs or local competent police station will issue the clearance.There is a clearance to ensure that the building has been constructed in accordance with the conditions that were outlined for the building. Obtain excerpt from the Land Registry for subject and bordering lands 1 day HRK 20 12 Agency : Land Registry The excerpt from the Land Registry is required for the building permit application as evidence of the legal interest to build. While the documents are currently available for viewing online, they are not accepted as official documentation at this time. If the investor in the construction is not the owner of the land, according to The Building Act of 2013, there are other newly acceptable ways to prove legal interest, including contracts and written approval from the owner. Page 14 Doing Business 2019 Croatia 13 Request and receive building permit 30 days HRK 1,070 Agency : Municipal Authority The construction of a building may commence only on the basis of a final and effective building permit. After obtaining all needed documentation, BuildCo requests and obtains a building permit. Building permit is issued by the municipal office responsible for physical planning and construction. Before receiving a building permit, applicant has to submit an inquiry to the municipal office responsible for physical planning and construction, with the main project enclosed, in order to receive a list of all authorities that need to preliminary approve the project and issue various clearances before the building permit application is submitted for approval. The investor’s application for issuing the building permit needs to be accompanied by: 1. three copies of the main design; 2. the designer's statement that the main design was developed in accordance with the spatial plan and other relevant regulations; 3. a written report on the performed main design audit, if the audit is prescribed; 4. certificates of public law bodies that the main design was developed in accordance with spatial regulations or spatial requirements and/or evidence that an application was submitted for the issuance of such certificates or determining such requirements, if they were not issued in the period prescribed in this Act; 5. evidence of legal interest for the issuance of a building permit; and 6. evidence that the applicant is permitted to be an investor (concession, approval or another official act prescribed by a spatial regulation), in the case of this particular construction work for which a spatial act prescribes who the investor can be in the cadaster if the building is subject to specification of the building plot. The building control authority will then, within five days of receipt of the notification of commencement, notify the Ministry of Interior, building inspection, labor inspection, administrative body of the local self-government unit competent for determining utility charges and body competent for determining water charges. 14 Obtain decision from the Municipal Authority regarding utilities 22 days HRK 292,613 Agency : Municipal Authority BuildCo must obtain a decision from the Municipal Authority on utility fees, based on the construction permit. The amount of the fee depends on the building size (in cubic meters) and on the location. Zagreb is divided into four zones for the purposes of communal fee calculations. The communal fee is set from HRK 56 to HRK 118 per cubic meter of a building, depending on the zone. The Doing Business case study warehouse would be located in Zagreb zone III, with the communal fee set at HRK 75 per cubic meter. The fee can be paid in full or in installments. Pay water contribution to the state company Croatian Waters (Hrvatske 15 days HRK 65,272 15 Vode) Agency : Croatian Waters (Hrvatske Vode) The water contribution is paid to finance the management of water resources and protection from floods. The cost is determined based on the following: (i) The zone the new construction is in. Zone A is Zagreb and the protected coastal area, Zone B is the rest of the country, and Zone C are areas subject to special Government care. (ii) The purpose of the construction (residential, industrial, public interest). (iii) The volume of the construction. The cost for the case study warehouse is 3901.5 * HRK 16.73 according to the fee schedule of Hrvatske Vode (www.voda.hr). Hire an external supervising engineer to conduct inspections during 1 day HRK 64,573 16 construction Agency : Private Firm Per Art. 50 & 56 of the Construction Law NN 153/ 13 , BuildCo must hire an external engineer to supervise the construction work. The cost varies, as it depends on the negotiations between BuildCo and external engineer, but the most usual cost calculation is 1.5% of the building value. This is one of the key roles in the whole process, as external supervising engineer is responsible for technical and expert supervision of the construction site from the commencement notice until the occupancy permit is issued. External supervising engineer also has to participate in the final inspection of the construction. Page 15 Doing Business 2019 Croatia 17 Submit commencement notice 1 day HRK 20 Agency : Municipal office for physical planning and construction The investor must notify the building control authority eight days before the commencement of construction. In the notification the builder must include: • Building classification • Register number • Date of issue of the building permit • List the contractor and supervising engineer • Evidence that the building plot was formed in the cadastre if the building is subject to specification of the building plot The building control authority will then, within five days of receipt of the notification of commencement, notify the Ministry of Interior, building inspection, labor inspection, administrative body of the local self-government unit competent for determining utility charges and body competent for determining water charges, while the building inspection shall also be notified whether the notification is complete. Receive random inspection from the Ministry of Construction and Physical 1 day no charge 18 Planning Agency : Ministry of Construction and Physical Planning - Building Inspection Building Inspection, as a part of Ministry of Construction and Physical Planning, conducts inspections of the construction site, in order to determine if the construction is in compliance with the laws and regulations in the area of building and physical planning. Inspections are random and may occur on multiple occasions throughout the construction process. 