Tax relief and economic measures offered by the Croatian government due to COVID-19 & Zagreb earthquake

Sharing is Caring:
Closed caffe bar in Croatia
Image by Sea Help News

LAST UPDATED: 27/05/2020

The coronavirus epidemic has just begun in Croatia and the biggest impact is expected in the coming weeks. COVID-19 has already left a huge bruise on the Croatian economy, but the full consequences have yet to reveal themselves. Job losses have already begun in the private sector. While public sector jobs are still safe, that may change.

Since the start of this economic crisis, the state has already implemented several tax relief measures to help businesses and individuals get through the impacts of the COVID-19 epidemic. The goal of these measures is to save jobs and balance the already shaken economy.

Before we dive in, the government has set up a web site for all things COVID-19 and Croatia, which you can check out here. The latest updates on absolutely everything will be posted there first.

If you are a business owner and you need help to navigate which tax relief measures you qualify for and how to apply, we can connect you a legal expert who can help you sort it all out. Contact us here.

Most vulnerable business sectors affected by COVID-19

Unfortunately, the economic effects are being felt across the business spectrum. While tourism will be the hardest hit, as products and services move through the supply chain most businesses will feel the hurt of this. The business sectors most impacted by the coronavirus pandemic include:

  • Anything related tourism, which includes:
    • Vacation apartment rentals
    • Hotels
    • Tour agencies
    • Restaurants
    • Caffe bars
  • Catering (Ugostiteljstvo)
  • Entertainment (Zabava)
  • Arts (Umjetnost)
  • Culture (Kultura)
  • Transport (Prijevoz)
  • Public Relations
  • Real estate agencies (Iznajmljivanje)
  • Household appliances (Bijela tehnika )
  • Small businesses (Mali poduzetnici)

Generally speaking, all businesses will be impacted in one way or the other. With highly recommended self-isolation and the state-mandated closing of all non-essential businesses, fewer people are out spending money and there are fewer places to spend money.

Croatia tax relief measures

The Croatian government has decided to implement several tax relief measures to help alleviate the financial burden that businesses across the country are feeling.

It is important to note that the available relief measures are changing frequently as the situation develops and as the parliament (Sabor) has time to address and finalize the details of each measure. As such, this list will continue to change in the coming weeks. We will update it as we get new information. If the program is already accepting applications, we’ve noted that it is “IMPLEMENTED” to the right of the program name.

#1 Deferment of public contributions – IMPLEMENTED

This measure includes:

  1. Deferment of paying porez na dohodak (income tax)
  2. Deferment of paying porez na dobit (profit tax)
  3. Deferment of paying doprinosi na plaću (contributions on wages)
    1. Zdravstveno osiguranje (health insurance)
    2. Mirovinsko osiguranje (pension)

Private entrepreneurs, self-employed, and freelancers most affected have the option of delaying payment of these taxes for a period of three months. If the situation worsens, it is possible that the deferment will be extended for another three months. After this period finishes, the taxes must be paid back in installments in a period of up to 24 months without any fees.

Your company must not have a debt that is higher than 200 kuna to qualify.

Usually these taxes feed into the budget for local authorities. During the period of deferment, the state will pay these contributions directly to local authorities so that their budget is not impacted.

Business owners whose business is endangered can now send the request for 3-months deferral of paying taxes to Porezna uprava.

Here are instructions on how to apply for this deferment:

Zahtjev za odgodom plaćanja uslijed posebnih okolnosti (A request for deferral of payment due to special circumstances) can be sent via:

  • ePorezna
  • Porezna uprava web form
    • Under the section Odabir teme * choose the option ePorezna – JPPU
    • Under the section Odabir podteme * choose the option Zahtjev za odgodu plaćanja
    • Fill in this form and enclose it under the section Priložene datoteke
    • Note: if you are not able to sign and attach the form, a form without the signature will be accepted as well. Be sure to include your contact information in the request and email if necessary.

Frequently asked questions regarding this measure can be found here.

This program expires in June.

