Tuesday, 1 January 2019

New Rules and Regulations Coming into Effect Today in Croatia

The year which began a few hours ago will bring us at least two elections (European and parliamentary), which means there will be no painful cuts or reforms. However, there will be many new rules and regulations which will in some ways significantly change how people in Croatia live their lives, reports Večernji List on January 1, 2019.

The new year has brought us a lower VAT rate on a variety of foods and non-prescription drugs. Although there was initially much doubt whether lower VAT on fresh meat and fish, fruit and vegetables would bring lower prices for consumers, some retail chains have already lowered the prices of these products. It can be expected that they will be soon be followed by their competition. The average Croatian family should have around 1,000 kuna more in its budget due to the lower VAT rate.

The new year also brings a higher minimum wage (3,000 kuna instead of 2,751 kuna). Also, parents of university and high school students who receive scholarships or receive prizes will not have to fear that they will have to pay a higher income tax in the future due to the success of their children. Certain provisions of the new Law on the Rights of Croatian Veterans and Their Family Members also come into force.

Another major novelty is the pension reform, bringing a quicker harmonisation of the retirement age for women and men. Full equality when it comes to the retirement age will be achieved in 2027 when both women and men will retire at age 65. “Emancipation” will be confirmed in 2033, through an increase in retirement age for everybody. Both women and men will then retire at age 67.

There is good news for people wanting to buy expensive cars. They will be able to write off 50 per cent of the VAT even for vehicles costing more than 400,000 kuna, which used to be the upper limit for VAT deduction. According to the EU rules, the government had to expand the measure to include more expensive vehicles.

As of 1 January, the property transfer tax will be cut. Last year, this tax which is paid when you buy or sell real estate was reduced from five to four per cent, and this year it will be just three per cent. Also, there is a lower income tax on higher salaries. Income between 17,500 kuna and 30,000 kuna a month will be taxed at the rate of 24 per cent, instead of 36 per cent. The higher tax bracket will cover income over 30,000 kuna. Two salary contributions have been abolished, but there is now a higher contribution for health insurance.

Starting from January, owners of private rentals will have to pay a tax between 150 and 1,500 kuna, which will be determined by towns and municipalities. In local authority units which do not make their decision by 15 January, the tax will be 750 kuna.

Changes are coming to students as well, whose minimum wage will be increased from 21.50 kuna to 23.44 kuna.

A new health care act is also in force, which means that all health centres will have to have at least one physician on call on weekends and holidays. The law also introduces changes in the organisation of emergency medical assistance through the integration of unified emergency hospital admissions.

Most misdemeanour courts in Croatia are abolished as of today. They have been merged with municipal courts. The only two misdemeanour courts that remain are those in Split and Zagreb. Also, judges at the same court level will receive equal pay, and all of them, as well as state attorneys, will receive six per cent higher salaries.

Fostering will become a profession. Allowance paid to foster parents, who have so far received between 300 and 500 kuna per month, will increase to 2,500 kuna. For foster parents of children and adults with special needs, the amount will reach between 5,000 and 6,000 kuna. Foster parents will also continue to receive a supply allowance, which is now between 1,800 and 2,200 kuna.

More news on Croatia’s tax system can be found in our Business section.

Translated from Večernji List (reported by Iva Boban Valečić).

Thursday, 27 December 2018

Mandatory Pension Funds Reach Almost 2 Million Members

ZAGREB, December 27, 2018 - The four Croatian mandatory pension funds had a total of 1.93 million members at the end of November 2018, or about 92,000 more than at the same time in 2017, while their combined assets exceeded 98 billion kuna, according data provided by to the Financial Services Supervisory Agency (HANFA).

Compared with October 2018, the number of insurance policy holders increased by 5.5 percent or by 5,500 people.

The AZ OMF mandatory pension fund had the largest number of insured persons - 664,000 followed by Raiffeisen OMF (577,000), PBZ/CO (363,000) and Erste Plavi (326,000).

A total of 526 million kuna of net pension contributions was paid into the accounts of the four mandatory pension funds during this past November, an increase of 9.98 percent or 47.8 million kuna as against November 2017.

Since the start of this year, 5.56 billion kuna of net pension contributions has been transferred to the four funds' accounts.

Since the creation of the four funds about 15 years ago, 72.66 billion kuna of net contributions has been paid into their accounts.

Total assets under the management of the compulsory pension insurance funds reached 98.03 billion kuna at the end of November 2018, which is 7 percent or 6.5 billion kuna more than in July 2017.

More news on the pension system in Croatia can be found in our Business section.

Friday, 7 December 2018

Parliament Passes Pension Reform Bills

ZAGREB, December 7, 2018 - Following a heated debate with high-pitched tones, parliament on Friday passed a set of six pension reform bills.

