In order to protect domestic workers on the national labour market and reduce the excessive "import" of foreign workers, which leads to the danger of the reduction of labour costs in the Republic of Croatia and further encourages young active people to pursue employment in other EU member states, the new Foreigners Act, which entered into force on 1st January 2021, introduced key changes in relation to the previous legal regulation of the residence and employment of foreigners (third-country nationals) in the Republic of Croatia. In addition, the Foreigners Act no longer contains provisions relating to citizens of the European Economic Area and members of their families, whose status is now regulated by the Act on Citizens of the Member States of the European Economic Area and their family members.

First of all, the new Foreigners Act abolished the annual quota for employment permits and instead introduced a system in which activities and occupations in which the employment of third-country nationals is allowed will no longer be precisely determined in advance, but will depend on labour market needs which will be evaluated by the Croatian Employment Service (hereinafter: "CES") by conducting a labour market test. The CES labour market test includes reviewing the data in the register of unemployed persons and an intermediation procedure with aim to employ workers from the national labour market.

However, for certain occupations and jobs employers will not be obliged to request a labour market test as a precondition for employing foreigners, meaning that employers will be able to directly apply for a residence and work permit to the competent diplomatic mission or consular office or police department or station.

This group of certain occupations and jobs includes, inter alia, key staff in companies, branches and representative offices (including procurators, members of the management/supervisory boards and persons holding similar positions) and a third-country national seeking a work permit for self-employment in a company in which he/she has an ownership share of at least 51% (founder who is self-employed in the company).

Unlike the previous regulation according to which foreigners could temporarily reside and work in the Republic of Croatia as directors/founders of the company on the basis of a certificate of registration issued for a period of 90 days, the new Foreigners Act stipulates that foreigners as directors/founders of the company may temporarily reside and work in the Republic of Croatia only on the basis of a temporary residence and work permit issued for a maximum period of one year (with the possibility of extension) with the fulfilment of the following additional conditions (in addition to the conditions normally required for obtaining temporary residence):

the value of the share capital of the company must exceed the amount of HRK 200,000.00;
at least three Croatian citizens, must be employed in a company for an indefinite and full-time period; and each of their gross salaries must be at least in the amount of the average gross salary paid in the Republic of Croatia in the previous year
the monthly gross salary of a third-country national - key staff/founder of a company must amount to at least 1.5 of the average gross salary paid in the Republic of Croatia in the previous year.

Finally, it is important to note that the performance of previous actions for the establishment and registration of a company is not considered employment within the context of the Foreigners Act, which means that the performance of these actions does not require a temporary residence permit.

Marija Elena Prskalo, Associate