COVID-19: Croatia – Tax measures and aid for protection of workplaces


On 19 March 2020, the Croatian parliament has through an urgent procedure adopted package of 63 measures aimed to preserve jobs an maintain the ability of employers to pay out salaries. The package contains changes to tax laws which will, due to the occurrence of special circumstances, enable deferred payment of tax liabilities and payment of non-taxable aids to the businesses.

Although the changes are being adopted due to the current COVID-19 pandemic, they make the legislative framework that will enable their reactivation when needed in future.

A. Deferred payment of tax liabilities

If a taxpayer, as a result of special circumstances, has difficulties with paying due taxes, there is a possibility of their interest-free deferral.

This applies to all taxes (including Corporate Income Tax, Personal Income Tax and VAT), contributions (including mandatory contributions from and on the salary) and other public fees – concession fees, fines for misdemeanours and other fees collected by the Croatian Tax Authority. Customs and excise duties are specifically excluded.

In more detail, taxpayers who are not able to settle tax liabilities which became due between 20 March and 20 June 2020, can apply for their three-month interest-free deferral. If special circumstances will be prolonged, there is a possibility for this measure to apply also to tax liabilities which will become due between 20 June and 20 September 2020.

A taxpayer can apply for deferred payment of taxes provided there are no unsettled tax liabilities from the past, and:

  • there is at least 20% revenue drop in the previous month compared to the same month of previous year, or

  • taxpayer successfully elaborates it is likely there will be a decrease of revenue of at least 20% over the next three months compared to the same period of previous year.

Note that deferral of VAT will apply only if the taxpayer was not able to collect invoiced supplies and/or there are other problems with the liquidity. Furthermore, the deferral of VAT is limited to smaller entrepreneurs, i.e. taxpayers with total supplies (excluding VAT) in previous year below HRK 7.5 million (approximately EUR 1 million) and not applying the cash accounting scheme. However, even such taxpayers will not be able to defer payment of VAT liability for February 2020.

All requests for deferred tax payments will be resolved expediently.

Note that the taxpayers who received approval of deferred payment are still obliged to prepare and file all tax returns and reporting within the prescribed deadlines (as before).

B. Payment of tax liabilities in instalments

If a taxpayer will still not be able to settle deferred tax liabilities (measure described above), there is an option of paying in instalments without incurring default interest. Payment in instalments can be approved for the period up to 24 months.

C. Tax treatment of financial aids

According to the amendments to the Personal Income Tax Act and Corporate Profit Tax Act, aids received by respective taxpayers will not be taxable (aids will not be included in their tax base).

D. Earlier tax refund to individuals

Refund of overpaid personal income tax for 2019 should be paid out earlier this year – in June instead of August.

E. Financial aid for protection of workplaces

Employers can apply for non-refundable financial aid for protection of workplaces. The measure should cover March, April and May 2020.

For each full-time employee, monthly aid is HRK 3,250 (approximately EUR 430). For each part-time employee, monthly aid is HRK 1,625 (approximately EUR 215).

The aid can be requested by following businesses:

  • from accommodation and catering sector;

  • from transport and warehousing sector;

  • from labour intensive activities within the processing industry – textile, clothing, footwear, leather, wood and furniture;

  • ordered by the relevant civil protection headquarters to discontinue activities;

  • other employers able to prove negative effects of special circumstances.

When requesting the aid, the employers need to describe and support the reasons of requesting the aid and state which activities were carried out to maintain the workplaces. Most common reasons would be a decrease of revenue or cancellations of projects and orders due to the pandemic.

Once the request and supporting documentation is filed, the respective body needs to issue the Resolution within 10 days.

After aid has been awarded, restrictions apply with respect to termination of work contracts and hiring of new employees.

For more information on Croatian COVID-19 response or any other issue, please contact your regular CMS advisor or local CMS experts Tamara Jelić Kazić, Marko Starčević and Maja Marcelić.