The bills were adopted without MOST lawmakers being in parliament. "We won't take part in this shameful trade where former SDP MPs are saving this government, and the key partners MP Milorad Pupovac of the SDSS and Darinko Dumbović (Reformists) are not present," MOST MP Nikola Grmoja said as MOST MPs walked out of parliament.

The voting continued, without Social Democratic Party MPs voting either. The majority required to adopt the laws was secured by SDP MPs who had defected to the HNS caucus and to Milan Bandić's Work and Solidarity party - MP Mario Habek, MP Milanka Opačić and MP Zdravko Ronko.

SDP MPs Arsen Bauk and Gordan Maras first called for these three MPs to be moved so that they no longer sit among SDP lawmakers. Move these MPs that "Bandić bought off," Maras said.

"I am not for sale. I didn't ask for anything from Ivica Račan, nor from Zoran Milanović, nor from Davor Bernardić. I earned my seat with more than 25,000 votes, which is something you'll never get," Opačić retorted.

The reform which enters into force as of 1 January 2019 foresees extending working life to 67 as of 2033, penalising early retirement by 0.3% for each month or 18% for five years, as well as allowing pensioners to continue working part-time for 4 hours a day and retaining their pensions.

Beneficiaries of the Second Pillar pension system will be given the option to choose which pillar to take their pension from.

The reform experienced some changes between the first and second readings in parliament, so the penalty for early retirement was reduced from the originally planned 0.34% to 0.3% as well as adding six months of working life for mothers and adopted mothers for each child, which should increase their pensions by about 2%.

The reform also brings changes to pension funds aimed at providing greater transparency and control.

For more on the pension system in Croatia, click here.

Wednesday, 5 December 2018

Government Presents Pension Reform, Opposition Not Supportive

ZAGREB, December 5, 2018 - Labour and Pension System Minister Marko Pavić said in parliament on Tuesday that the pension reform was aimed at increasing pensions, securing the system's long-term sustainability and to redress the imbalance between generations, however, during the debate in parliament, opposition lawmakers said that the reform was prepared without taking into consideration any demographic analysis and that a lot more should have been done, adding that this was the worst possible Christmas present for citizens.

"By the end of 2020, 3,000 women will retire and will receive a pension 600 kuna to 700 kuna lower than current pension recipients and we know that their pensions are not high. That problem inspired us to resolve the problem and we did with the supplement of 27% and then we turned to fully improve the entire pension system," Pavić explained.

Parliament was debating a pension package comprising three laws in second reading.

The reforms are geared toward current pensioners, Minister Pavić explained and added that it has secured an increase for 248,000 people who had the lowest pensions and current pensioners with the lowest pensions can expect an increase of more than 6% next year and all pensioners have been provided with the opportunity for part-time work in addition to their pensions.

Pavić said that the average pensioner in Croatia has a working life of 30 years and added that the intention is to increase pensions for current pensioners but without jeopardising state finances.

The pension reform which is expected to enter into force as of 1 January 2019 foresees increasing working life to 67 as of 2033, penalising early retirement by a rate of 0.3% each month or 18% for five years. He reiterated that pensioners would be allowed to continue working 4 hours a day while keeping their pensions.

Beneficiaries of the second pillar pensions system will be given the option to choose which pillar to take their pension from.

"Do more because it's your obligation to save pensioners from poverty, and there are 90% of them. Adjust trends for the average pension to be in line with the average monthly pay, because now they are a mere 39% of the average wage, and we are almost the worst in the EU in that regard," MP Ivan Lovrinović of the opposition Let's Change Croatia party.

"We've increased the average pension to 2,700 kuna, which is 43% of the average pay. And we are pleased to say that people with a 40-year working life have an average pension of 4,600 kuna which is 70% of the average pay," Minister Pavić retorted.

The Social Democratic Party (SDP) is opposed to this type of reform because it is aimed exclusively at decreasing pensions for future pensioners and to make a saving on them. According to the proposal, citizens will work longer, receive less and have a much harder life in retirement, SDP leader Davor Bernardić said, criticising the government for not having the decency to even consult with unions.

He called out the government claiming that it is forcing people to work outside Croatia and that during this government's term, more than 100,000 people had emigrated. He added that raising the retirement age to 67 was unacceptable.

Bernardić said Labour Minister Marko Pavić's proposal was bad, dangerous, destructive and socially irresponsible. The proposed reform is showing pensioners that the future can be even worse than the present, Bernardić said.

It's illusionary to discuss whether the pension age will be 63, 65 or 67 while our demographic picture is as it is, MP Nikola Grmoja (MOST) said.