19 Obtain water and sewage connection 20 days HRK 8,000 Agency : Zagreb Holding d.o.o. - Water and sewerage BuildCo obtains water and sewerage connection from the Water & sewerage Authority of Zagreb. Apply for occupancy (use) permit 1 day HRK 20 20 Agency : Municipal office for physical planning and construction The occupancy permit is mandatory for the use of a completed building. The following documents must be submitted: • Photocopy of the building permit or a copy of the main design for construction work • Information on the participants in the construction (investor, designer, general contractor, supervising engineer) • Written statement of the contractor on works completed and the requirements for the maintenance of the construction • Final report of the supervising engineer • Statement of the geodetic engineer that the construction work was built in accordance with the surveying design • Surveying study for entering the construction work in the cadaster or for change of information on buildings and other construction works, if the construction work is not subject to developing the surveying design, but is to be entered in the cadaster • Statement of the authorized geodetic engineer that the construction work is located on the building plot • Energy certificate of the building, if applicable The Municipality forms an evaluation committee within 30 days after the submission of the application for the issuance of the occupancy permit, and determines the date of the on-site inspection. The investor submits various documents which substantiate that the construction has been conducted in accordance with the regulations (e.g., construction diary, licenses of the construction firm which executed the works, technical certificates for the material used in the construction, etc.) to the evaluation committee no later than one day after the site inspection. If any of the members of the evaluation committee find that the building does not comply with a specific requirement, the investor may be given an additional 90 days to make the necessary corrections (if the error is, in fact, can be corrected). If all requirements have been met, the Municipality should issue the occupancy permit within 30 days after the inspection. 21 Receive final inspection 1 day HRK 2,040 Agency : Municipal office for physical planning and construction Within 15 to 30 days after receiving a request for the occupancy permit, a technical review team from the municipality must conduct the final inspection. All entities that previously participated in this process and issued permits or clearances, would participate in this final inspection. 22 Receive occupancy (use) permit 21 days HRK 1,070 Agency : Municipal office for physical planning and construction After the on-site inspection, the municipality has up to 30 days to issue the occupancy certificate. Page 16 Doing Business 2019 Croatia Takes place simultaneously with previous procedure. Page 17 Doing Business 2019 Croatia Details – Dealing with Construction Permits in Croatia – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 0.0 Which third-party entities are required by law to verify that the building plans are in By law, there is 0.0 compliance with existing building regulations? (0-1) no need to verify plans compliance; Civil servant reviews plans. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? Inspections by 1.0 (0-2) external engineer or firm. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance Yes, final 2.0 with the approved plans and regulations? (0-2) inspection is done by government agency. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building Architect or 1.0 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) engineer; Professional in charge of the supervision; Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the Minimum number 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) of years of experience; University degree in architecture or engineering; Being a registered architect or engineer. Page 18 Doing Business 2019 Croatia What are the qualification requirements for the professional who supervises the construction Minimum number 2.0 on the ground? (0-2) of years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer. Page 19 Doing Business 2019 Croatia Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and obtaining final supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property income per capita) because the warehouse has access to a road. - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 20 Doing Business 2019 Croatia Getting Electricity - Croatia Standardized Connection Price of electricity (US cents per kWh) 17.6 Name of utility HEP ODS City Covered Zagreb Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 4 5.3 4.5 3 (25 Economies) Time (days) 65 110.3 77.2 18 (3 Economies) Cost (% of income per capita) 276.6 325.1 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 5 5.5 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Croatia and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 95.36: Czech Republic (Rank: 10) 85.28: Italy (Rank: 37) 80.50: Croatia (Rank: 61) 71.66: Regional Average (Europe & Central Asia) 63.29: Hungary (Rank: 122) 57.71: Albania (Rank: 140) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 21 Doing Business 2019 Croatia Figure – Getting Electricity in Croatia – Procedure, Time and Cost Time (days) Cost (% of income per capita) 300 60 Cost (% of income per capita) 250 50 200 Time (days) 40 150 30 100 20 10 50 0 0 1 2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in Croatia and comparator economies – Measure of Quality 8 8 7 7 7 6 5.5 Index score 5 5 4 3 3 2 1 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Page 22 Doing Business 