 

#2 Exemption for obrt trade companies – IMPLEMENTED

HOK (Croatian Chamber of Trades and Crafts) will exempt all owners of obrt (trades) from paying komorski doprinos (chamber contribution) for the next 3 months, starting from April 1, 2020. You can read more about this measure here.

This program expires in June.

 

#3 Subsidized employee salaries – IMPLEMENTED

A new measure from HZZ has been implemented called “Potpore za očuvanje radnih mjesta u djelatnostima pogođenima koronavirusom (COVID – 19)”. The purpose of this measure is to give financial support to businesses in an effort to preserve jobs.

This financial support will help subsidize employee salaries for up to 3 months starting March 1, 2020. The amount of the subsidy is 3.250 kuna for March per worker, and will increase to 4.000 per month per worker for April and May. The state will also pay the contributions on top of salary, which amounts to approximately 1.460 kuna per worker per month on a salary of 4.000 kuna. The exact amount varies as local taxes vary by jurisdiction.

The government hopes that businesses will pay their employees more in salary than just this subsidized amount. This program is only available to business owners (companies, trades and independent professions) who KEEP their employees. The companies must have been opened before February 29, 2020.

To qualify for this subsidy, you must prove that your income is 20% lower now than it was at the same time last year.

Requests for March can still be submitted by April 4th. The payment will be made by the 10th. This same schedule will apply to May and June as well respectively.

You can submit your application for support here.

This program expires in May.

 

#4 Unemployment benefits for fired workers – IMPLEMENTED

Residents who have lost their job can register for unemployment through HZZ via email. They must apply to the closest office to their address. The list of all HZZ’s offices and their email addresses can be found here.

You will need to provide:

  • Filled out application form (Signature not required)
  • Identifikacijski dokument (identification document) – Valid ID card issued in Croatia or another EEA member state or Switzerland, a passport or a residence card for third-country nationals
  • Potvrda o boravištu (Residence certificate) – This is necessary if the person applies somewhere outside the place/address stated in an identification document

#5 Elimination of chamber of commerce fees – IMPLEMENTED

HGK (Croatian Chamber of Commerce) has decided to exempt business owners who are not earning an income during the pandemic from paying membership fees for the next 3 months.

This program expires in May.

 

#6 Elimination of real estate interest – IMPLEMENTED

Ministarstvo državne imovine (Ministry of State Property) has decided that during the coronavirus crisis, they won’t charge statutory interest rates on real estate rents and contracts won’t be terminated if the rent isn’t paid.

#7 Reduction of reserve requirement – IMPLEMENTED

HNB (Croatian National Bank) has reduced the usual reserve requirement rate from 12% to 9%. This will make things easier for the Croatian banking system and help the economy to survive the crisis. By lowering the reserve requirement rate, more money will circulate and the liquidity of the banking system will be increased.

#8 Payment of income tax and salary contributions – IMPLEMENTED

Businesses that earn income in amounts of less than 7,5 million kuna per year (93% of companies) and whose income has fallen more than 50% will be exempt from paying tax liabilities (porezne obveze), which includes income taxes (porez na dobit and porez na dohodak) as well as contributions on salary (doprinosi).

The 7% of businesses that earn more than 7,5 million kuna will be exempt from these tax liabilities in proportion with the fall of their incomes for April, May, and June as compared to the same months last year.

For businesses whose income has fallen 20-50%, tax liabilities will be postponed for 24 months. Those whose income has fallen 50-100% will pay proportionally. For example, if income has fallen 75%, they will pay 25% from the total 100%.

For businesses whose income has fallen for less than 20%, it is assumed that they are strong enough to survive the crisis.

#9 Postponing payment of PDV – IMPLEMENTED

All companies will have the option to delay payment of PDV until invoices are paid, to remove the burden from the taxpayer. This change in policy is only temporary and thus far, the government has not yet defined an exact timeline for how long they will allow this postponement.

  • For March, the delay expires in July
  • For January to March, the delay expires in July
  • For April, the delay expires in August

 

#10 Delay of financial reporting deadline – IMPLEMENTED

This measure is offered to all businesses.