MP Anka Mrak Taritaš (GLAS) referred to the pension reform as something "so-called," and that there actually hasn't been any reforms during this government's term.

Parliamentary groups forming the ruling majority commended the government's proposal saying that it was necessary to take into account the circumstances in which the reform is being adopted.

For more on the pension system in Croatia, click here.

Tuesday, 13 November 2018

Retirees Opposed to Croatian Government's Pension Reform

ZAGREB, November 13, 2018 - The leader of the HSU pensioners' party, Silvano Hrelja, said on Tuesday that the government's pension reform would produce negative effects because of the harsh penalisation of early retirement without taking account of working life.

Addressing a press conference, Hrelja commended the "27% supplement for each year since 2001 and the 20.25% supplement on the Second Pillar pension," and the right of Second Pillar beneficiaries to choose the more favourable pension allowance, which he said has in fact become a voluntary pillar.

He noted that it wasn't true that Croatian workers have a short working life and said that on average workers have a working life of 34 years and not 30 years because it is necessary to exclude "disability and family pensions that are never counted in the same statistics anywhere in the world."

He added that they support the idea of a bonus for those remaining on the labour force even after the age of 65, even though it will benefit only doctors, judges and academicians.

HSU has made some calculations regarding the pension system and the consequences of the future reform for a person with an average wage, which currently amounts to 6,200 kuna, and with 40 years of service who goes into early retirement, prior to the age of 62 for women and 65 for men, and for a person who earned the minimum wage and who, with 40 years of service, became eligible for an age pension or early retirement.

The current penalty for early retirement is 6%, and the government proposes that it be 20.4%, whereas the bonus would be 3.13%. "We are opposed to a rigid penalisation of 0.34% for each month without taking working life into consideration," Hrelja said.

For a person with the average pay who wishes to retire five years earlier, currently their pension would amount to 2,466.56 kuna, whereas according to the government's proposal, their pension allowance would amount to 2,088.70 kuna.

Someone on a minimum wage and 40 with years of working life would receive an age pension of 2,544.40 kuna, while after the reform they would receive 2,624 kuna, which is an increase of 79.60 kuna due to the 3.13% bonus, Hrelja explained. If that person were to retire earlier, their pension would currently amount to 2,391.70 kuna, whereas after the reform it would be 2,088.73 kuna, regardless of the 3.13% bonus.

"The increase of 3.13% is a big farce due to the rigid penalisation of early retirement," he stressed.

Instead of the increase of 3.13%, HSU proposes an income and assets test for pensioners and that pensioners receive a Christmas bonus because they will get more from the state than they do now and that won't upset the system of contributions.

HSU also recommends that each woman is accredited with an additional year of working life for each child for the purpose of pension insurance.

Hrelja also recommends introducing the Family Pension as exist elsewhere in Europe. As an example he cited a working couple who together have 70 years of working life, and if the husband dies earlier the wife would be eligible for her own pension and a portion of her late husband's pension.

For more on Croatia’s pension system and pension reform, click here.

Tuesday, 23 October 2018

Pension Reform Continues to Draw Criticism

ZAGREB, October 23, 2018 - Labour and Pension System Minister Marko Pavić said on Tuesday that he was willing to continue negotiations with the unions regarding the pension reform, calling on unions to have additional rounds of talks.

Sunday, 21 October 2018

Government Defends Pension Reform Plans

ZAGREB, October 21, 2018 - Labour and Pension System Minister Marko Pavić commented on Saturday's union protest against a draft pension reform, saying citizens should not worry because their pensions would not be cut and that the reform was launched to raise pensions and make the system sustainable.

Saturday, 20 October 2018

Unions Protest against Pension Reform Plans

ZAGREB, October 20, 2018 - Several thousand people rallied in downtown Zagreb on Saturday for a protest against the government's pension reform proposal, organised by three trade union federations.

Wednesday, 17 October 2018

Government Sends Pension Reform to Parliament

ZAGREB, October 17, 2018 - The government on Wednesday sent a package of bills to parliament for the comprehensive pension reform following four months of negotiations with social partners, with Labour and Pension System Minister Marko Pavić saying that current pensioners can expect further increases in their pension allowances, while future pensioners can expect the second pension pillar to strengthen, the investments to increase in that pillar, and that pensioners will be able to select the most favourable option to use those funds upon retiring.

Monday, 24 September 2018

Government Ready to Compromise on Pension Reform

ZAGREB, September 24, 2018 - After meeting with trade union leaders on Monday, Labour and Pension System Minister Marko Pavić said that during the four-hour-long talks on the government's proposed pension reform, the unions outlined a proposal that changes the concept on the pension reform, adding that the government is prepared to come up with a compromised proposal and that the talks will continue.

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