2019 Croatia Details – Getting Electricity in Croatia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application and receive preliminary connection approval and 25 calendar days HRK 0 contract Agency : HEP Distribution System Operator (HEP ODS) The applicant starts the process by requesting a provisional connection authorization from HEP ODS, the national electricity distributor. This request is regulated by the “General conditions of electricity supply” (Official Gazette, No. 14/06), article 7. The applicant needs to provide information about the location and the type of construction, as well as the basic characteristics of the requested connection (e.g. the type of connection, the capacity needed, the category of consumption, and the estimated annual electricity consumption). The applicant also needs to enclose a set of documents, such as the excerpt from cadastral plan, the description or conceptual design of the construction, and a list the power consumption equipment with technical characteristics and nominal power. HEP ODS assesses the feasibility of the connection and determines the technical and economic conditions for connecting the building to the grid. If the connection is approved, HEP ODS sends a connection contract to the client, together with the technical and economic conditions and the approved provisional connection authorization. 2 Accept estimate and await completion of external works by utility 30 calendar days HRK 238,184.43 Agency : HEP ODS The customer signs and returns the connection contract to HEP ODS. At least 50% of the connection fee must be paid within 8 days after signing the contract. Upon the payment of 50% of the fee, the construction works can start. The external connection construction, carried out by HEP ODS, includes the installation of a connection cubicle, of a meter, of a tariff switch unit or a time- switch and a limiter switch or other demand controller. According to the “Rulebook on charges for connection to the power grid and for increasing the connection power” and to the “Decision on the amount of the fee for connecting to the power grid and for increasing the power”, the connection fees in Zagreb are HRK 1,700 per kVA. In most cases in Zagreb, for a new connection with a subscribed capacity of 140 kVA, the installation of a transformer is not needed. 3 Submit internal wiring certificate to utility and request final connection 9 calendar days HRK 0 Agency : HEP ODS Once the connection is ready, the customer has to submit the “Request for electricity power supply and conclusion of the network agreement”. The application form is available online on HEP ODS website. Together with this form, the customer has to submit the internal wiring certificate, a statement on final inspection and testing of electrical installation, a certificate on electric installations usage, a proof that the connection fees have been paid in full, and the building permit of the construction. The documents pertaining to the electrical installation can be prepared by the client's electrician - or a third party firm if the client's electrician does not have the required qualifications. If this documentation is satisfactory, HEP ODS issues a final connection approval and a network usage contract that the customer needs to sign. 4 Receive visit by utility to open the meter 1 calendar day HRK 0 Agency : HEP ODS After receiving the final connection approval and signing the network usage contract, an authorized person from HEP ODS comes to switch on the meter and electricity starts flowing. In terms of the supply contract, the customer has the option to sign a supply agreement with a private supplier in the liberalized market but this is typically done once connected as HEP is the default supplier. Takes place simultaneously with previous procedure. Page 23 Doing Business 2019 Croatia Details – Getting Electricity in Croatia – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 5 Total duration and frequency of outages per customer a year (0-3) 1 System average interruption duration index (SAIDI) 4.8 System average interruption frequency index (SAIFI) 2.3 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.hep.hr/od s/kupci/poduzetnistv o.aspx Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 24 Doing Business 2019 Croatia Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. • Official costs only (such as administrative fees, - Has no trees, natural water sources, natural reserves or historical monuments of duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 25 Doing Business 2019 Croatia Registering Property - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 5 5.3 4.7 1 (4 Economies) Time (days) 47 20.3 20.1 1 (New Zealand) Cost (% of property value) 4.0 2.6 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 23.5 19.6 23.0 None in 2017/18 Figure – Registering Property in Croatia and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 81.72: Italy (Rank: 23) 80.09: Hungary (Rank: 30) 79.74: Czech Republic (Rank: 33) 75.57: Regional Average (Europe & Central Asia) 74.07: Croatia (Rank: 51) 62.08: Albania (Rank: 98) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in Croatia – Procedure, Time and Cost Time (days) Cost (% of property value) 4.5 45 4 40 Cost (% of property value) 3.5 35 3 30 Time (days) 2.5 25 20 2 15 1.5 10 1 5 0.5 0 0 1 2 3 *4 *5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 26 Doing Business 2019 Croatia Figure – Registering Property in Croatia and comparator economies – Measure of Quality 30 26.0 26.5 25.0 25 23.5 Index score 19.6 20 15.5 15 10 5 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Details – Registering Property in Croatia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain the land registry extract from the competent land register court 1 day HRK 20; (HRK 20 per Agency : Municipal Court Zagreb, Land Registry Office extract) As part of the due diligence, the buyer needs to verify the status of the land registry. In practice, the buyer obtains a land registration extract in person at the the Land Registry Office of the Municipal Court, although it is possible to obtain informal extracts online or from a notary public or a lawyer. 