The deadline for delivering financial reports for 2019 is postponed from April 30th to June 30th. This also includes all the forms and income tax related to these financial reports. Paying fees to FINA for publishing these reports are abolished.

This program expires in June.

 

#11 Agricultural subsidies – IMPLEMENTED

To encourage domestic agricultural production, at least 60% of agricultural and food products must be produced or refined in Croatia or come from Croatian businesses going forward.

The government will buy up all surpluses from companies that produce domestic dairy products.

#12 Loans, credit reprogramming and credit deferral – IMPLEMENTED

All companies whose business is endangered due to the coronavirus crisis can apply for loan and credit measures through FINA to preserve the level of economic activity and liquidity.

Available measures include:

  • Krediti za likvidnost i radni kapital (Liquidity and working capital loans)
  • Reprogram kredita (Credit reprogramming)
  • Odgoda kredita (Credit deferral)

All requests can be sumbitted online, which will then be processed and delivered to banks. Banks will contact applicants with feedback and next steps.

All queries can be asked via email [email protected]

#13 Micro loans for rural development – IMPLEMENTED

Applications for a loan called “Mikro zajam za ruralni razvoj” are open. Funds are intended for micro and small businesses in agricultural, manufacturing, and forestry sectors.

The loan amount ranges from 1.000 EUR to 25.000 EUR with an interest rate of 0,5%. The repayment period is 3 years.

Detailed program is available here.

 

#14 Enforcement procedures will be stopped – IMPLEMENTED

The government will stop enforcement procedures for citizens who aren’t paying their debts on time.

Zakon o provedbi ovrhe na novčanim sredstvima (Law on Enforcement) has been revised and was published in Narodne Novine.

This change to the law includes:

  • A temporary stop of all enforcement on citizen’s bank accounts
  • A temporary stop of all interest rates

The goal is to help citizens who give a part of their monthly income for enforcement costs. Instead, they can use this extra money for daily living costs.

These special measures will last three months from the law’s entry into the force. After these 3 months, the government may prolong this period for additional three months.

This program expires in July.

 

#15 Postponing the seasonal toll increase – IMPLEMENTED

Croatian Minister of Sea, Transport and Infrastructure has announced that the seasonal toll on highways will not increase for the summer. The cost to use the toll highways typically increases for the summer season. There is a possibility that the government will even reduce the toll for Croatian citizens but that has yet to be decided. (If they do, we’ll update this post. Let’s hope they do!)

The hold on the season toll increase is valid for the summer only.

The toll at the Krčki most (Krk’s bridge) is also now abolished.

 

#16 Free dopunsko for low income people – IMPLEMENTED

The government has changed Zakon o dobrovoljnom zdravstvenom osiguranju to allow for low income citizens to have free dopunsko health insurance. Citizens whose monthly incomes are lower than 1.563 kuna (on average per family member in a household) don’t have to pay for dopunsko health insurance. For single people, their monthly income must be lower than 2.000 kuna to qualify.

 

#17 Early release of income tax refunds – IMPLEMENTED

The government will pay tax refunds earlier this year and hope to make this standard practice in the future. Citizens will receive decisions on tax refunds by the end of May together with the deadline for appeal. Tax refunds will be paid in June.

 

#18 20.000 kuna per household for earthquake damage – IMPLEMENTED

The government will help finance owners of family houses, apartments, and protected tenants that suffered damage from the earthquake in Zagreb, Zagreb county, and Krapina-Zagorje county. Each household will receive 20.000 kuna. This money is intended for repair of heating, chimneys, boilers and other essentials. The aim is to help citizens return to their homes.

The building manager should apply for this benefit on behalf of buildings. Homeowners should apply for houses.

Applications opened on May 15 and will be closed after 60 days.

All the information and forms are available here.

 

#19 Tourism-specific tax relief – IMPLEMENTED

The Ministry of Tourism has implemented the following benefits in the tourism sector:

  1. Exemption from paying tourist fees for private renters

Persons who offer catering services in the household and family farms are exempt from paying 50% of tourist fee in 2020, which they are obligated to pay for the main bed and the accommodation unit in camps or objects arranged in the “robinson” style. They are also exempt from paying tourist fees for additional beds for the year of 2020.

