Potential Impact of Croatia's New Foreigner Law on Business Operations

May 3, 2025 - The Voice of Entrepreneurs Association (UGP) Slams New Croatian Foreigner Law as a Business Strangler

According to Poslovni Dnevnik, the UGP has been dealing with complaints on a regular basis from micro and small companies struggling to lawfully employ foreign workers due to the lengthy process and strict requirements set forth by the new Croatian Law on Foreigners.

In their opinion, this legislation is mere evidence of a concerning lack of understanding about doing business in Croatia, particularly in sectors like tourism and construction that are heavily seasonal in nature.

Take, for instance, a construction company raking in half a million euros in January but barely scraping by in February. While their average monthly revenue is well above the designated minimum, the rigid system still denies them the right to employ foreign workers. It's downright ridiculous, the UGP argues, that they are still penalized for their off-season revenue shortage.

Construction companies along the coast are already prohibited from operating during the summer months, and it seems utterly unfair to then criticize them for not maintaining a regular income. A similar situation plagues the tourism sector, with businesses generating minimal revenue in the winter but skyrocketing amounts in the summer when they employ more workers.

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The UGP is categorically opposed to this legal solution, which they believe is directly driving micro and small businesses into the ground. If the current trend continues, it could extinguish the livelihoods of thousands of families dependent on these sectors for employment.

To address the crisis, the UGP is calling on the Ministry of the Interior to take drastic measures, such as reallocating personnel, strengthening the work permit sector, rationalizing the process, and limiting it to a thirty-day maximum from the submission of proper documents.

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The association also stresses the need to adjust the criteria for turnover to better mirror the realities faced by businesses, particularly those in tourism and construction.

In conclusion, Boris Podobnik, president of the UGP, underscores the urgency for Minister Davor Božinović and relevant institutions to make swift adjustments to the Croatian Law on Foreigners and reorganize the work permit system to save struggling businesses and rescue the Croatian economy from the grasp of bureaucracy and nearsighted policy-making.

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Enrichment Data:The recent amendments to the Croatian Law on Foreigners have introduced changes that affect various sectors, including tourism and construction, particularly impacting micro and small businesses. Here are some key issues and potential solutions:

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Key Issues

Financial Requirements: The new law mandates that employers must demonstrate a monthly income of €10,000 for companies or €15,000 over six months for tradespeople, which can be challenging for small businesses in seasonal industries like tourism[1].
Work Permit Duration: While extending work permits to three years is beneficial for long-term planning, it might not address immediate staffing needs during peak tourist seasons[1][3].
Digital Nomad Visas: Stricter rules for digital nomads include higher financial thresholds and limited extensions, which could affect the influx of remote workers who support small businesses through their presence[2].
Workforce Shortages: Despite efforts to boost domestic employment, labor shortages persist, particularly in sectors like construction and tourism[3].

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Urgent Solutions Needed

For Micro and Small Businesses in Tourism

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Flexible Financial Requirements: Consider seasonal adjustments to financial thresholds for small tourism businesses to ensure they can hire foreign workers during peak seasons.
Simplified Permit Processes: Streamline the application process for foreign workers to quickly address staffing gaps during tourist seasons.
Partnerships with Local Communities: Encourage partnerships between local businesses and communities to enhance domestic workforce engagement.

For Construction Sector

Targeted Incentives: Offer specific incentives for foreign workers to fill labor gaps in construction, such as specialized training programs.
Strengthening Local Workforce: Implement training programs for Croatian workers to increase their participation in the construction sector.
Improved Accommodation Policies: Enhance accommodation options for foreign workers to make Croatia a more appealing destination for construction industry professionals[3].

General Solutions

Clear Communication Channels: Enhance communication between government bodies and small businesses to address concerns and implement solutions effectively.
Policy Reviews: Regularly review and adjust policies to reflect the evolving needs of both small businesses and foreign workers.
Support for Domestic Employment: Continue incentives to encourage domestic employment while ensuring flexibility for foreign hires when necessary.

These solutions can help mitigate the challenges faced by micro and small businesses in the tourism and construction sectors due to the amendments in the Croatian Law on Foreigners.

The UGP argues that the new Croatian Law on Foreigners, which severely restricts foreign worker employment, overlooks the unique challenges faced bybusinesses, particularly those in the finance-intensive sectors of tourism and construction.
To mitigate these issues, the association calls for industry-specific financial requirements, simplified work permit processes, and targeted incentives in both the tourism and construction industries.