2 Notary notarizes the sale contract 1 day HRK 40; (HRK 40.0 Agency : Notary (VAT not included) A notary must notarize the sale and purchase agreement. The notary fee for (47.5 VAT included) certification of the seller’s signature is HRK 40 (EUR 5.38). per signature verified by public notary) 3 Register the title transfer at the Land Registry Court 45 days To be paid in Agency : Register the title transfer at the Land Registry Office procedure 5 The parties submit the request for property registration to the Land Registry Office. The registration fee payable to the Land Registry Office is HRK 200 (EUR 26.89), and the stamp duty is HRK 50 (EUR 6.67). Since 2017, lawyers and notaries with special certification can take care of the entire registration process on behalf of their clients and directly submit the application online. 4 Submit the sale contract to the municipal tax administration to receive an 30 days no charge estimate of the land transfer taxes Agency : Municipal Tax Administration The buyer usually submits the sale contract to the municipal tax administration (although the notary is legally mandated to do the same as well). Pursuant to Article 19 of the new Real Estate Transfer Tax Act (Official Gazette No. 115/2016) in force as of January 1, 2017, a person is obligated to pay the real estate transfer tax, and is exceptionally obligated to submit a real estate transfer tax application if documents on the acquisition of the real estate were not notarized by the notary public, issued by the competent court or other public authority. A person is obligated to submit a real estate transfer application to the Municipal Tax Administration where the real estate is located within 30 days. Likewise, a public notary is obligated to electronically deliver one copy of a document which is a legal base for real estate transfer, together with the personal identification number PIN ("OIB") of the parties, within 30 days to the Municipal Tax Administration where the real estate is located. (Pursuant to Article 18 of the new Real Estate Transfer Tax Act (Official Gazette No. 115/2016) in force as of January 1, 2017). 5 Pay land transfer taxes, stamp duty and registration fees at the commercial 1 day HRK 172,445.23; bank or post office (HRK 50 (stamp duty) Agency : Commercial Bank or Post Office + HRK 200 The parties submit the request for property registration to the Land Registry (registration fee) + Office. The registration fee payable to the Land Registry Office is HRK 200 (EUR 4% of property value 26.89), and the stamp duty is HRK 50 (EUR 6.67). Since 2017, lawyers and (real property transfer notaries with special certification can take care of the entire registration process on behalf of their clients and directly submit the application online. tax)) Takes place simultaneously with previous procedure. Page 27 Doing Business 2019 Croatia Details – Registering Property in Croatia – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 6.0 What is the institution in charge of immovable property registration? Municipal Court Zagreb, Land Registry Department In what format are the majority of title or deed records kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions Yes 1.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Zagreb City Office for Cadastre and Geodetic Affairs In what format are the majority of maps of land plots kept in the largest business city—in a Computer/Scann 1.0 paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Different 1.0 or mapping agency kept in a single database, in different but linked databases or in separate databases but databases? linked Do the immovable property registration agency and cadastral or mapping agency use the No 0.0 same identification number for properties? Transparency of information index (0–6) 3.5 Who is able to obtain information on land ownership at the agency in charge of immovable Anyone who 1.0 property registration in the largest business city? pays the official fee Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: https://gov.hr/moj a- uprava/stanovanj e-i- okolis/vlasnicka- prava/upis-prava- vlasnistva/1855 Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: http://sudovi.prav osudje.hr/ogszg/i ndex.php? linkID=38 Does the agency in charge of immovable property registration commit to delivering a legally No 0.0 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the Yes 0.5 immovable property registration agency? Page 28 Doing Business 2019 Croatia Number of property transfers in the largest business city in 2017: Number of property transfers in Zagreb in 2017 was 19,245 (Based on purchase sale contracts) Who is able to consult maps of land plots in the largest business city? Freely accessible 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, online 0.5 and if so, how? Link for online access: http://www.katast ar.hr/dgu/proizvo di-Kopija- katastarskog- plana-83 Does the cadastral or mapping agency commit to delivering an updated map within a No 0.0 specific time frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 8.0 Are all privately held land plots in the economy formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the largest business city formally registered at the Yes 2.0 immovable property registry? Are all privately held land plots in the economy mapped? Yes 2.