  1. Exemption from paying the variable part of the concession fee for 2019 for those who use concession on tourist land in camps

The variable part of the concession fee won’t be charged according to the prescribed model. Instead it will be the amount of 1 kuna.

There is an exemption from paying the fixed part of the concession fee for 2020 for those who use concession on tourist land in camps.

Paying the fixed part of the concession fee is delayed for 3 months – from August 31 to November 30, 2020.

  1. Exemption from paying the variable part of the concession fee for 2019 for using tourist lands in ownership of JLS (jedinice lokalne samouprave = local authority units)

The variable part of the concession fee won’t be charged according to the prescribed model. Instead it will be the amount of 1 kuna.

There is an exemption from paying the fixed part of the concession fee for 2020 for using tourist lands in ownership of JLS.

Paying the fixed part of the concession fee is delayed for 3 months – from August 31 to November 30, 2020.

  1. Additional changes in the law:
  • The validity period for temporary solutions for catering objects, household facilities and family farms have been extended to the end of 2021. This regards objects that already submitted the request for legalization, but they still haven’t received permanent solutions on legalization.
  • Deadlines for renters who want to keep their category label (stars) must submit the request for the new solution:
    • Until April 8 2022 – those who got old solution for category labels before December 31, 2000
    • Until April 8 2023 – those who got old solution for category labels between January 1, 2001 and December 31, 2004
    • Until April 4 2024 – those who got old solution for category labels after December 31, 2004
  • The directive which regulates amounts that can be used for salary of workers in tourism in relation to the total revenues of the company won’t be applied in 2020 and 2021.

#20 Additional proposed financial relief measures – Not yet implemented

The government is currently working on implementing 66 additional measures in effort to help Croatian residents survive the impact of COVID-19. These measures relate to 8 Croatian ministries, the largest part covered by the Ministry of Finance. As they are finalized, we will update this post with more detailed information. For now, these additional measures are only in the proposal stage.

The possible measures that have been proposed include:

  • Elimination of fees resulting from tax payment or installment tax payment delays
  • Providing funds for existing loans (via commercial banks and Hrvatska Banka for Reconstruction and Development) and reconsidering the option to postpone credit payments for a period of three months
  • Loans without any fees for local units, HZZO, and HZMO
  • Taxpayers who pay utility bills for business premises to local authority units will be exempt from paying it
  • Payment of tourist taxes, tourist membership fees, and concessions on tourist land will be postponed

Dugo Selo, Sveti Ivan Zelina, Sveta Nedelja, Pirovac, and Križ have already implemented measures on a local level including:

  • Cancelling payments for closed kindergartens
  • Payments for enforcement
  • Deferred utility bills for businesses and entrepreneurs
  • Cancellation of option to lease all government-run office and public spaces

#21 COVID-19 Loan – EXPIRED

Applications for a loan called “COVID-19 zajam” are open. Its aim is to ensure additional liquidity for micro, small and medium businesses. It is funded by the European Regional Development Fund.

The maximum loan amount is 750.000 kuna with an interest rate of 0,25%. Expiration date is up to 6 months, and the repayment deadline is 5 years.

It is intended to help all micro, small and medium businesses EXCEPT:

  • Fisheries, aquaculture, and primary agricultural production
  • Tobacco and distilled alcoholic beverages
  • Manufacture and trade of weapons
  • Casinos
  • Other businesses excluded by the Program’s terms

This program is no longer available.

 

Are you a business owner and need help figuring out which measures you qualify for?

As a business owner myself, I know how hard it can be to navigate the system. The Croatian government has implemented some real valuable tax relief measures and subsidies that can help your business during this time if you’re revenue has been impacted by the pandemic. You shouldn’t have to miss out because you don’t know the language or what to do.

We can connect you with a legal expert who can advise you on which measures you qualify and how to apply. Contact us using the below form and get help now.

 

Has your business been affected by COVID-19? What do you want the government to do to help your business survive?

Sharing is Caring:

Leave a Reply

Your email address will not be published. Required fields are marked *