The second package of government measures for mitigating the effects of the COVID-19 pandemic on the Croatian economy entered into force in the second week of April 2020. All of the government-proposed measures were accepted in Parliament, some of them unanimously. This second package completed and upgraded the initial 63 measures launched in March. There are now 100 measures in total pertaining to different sectors, but mainly focusing on liquidity and employment (for further details please see "Measures introduced to preserve employment during COVID-19 pandemic").
Two weeks after the initial package was announced, which included a deferral of company obligations to the state (for further details please see "Measures introduced to protect businesses affected by COVID-19 pandemic"), the government turned the deferral into a full or partial waiver of tax obligations and contributions during the pandemic.
The April 2020 package of measures was implemented through amendments to numerous laws, regulations and by-laws, including the General Tax Act, the Act on the Execution of the State Budget 2020 and the Accounting Act.
While some sectors such as tourism or hospitality were hit immediately and directly due to the lockdown, others would feel the consequences in the coming months as supply chains are disrupted and repercussions from other sectors spread. Croatia decided on the strategy of aiding companies proportionally, according to the extent to which they are affected.
Some of the measures include:
- the deferral of tax liabilities or full exemption, depending on revenue;
- the deferral of VAT payment for issued invoices; and
- an extended deadline for submission of 2019 financial statements.
Companies whose revenue in April 2020, May 2020 and June 2020 has fallen by 50% or more compared with the respective month in 2019 will be completely exempt from their tax liabilities (other than value added tax (VAT)) – namely from paying profit tax, income tax and contributions. If a company's fall in revenue is between 20% and 50%, it is entitled to a deferral of said liabilities and payment in instalments for 24 months without interest. Businesses whose revenue fell by less than 20% can weather the storm according to the prime minister.
The above tax relief measures concern companies which generate a turnover of less than HRK7.5 million (approximately €1 million), which is 93% of all companies in Croatia. The 7% of companies which generate more will be exempt from tax liabilities in proportion to the fall in their revenue for April 2020, May 2020 and June 2020. If their revenue has fallen by 20% to 50%, they are entitled to a deferral and interest-free payments in instalments like smaller companies and if the fall in revenue is more than 50%, they can pay proportionately. For example, a company that experienced a 75% fall in revenue will pay 25% of its tax liabilities.
Further, it will now be possible to defer VAT payments until the invoices issued are billed and the actual financial transaction takes place (this applied only to small businesses before the measures were introduced).
The deadline for the submission of financial statements for 2019 has been extended until 30 June 2020 and the Financial Agency will waive its fee for the publication of financial statements.
Government offices are conducting analysis to find additional possibilities for saving resources and alleviating the impact on the economy in the wake of the health crisis. It was announced that a third packet of measures should include a reduction or waiver of parafiscal levies. A total of 488 of such levies are currently imposed on Croatian employers in different sectors.