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Land dispute resolution index (0–8) 6.0 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific compensation mechanism to cover for losses incurred by parties who Yes 0.5 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of identity documents? No 0.0 For a standard land dispute between two local businesses over tenure rights of a property Municipal civil worth 50 times gross national income (GNI) per capita and located in the largest business court Zagreb and city, what court would be in charge of the case in the first instance? Municipal court Novi Zagreb, Land Registry department How long does it take on average to obtain a decision from the first-instance court for such a Between 1 and 2 2.0 case (without appeal)? years Are there any statistics on the number of land disputes in the first instance? Yes 0.5 Page 29 Doing Business 2019 Croatia Number of land disputes in the largest business city in 2017: Total number of land disputes in 2017 was 1,094 Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 30 Doing Business 2019 Croatia Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 31 Doing Business 2019 Croatia Getting Credit - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Strength of legal rights index (0-12) 5 7.2 6.1 12 (5 Economies) Depth of credit information index (0-8) 6 6.6 6.7 8 (42 Economies) Credit registry coverage (% of adults) 0 25.3 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 100 43.4 65.3 100.0 (25 Economies) Figure – Getting Credit in Croatia and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 75.00: Hungary (Rank: 32) 70.00: Albania (Rank: 44) 70.00: Czech Republic (Rank: 44) 68.70: Regional Average (Europe & Central Asia) 55.00: Croatia (Rank: 85) 45.00: Italy (Rank: 112) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Croatia and comparator economies 8 9 8 7 7.2 7 6 Index Score 5 5 4 3 2 2 1 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Page 32 Doing Business 2019 Croatia Details – Legal Rights in Croatia Strength of legal rights index (0-12) 5 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and No replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be Yes secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by Yes asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed No online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency No procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization No procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow Yes the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Croatia and comparator economies 8 7 7 7 6.6 6 6 6 6 Index Score 5 4 3 2 1 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Page 33 Doing Business 2019 Croatia Details – Credit Information in Croatia Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and No No 0 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No No 0 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 6 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 3,211,120 0 Number of firms 189,539 0 Total 3,400,659 0 Percentage of adult population 100 0 Page 34 Doing Business 2019 Croatia Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 35 Doing Business 2019 Croatia Protecting Minority Investors - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Extent of disclosure index (0-10) 5.0 7.3 6.5 10 (13 Economies) Extent of director liability index (0-10) 6.0 4.9 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 6.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 8.0 7.1 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 8.0 5.6 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 7.0 7.5 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Croatia and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 71.67: Albania (Rank: 26) 66.67: Croatia (Rank: 38) 65.29: Regional Average (Europe & Central Asia) 58.33: Czech Republic (Rank: 72) 58.33: Italy (Rank: 72) 50.00: Hungary (Rank: 110) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Croatia and comparator economies – Measure of Quality Croatia 7 6 5 8 8 6 Albania 8 7 9 6 6 7 Czech Republic 5 6 2 7 6 9 Hungary 7 4 2 5 6 6 Italy 8 4 7 4 6 6 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Europe & Central Asia 7.6 4.6 7.2 5.6 7.3 6.8 0 5 10 15 20 25 30 35 40 45 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 36 Doing Business 2019 Croatia Details – Protecting Minority Investors in Croatia – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 5.7 Extent of disclosure index (0-10) 5.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders or 1.0 board of directors including interested parties Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of 2.0 all material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 6.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Liable if negligent 1.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by Yes 1.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if 1.0 negligently concluded Ease of shareholder suits index (0-10) 6.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Documents that 1.0 the defendant relied on Can the plaintiff request categories of documents from the defendant without identifying No 0.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 7.7 Extent of shareholder rights index (0-10) 8.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Page 37 Doing Business 2019 Croatia Do shareholders automatically receive preemption rights every time Buyer issues new Yes 1.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a Yes 1.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to No 0.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 8.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of Yes 1.0 directors? Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board Yes 1.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Yes 1.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum Yes 1.0 period set by law? Extent of corporate transparency index (0-10) 7.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and No 0.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting Yes 1.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on the No 0.