LAW ON FOREIGN EXCHANGE BUSINESS General Provisions

This Act regulates: 1st transactions between residents and nonresidents in foreign exchange and kuna 2nd transactions between residents in foreign currencies, 3rd unilateral transfers of assets from the Republic of Croatia and to Croatia, which do not have the characteristics of the execution of work between residents and nonresidents. Business involves making current and capital transactions and their execution with payments, charges or transfers.
Direct investment Direct investments are the investments abroad by residents and nonresidents in the Republic of Croatia that an investor do with the intention of establishing permanent economic relations and realizing a significant impact on the management of legal persons. The intention of establishing permanent economic relations and realizing a significant impact on the management of legal persons are stated in the following cases: 1. The establishment or increase of the share capital of the Company's wholly-owned by investors, establishing a branch or the acquisition of already existing company in full ownership of an investor or investment to perform activities of individual entrepreneurs. 2. Investments in new or existing company, if an investor acquires thereby a total of 10% or more of the share capital of a company, or 10% or more of the voting rights 3. Loans with a maturity of five years or longer to establish a permanent economic relation, if the loans have the characteristics of the subordinate claims or hybrid claims.

After establishing a direct ownership relationship between residents and nonresidents, transactions of direct investment is also considered: 1. Reinvested earnings, the share of direct investors in company profit which is not distributed as dividends or other forms of profit distribution

Direct investment by non-residents and residents Direct investments by non-residents in the Republic of Croatia are allowed, unless a special law provides otherwise. Direct investment abroad by residents is free

Protection of FDI Transfer of profit abroad which was realized by the nonresident direct investment is free under the condition that in the Republic of Croatia income tax on the amount to be transferred abroad is squared (payed). Billing and payment in transactions with non-residents in domestic cash, foreign cash and checks Croatian National Bank shall prescribe the manner in which residents raise and take foreign cash and checks on the account at the bank, the period in which they are bounded charged foreign cash and checks deposit into the account at the bank and the conditions under which they can hold foreign cash and checks in hand. GENERAL PROVISIONS ON THE REPORTING OF EXTERNAL AFFAIRS Mandatory Reporting Residents are required, in accordance with the provisions of this Act and regulations, report to the Croatian National Bank on matters that were concluded with foreign countries. Banks, authorized companies, Central Depository Agency, notaries and customs authorities are obliged to inform the Croatian National Bank of third parties transactions concluded with foreign countries, this information they get by carrying out its activities in accordance with the provisions of this Act and regulations. Residents who are required to report (about activities of third parties), must allow inspection of books and other business records to verify the data to Croatian National Bank and the Ministry of Finance Financial Inspectorate and the Customs Administration In order to control foreign exchange operations and monitoring the achievement of projections balance of payments of Republic Croatia, residents are required to submit to the Croatian National Bank data on the operations and transactions with foreign countries in a manner and timeframe that it establishes by a separate decision. Residents who are obliged to inform the Croatian National Bank on capital transactions with nonresidents are obliged to request of the Ministry of Finance - Financial Inspectorate provide information on the actual non-resident owners with Which they conclude business if the resident is non-territorial (offshore) entrepreneur.