Croatia's new FDI rules raise the bar for investor disclosure

What does the Ordinance prescribe?

The Ordinance prescribes in detail the content and form of applications for approval of foreign direct investments in designated entities. It differentiates between foreign investors that are legal persons and those that are natural persons, prescribing a separate set of required information and documentation for each. The Ministry of Finance may also request additional information and documentation beyond these lists where necessary to establish the true state of affairs.

All submissions must be in Croatian or translated and certified by an authorised court interpreter and may be filed by registered mail or electronically. Foreign investors located abroad must appoint an authorised representative in Croatia.

How much does Croatia diverge?

The Croatian Ordinance is broadly aligned with the spirit and objectives of the EU FDI Screening Regulation – particularly regarding investor identification, ownership structures, third-country government links and the nature or value of the investment. However, Croatia goes substantially beyond the EU framework in several respects:

1. Criminal record requirements are a notable Croatian addition. The EU framework does not mandate criminal background checks on investors, their management, supervisory boards and beneficial owners as part of the filing.
2. Third-country sanctions screening is more detailed in Croatia, requiring separate statements on EU/UN sanctions and third-country restrictive measures.
3. Financial disclosure (three years of audited accounts, employee numbers) goes well beyond anything the EU framework prescribes for national-level filings.
4. Source-of-funds verification with supporting documentation is a Croatian-specific requirement that mirrors AML-style due diligence rather than standard FDI screening practice at the EU level.
5. The three-year relocation disclosure is a unique Croatian requirement not found in the EU framework, reflecting a domestic policy concern about capital flight or de-industrialisation. 
6. Procedural requirements, including the use of the Croatian language, an authorised representative and registered mail, are purely national administrative additions.

In summary, the Croatian regulation is a significantly more demanding and prescriptive instrument than the EU framework. 

Practical challenges ahead

While the Ordinance provides the welcome clarity of a defined filing checklist, several aspects may prove challenging in practice:

Criminal record certificates across multiple jurisdictions: For legal persons, the Ordinance requires separate criminal record certificates for the legal entity, each member of its management and supervisory bodies, and each beneficial owner – all issued by the competent authority of the relevant nationality, and each not older than six months. For multinational groups with management spread across several jurisdictions, this will involve coordinating certificate requests from multiple countries with different processing times, formats and availability. Some jurisdictions do not issue criminal record certificates for legal entities at all, raising the question of how the Ministry of Finance will treat cases where compliance with this requirement is objectively impossible.

Sanctions statement: The Ordinance requires certified statements covering EU, UN Security Council and third-country restrictive measures. While checking EU and UN sanctions lists is straightforward, the obligation to certify compliance with the restrictive measures of all third countries introduces potential uncertainty, as there is no single consolidated database and the scope of what constitutes "restrictive measures of third countries" is undefined.

Source and origin of financing: The requirement to document both the legal status and the origin of financial resources may create difficulties where complex financing structures are involved, particularly given the uncertainty as to what the newly established local FDI authority will accept as sufficient evidence.

Open questions

The scope of information required, combined with the statutory review period of 120/150 days, places a significant burden on investors. It is even more consequential because FDI clearance typically operates as a condition precedent, suspending or gating other regulatory approvals rather than running in parallel with them. In practice, this means that investors face not only a more demanding disclosure and compliance exercise than contemplated by the EU baseline, but a critical-path delay that can materially extend overall deal timing. The Croatian regime is therefore considerably more stringent and time-consuming than the EU framework it implements.

Authors: Ana Mihaljević and Sven Sušanj