Croatia's FDI Screening Regime: Faster than expected

The FDI Act operates on a designation principle: the obligation to notify foreign investments is linked to the designation of obliged entities by the competent authorities. Each authority, acting within its respective sector, was to be responsible for identifying entities subject to obligations under the FDI Act within six months of the entry into force of the Regulation on designation criteria. The Minister of Finance is required to prepare an Implementing Regulation specifying the exact content of the notification and the supporting documents within 90 days, while the FDI Committee must be established within 30 days of the FDI Act's entry into force.

It was initially expected that the regime would not become operational before the obliged entities were identified on the basis of the detailed designation criteria set out in a government regulation. However, recent developments suggest that the expected timeline and dynamics may have fundamentally changed.

What happened?

It seems that the process of designation has started ahead of the originally anticipated timeline, with certain entities being designated even prior to the adoption of the government regulation prescribing the detailed criteria for designation. In parallel, the Regulation prescribing the content of the filing has been put out for public consultation (Implementing Regulation). The regime is now expected to become operational as of the date this Regulation enters into force – which could be as early as mid-May to end of June 2026.

Practical implications

1.   Notification obligation trigger: Once an entity is informed that it qualifies as an obliged entity under the FDI Act, any foreign investment involving that entity must be reported to the Ministry of Finance before it is completed. From entry into force of the regulation prescribing the content of the filing, all entities that have been designated by then will be subject to standstill and notification obligations.

2.   Non-public list: The list of obliged entities is not intended to be a publicly available document. This creates practical challenges for foreign investors, who may be unable to verify in advance whether a target qualifies as an obliged entity and hence whether a filing obligation will arise.

3.   Evolving scope: The initial designations are expected to be further updated once the government regulation prescribing the detailed criteria for designation enters into force. This means that additional entities may be designated over time and the scope of the regime is likely to expand.

4.   Retroactive screening remains a risk: The Act will also apply to investments made before its entry into force, and such retroactive screenings must be carried out by the authority within three years from the date the Act enters into force. Based on unofficial guidelines of the Croatian Ministry of Finance, the same will apply to foreign investments which are completed after the entry into force of the Act but before the relevant targets are identified in accordance with the pending Implementing Regulations.

Key thresholds and scope reminder

For reference, the key parameters of the regime remain as follows:

·      Foreign investment: Direct or indirect acquisition by a foreign investor of a qualifying holding in an obliged entity, as well as any other transaction that enables the foreign investor to acquire effective participation in the management or control of such entity.

·      Qualifying holding: Direct or indirect acquisition of at least 10 % of shares, voting rights or property rights in the obliged entity.

·      Foreign investor: Any natural person who is not a citizen of Croatia or another EU or EEA Member State (including dual nationals who also hold third-country citizenship), any legal person organised under the laws of a third country, any investment migration intermediary and any legal person established in Croatia or another EU or EEA Member State that is directly or indirectly controlled by a foreign investor or by a public body of a third country.

·      Review timeline: The final decision on the FDI Act will be issued within an overall limit of 120 days from the filing of a complete notification, or 150 days in exceptional cases.