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be Yes 1.0 audited by an external auditor? Page 38 Doing Business 2019 Croatia Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be Total tax and contribution rate (% of commercial profits) fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 39 Doing Business 2019 Croatia Paying Taxes - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Payments (number per year) 34 16.6 11.2 3 (Hong Kong SAR, China) Time (hours per year) 206 214.8 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 20.5 32.3 39.8 26.1% (32 Economies) Postfiling index (0-100) 66.66 64.41 84.41 None in 2017/18 Figure – Paying Taxes in Croatia and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 81.42: Czech Republic (Rank: 45) 75.80: Regional Average (Europe & Central Asia) 73.81: Hungary (Rank: 86) 72.68: Croatia (Rank: 89) 66.32: Italy (Rank: 118) 64.91: Albania (Rank: 122) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Croatia and comparator economies – Measure of Quality 100 90.75 80 66.66 63.94 64.41 Index score 60.11 60 52.39 40 20 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Page 40 Doing Business 2019 Croatia Details – Paying Taxes in Croatia Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Social 1.0 online 96.0 17.2% gross salaries 19.40 security contributions Forest 5.0 0.0265% total income 0.47 contribution Tourist fee 1.0 online 0.01938% total turnover 0.34 Chamber of 12.0 HRK 1,083 fixed fee 0.29 Economy fee per month Radio and 12.0 HRK 80 per Every TV and 0.02 Television fee month radio receiver Corporate 1.0 online 58.0 18% taxable profit 0.00 income tax Employee 0.0 online and 20% gross salaries 0.00 withheld paid - Social jointly security contributions Fuel tax 1.0 included into 0.00 small amount fuel price Value added 1.0 online 52.0 25% value added 0.00 not included tax (VAT) Totals 34 206 20.5 Page 41 Doing Business 2019 Croatia Details – Paying Taxes in Croatia – Tax by Type Taxes by type Answer Profit tax (% of profit) 0 Labor tax and contributions (% of profit) 19.4 Other taxes (% of profit) 1.1 Page 42 Doing Business 2019 Croatia Details – Paying Taxes in Croatia – Measure of Quality Answer Score Postfiling index (0-100) 66.66 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process None Percentage of cases exposed to a VAT audit (%) 25% - 49% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 0.0 100 Time to obtain a VAT refund (weeks) 6.2 94.27 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 25% - 49% Time to comply with a corporate income tax correction (hours) 36.5 35.78 Time to complete a corporate income tax correction (weeks) 20.3 36.61 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 43 Doing Business 2019 Croatia Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual • Covers all documents required by law and in procedure took 24 hours. practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 44 Doing Business 2019 Croatia Trading across Borders - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Time to export: Border compliance (hours) 0 22.1 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 0 157.5 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 1 24.3 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 0 97.9 35.2 0 (20 Economies) Time to import: Border compliance (hours) 0 21.1 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 0 162.3 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 1 24.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 0 93.9 24.9 0 (30 Economies) Figure – Trading across Borders in Croatia and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 96.29: Albania (Rank: 24) 86.17: Regional Average (Europe & Central Asia) 100.00: Czech Republic (Rank: 1) 100.00: Croatia (Rank: 1) 100.00: Hungary (Rank: 1) 100.00: Italy (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in Croatia – Time and Cost Time (hours) Cost (USD) 1.2 1.2 1 1 1 1 Time (hours) Cost (USD) 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0 0 0 0 0 0 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 45 Doing Business 2019 Croatia Details – Trading across Borders in Croatia Characteristics Export Import Product HS 85 : Electrical machinery and HS 8708: Parts and accessories of motor equipment and parts thereof; sound vehicles recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Trade partner Austria Germany Border Croatia- Slovenia border crossing Croatia-Slovenia border crossing Distance (km) 76 76 Domestic transport time (hours) 2 2 Domestic transport cost (USD) 135 135 Details – Trading across Borders in Croatia – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 0.0 0.0 by customs authorities Export: Clearance and inspections required 0.1 0.0 by agencies other than customs Export: Port or border handling 0.1 0.0 Import: Clearance and inspections required 0.0 0.0 by customs authorities Import: Clearance and inspections required 0.1 0.0 by agencies other than customs Import: Port or border handling 0.1 0.0 Page 46 Doing Business 2019 Croatia Details – Trading across Borders in Croatia – Trade Documents Export Import CMR waybill CMR waybill Commercial invoice Commercial invoice Packing list Packing list Intrastat Intrastat Page 47 Doing Business 2019 Croatia Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 48 Doing Business 2019 Croatia Enforcing Contracts - Croatia Standardized Case Claim value HRK 159,606 Court name Zagreb Commercial Court City Covered Zagreb Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Time (days) 650 496.3 582.4 None in 2017/18 Cost (% of claim value) 15.2 26.3 21.2 None in 2017/18 Quality of judicial processes index (0-18) 13.0 10.3 11.5 None in 2017/18 Figure – Enforcing Contracts in Croatia and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 70.98: Hungary (Rank: 22) 70.60: Croatia (Rank: 25) 65.65: Regional Average (Europe & Central Asia) 56.44: Albania (Rank: 98) 56.38: Czech Republic (Rank: 99) 54.79: Italy (Rank: 111) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in Croatia – Time and Cost Time (days) Cost (% of claim value) 1200 1120 40 Cost (% of claim value) 34.9 33.8 35 1000 30 Time (days) 26.3 800 23.1 650 678 21.2 25 605 582.4 600 525 496.4 20 15.2 15.0 15 400 10 200 5 0 0 Albania Croatia Czech Europe Hungary Italy OECD Republic & high Central income Asia Page 49 Doing Business 2019 Croatia Figure – Enforcing Contracts in Croatia and comparator economies – Measure of Quality Croatia 2.5 3.5 2 5 Albania 1.5 1.5 1 3.5 Czech Republic 2 3 3 1.5 Hungary 3 4 2.5 3 Italy 3 4 3 3 OECD high income 2.5 3.1 2.3 3.6 Europe & Central Asia 2.1 3 1.4 3.