Hey folks,

I reached out to a few different resources and cannot get a straight answer, so I am hoping Reddit can help.

For sake of this post, my name is Robert, I run an S-Corp in the USA, and I wish to employ Josip, a Croatian citizen. Josip will perform all of their work in Croatia for me **full time**.

Josip’s preference for tax purposes is to be \_HIRED\_ by a US corporation, if possible and reasonable. Obviously, I want to do everything the IRS requires (USA and Croatian equivalent) to accommodate this, so I need some advice.

It appears there are three solutions for their work in Croatia:

1. artisan/craft business (Croatian ‘obrt’)

2. a company (Croatian ‘d.o.o.’ )

3. direct hire from a third country (Croatian ‘zaposlenik u firmi trećih zemalja’)

\~\~\~ about the three

1. Josip currently has an ‘artisan/craft business,’ but they believe it is not advised to perform this kind of work under that business type

2. With #2, Josip’s taxes would still be higher than #3 if they had a ‘d.o.o.’ (they believe)

3. #3 is their preference (depending on what extra liability the US Corporation would have to incur)

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If we go with #2 or #3, I would need to know the different requirements for each on my end for a US corporation (payroll? insurance? extra taxes? anything else?) in the US — and internationally (Croatia).

We do know that if we go with #3, I would need to hire a lawyer on both ends (US and Croatia) to ensure the hiring contract holds up on both ends, this is understood.

According to [https://www.ecovis.com/global/non-resident-employer-in-croatia/](https://www.ecovis.com/global/non-resident-employer-in-croatia/)

“However, if Croatian residents conclude an employment contract with an employer based in a third country, they remain in the Croatian social security system and pay contributions. Here, the employees submit the application for pension and health insurance using the forms prescribed by the tax administration. The basis for calculation of the employees’ contributions is determined by the tax administration annually. Employees pay contributions for the first and second pillars of the pension scheme, as well as health insurance. It is easily possible to hire Croatian workers in Croatia, even without a branch or a local representative.”

According to that, it does not appear that I need a business of representation within Croatia and can directly hire Josip, but I don’t know where to begin.

I reached out to Ecovis (author of the article), I did not get very far.

Has anyone had any experience doing so?

5 comments

  1. With option #2, Josip would be employed by his own Croatian company (d.o.o. or j.d.o.o.) and be on that company’s payroll (paying national and municipal taxes, retirement fund, healthcare and social security). Josip’s company would invoice S-Corp. For S-Corp, it would be invoice like any other. Josip’s company would also have obligations on income tax and VAT. Being a sole proprietorship (option #1) would probably complicate things with tax and VAT.

  4. You have multiple easier solutions. Check out Oyster. They provide exactly kind of service you are asking for.

  5. If you want to employ him full time to work exclusively for you, 3 is your only option. If you go with options 1 or 2 that could be considered covert employment (Prikriveno zapošljavanje) which is illegal and you could both be subject to fines from the Croatian version of the IRS due to tax evasion.

    More information can be found in the PDF from this article (it’s in Croatian) – https://rep.hr/vijesti/financije/cak-i-firme-mogu-biti-optuzene-za-prikriveno-zaposljavanje/8240/

    If you were just hiring him as a contractor without requiring him to be available full time and if he had other clients besides you, that would be a different story.

    I cannot help you with the rest of your questions as I do not know the answer to those.

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