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Croatia Indicator Time (days) 650 Filing and service 50 Trial and judgment 365 Enforcement of judgment 235 Cost (% of claim value) 15.2 Attorney fees 8.6 Court fees 4 Enforcement fees 2.6 Quality of judicial processes index (0-18) 13.0 Court structure and proceedings (-1-5) 5.0 Case management (0-6) 3.5 Court automation (0-4) 2.0 Alternative dispute resolution (0-3) 2.5 Page 50 Doing Business 2019 Croatia Details – Enforcing Contracts in Croatia – Measure of Quality Answer Score Quality of judicial processes index (0-18) 13.0 Court structure and proceedings (-1-5) 5.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 3.5 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil Yes case? 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.5 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? Yes 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? Yes 3. Can two of the following four reports be generated about the competent court: (i) time to Yes 1.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 2.0 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the Yes general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 Page 51 Doing Business 2019 Croatia 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public No order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation No (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 52 Doing Business 2019 Croatia Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 53 Doing Business 2019 Croatia Resolving Insolvency - Croatia Indicator Croatia Europe & OECD high Best Regulatory Central Asia income Performance Recovery rate (cents on the dollar) 34.8 38.6 70.5 None in 2017/18 Time (years) 3.1 2.3 1.7 0.4 (Ireland) Cost (% of estate) 14.5 13.2 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 12.0 11.1 11.9 None in 2017/18 Figure – Resolving Insolvency in Croatia and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 80.05: Czech Republic (Rank: 15) 77.28: Italy (Rank: 22) 67.42: Albania (Rank: 39) 56.20: Croatia (Rank: 59) 55.58: Regional Average (Europe & Central Asia) 55.03: Hungary (Rank: 65) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Croatia – Time and Cost Time (years) Cost (% of estate) 3.5 25 3.1 22.0 Cost (% of estate) 3 20 17.0 Time (years) 2.5 2.3 2.0 14.5 2.1 2.0 14.5 2 13.2 1.8 15 1.7 1.5 10.0 9.3 10 1 5 0.5 0 0 Albania Croatia Czech Europe Hungary Italy OECD Republic & high Central income Asia Page 54 Doing Business 2019 Croatia Figure – Resolving Insolvency in Croatia and comparator economies – Measure of Quality Croatia 4 3 2 3 Albania 6 3 2 3 Czech Republic 5.5 2.5 3 3 Hungary 5 2.5 2 0.5 Italy 5.5 3 2 3 OECD high income 5.3 2.8 2.2 1.9 Europe & Central Asia 4.5 2.6 2.3 1.8 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Croatia and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 67.4 65.2 60 44.0 44.2 38.6 40 34.8 20 0 Croatia Albania Czech Republic Hungary Italy Europe & Central Asia Page 55 Doing Business 2019 Croatia Details – Resolving Insolvency in Croatia Indicator Answer Score Proceeding foreclosure Mirage will apply for the pre-bankruptcy settlement procedure under the Bankruptcy Act. But, it is likely that BizBank would not be interested to reach a settlement on restructuring in that procedure, because, if agreement is settled, Bizbank would not get the payment for, at least, few years. As Bizbank owns 74% of Mirage's debt, the agreement on restructuring plan depends only on the BizBank decision. Instead of agreeing with the Miracle's plan of reorganization in pre- bankruptcy procedure, it is likely that BizBank will initiate foreclosure proceedings requiring sale of the hotel property As a creditor with a registered pledge, BizBank could enforce its interest in separated foreclosure process, even if Insolvency proceedings is opened. Outcome piecemeal sale Even if Mirage management initiates pre-insolvency or insolvency proceedings, the hotel will not be able to operate if its acts would be done at the expense of the bankruptcy estate. It will have to reduce its working power and cut expenses. And after the bank enforces its security interest, and it can do that outside the insolvency proceedings framework, the hotel will stop operating and its assets will be sold piecemeal. Time (in years) 3.1 It will take 37 months to complete an unsuccessful pre-bankruptcy settlement procedure, which is followed by foreclosure, when BizBank enforces its security interest in Mirage's assets. Cost (% of 14.5 Major expenses in foreclosure include attorneys' fees (8%) and fees of accountants and other estate) professionals involved in the proceedings, especially the insolvency representative (5-6%), the rest will cover court fees and sale of the assets. Recovery rate 34.8 (cents on the dollar) Page 56 Doing Business 2019 Croatia Details – Resolving Insolvency in Croatia – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 12.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may 1.0 file for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the (c) Both (a) and 1.0 insolvency framework? (b) options are available, but only one of them needs to be complied with Management of debtor's assets index (0-6) 4.0 Does the insolvency framework allow the continuation of contracts supplying essential goods Yes 1.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 3.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are affected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization receive at Yes 1.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, Yes 1.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 2.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information No 0.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 57 Doing Business 2019 Croatia Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 58 Doing Business 2019 Croatia Labor Market Regulation - Croatia Details – Labor Market Regulation in Croatia Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 496.6 Ratio of minimum wage to value added per worker 0.3 Maximum length of probationary period (months) 6.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 0.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 20.0 Paid annual leave for a worker with 5 years of tenure (working days) 20.0 Paid annual leave for a worker with 10 years of tenure (working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 20.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? Yes Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 10.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 7.9 Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0 Page 59 Doing Business 2019 Croatia Severance pay for redundancy dismissal for a worker with 5 years of tenure 7.2 Severance pay for redundancy dismissal for a worker with 10 years of tenure 14.4 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 7.2 Job quality Equal remuneration for work of equal value? Yes Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 208.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 9.0 Page 60 Doing Business 2019 Croatia Business Reforms in Croatia In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Registering Property: Croatia made transferring property more efficient by digitizing its land registry. DB2018 Dealing with Construction Permits: Croatia made dealing with construction permits more costly by increasing the administrative fees for building and occupancy permits. Registering Property: Croatia made it less costly to transfer property by lowering the real estate transfer tax. DB2017 Starting a Business: Croatia made starting a business more difficult by increasing notary fees. Protecting Minority Investors: Croatia strengthened minority investor protections by requiring detailed internal disclosure of conflicts of interest by directors. Paying Taxes: Croatia made paying taxes more complicated by introducing a radio and television fee, and eliminating the reduction of the Chamber of Economy fee for new companies. DB2016 Enforcing Contracts: Croatia made enforcing contracts easier by introducing an electronic system to handle public sales of movable assets and by streamlining the enforcement process as a whole. Labor Market Regulation: 1) Croatia eliminated the requirement to retrain or reassign employees before they can be made redundant. 2) In accordance with the Minimal Wage Act, Art. 1, published in Official Gazette No.151/2014, the minimum wage has been increased from 3.017,61 Kuna/month to 3.029,55 Croatian Kuna/month gross salary, in force for the period of January 1, 2015 to December 31, 2015. DB2015 Starting a Business: Croatia made starting a business easier by reducing notary fees. Dealing with Construction Permits: Croatia made dealing with construction permits easier by reducing the requirements and fees for building permits and carrying out the final building inspection more promptly. Paying Taxes: Croatia made paying taxes more complicated for companies by raising the health insurance contribution rate, increasing the Croatian Chamber of Commerce fees and introducing more detailed filing requirements for VAT. On the other hand, it abolished the contribution to the Croatian Chamber of Commerce. Trading across Borders: Croatia made trading across borders easier by implementing a new electronic customs system. Labor Market Regulation: Croatia lifted the 3-year limit on the duration of first-time fixed-term contracts. DB2014 Paying Taxes: Croatia made paying taxes easier for companies by introducing an electronic system for social security contributions and by reducing the rates for the forest and Chamber of Commerce contributions. Trading across Borders: Croatia made trading across borders easier by improving the physical and information system infrastructure at the port of Rijeka and by streamlining export customs procedures in preparation for accession to the Common Transit Convention of the European Union. Enforcing Contracts: Croatia made enforcing contracts easier by streamlining litigation proceedings and transferring certain enforcement procedures from the courts to state agencies. Resolving Insolvency: Croatia made resolving insolvency easier by introducing an expedited out-of-court restructuring procedure. DB2013 Paying Taxes: Croatia made paying taxes less costly for companies by reducing the health insurance contribution rate. Page 61 Doing Business 2019 Croatia DB2012 Getting Credit: In Croatia the private credit bureau started to collect and distribute information on firms, improving the credit information system. DB2011 Starting a Business: Croatia eased business start-up by allowing limited liability companies to file their registration application with the court registries electronically through the notary public. Dealing with Construction Permits: Croatia replaced the location permit and project design confirmation with a single certificate, simplifying and speeding up the construction permitting process. Paying Taxes: Croatia made paying taxes more difficult and costly for companies by introducting a tourist fee. Labor Market Regulation: Croatia increased the mandatory paid annual leave. DB2010 Dealing with Construction Permits: Croatia improved its construction permitting process through the operation of a one-stop shop and enforcement of the building code. DB2009 Dealing with Construction Permits: Croatia made dealing with construction permits easier through a new building code that eliminated several procedures for obtaining a building permit—though other changes caused an administrative backlog for building and occupancy permits that increased the overall time required. Paying Taxes: Croatia made paying taxes easier for companies by encouraging online filing. Trading across Borders: Croatia reduced the time for exporting and importing through ongoing improvements in port infrastructure. DB2008 Starting a Business: Croatia made starting a business easier by enhancing the services of the one-stop shop. Registering Property: Croatia reduced the time required to register property through ongoing improvements at the land registry. Getting Credit: Croatia strengthened its secured transactions system by launching a unified and geographically centralized collateral registry and improved access to credit information by setting up a new private credit bureau, HROK. Resolving Insolvency: Croatia made resolving insolvency easier through amendments to its insolvency act regulating the profession of bankruptcy administrators. Page 62 Doing Business 2019 Croatia Page 63