Friday, 26 February 2021

Croatian Finance Minister Talks Economic Measure Extensions

February the 26th, 2021 - The Croatian Finance Minister Zdravko Maric has stated that more is set to be revealed about the extension of the government's economic support packages to Croatian enterprises in the coming days.

As Poslovni Dnevnik writes, after a government session, Croatian Finance Minister Zdravko Maric commented on the economic measures set out for businesses in order to help them preserve jobs and keep their heads above water after those measures are relaxed on Monday.

"We're going to continue our dialogues with the representatives of all economic activities that are still influenced by these measures. We'll talk and hear their reflections. We still remain of the clear position that the protection of public health and the preservation of jobs are our priorities,'' Maric said.

"We aren't going to ignore certain appeals. Dialogue does exist. Representatives of the caterers' association have had conversations with my colleagues. We're being open here, there will be a dialogue,'' stated Maric, remaining staunch in an apparent avoidance of offering a more concrete answer to the question that is weighing on the shoulders of many company owners.

When asked whether support for job preservation could be expected to continue, the Croatian Finance Minister stated that it would definitely be discussed. He said that the economic measures for preserving jobs will remain in force until March the 1st, so for a few more days.

Warnings that business owners should at least have some sort of vague idea about what they can expect in the coming weeks and months didn't help to push Maric along in offering deeper explanations.

''We know how much money is in the state budget. The budget situation is as it is. We have cash for the continued preservation of jobs costs foreseen and provided. If additional funds are needed, then we will find a way,'' said Maric, who remained a closed book in the sense of offering more precise details.

"Talks will be held on how and in what way we can extend the measures and in which segments," he added, announcing that much more will be known over he coming days when it comes to which measures for preserving jobs will be extended and which will be allowed to expire.

Minister Josip Aladrovic continued in a similar tone despite being asked some very specific questions.

"We can expect continued assistance, but we must know that no one is prevented from working anymore, although it won't be possible for that work to take place in full. We'll protect the labour market and we can expect measures in that direction even after March the 1st,'' stated Aladrovic.

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Monday, 30 November 2020

FinMin Presents Three Measures to Help Entrepreneurs

ZAGREB, November 30, 2020 - Finance Minister Zdravko Maric presented on Monday, after talks with employers' and entrepreneurs' associations, three measures to help entrepreneurs whose businesses are closed due to new epidemiological measures, including job-retention measures, "COVID loans" and covering fixed costs.

The government, he said, will continue paying HRK 4,000 per worker under the job-retention scheme, and HRK 470 million has been provided for that purpose for the period until the end of the year.

"COVID loans" for liquidity, totalling HRK 1.3 billion, will remain to be available for "closed" business, which are the priority, and for other businesses, as well.

The third measure will cover entrepreneurs' fixed costs, or part of them, such as rent, lease, RTV subscription, monument annuity, music licensing fee, etc.

The decline in turnover in December will be compared to last year's results, the minister said, with businesses that have seen a drop in turnover of at least 60% being eligible for the measure, and the Tax Administration will be in charge of administration, based on fixed costs invoices.

Representatives of hospitality stakeholders said the measures were too weak and insufficient, noting especially that it is necessary to reduce VAT.

Monday, 30 November 2020

Proposals to Employers on Monday, They Insist on Any of Their Two Models

ZAGREB, November 30, 2020 - Economy Minister Tomislav Coric said on Sunday evening that during the weekend, the government's delegation led by Finance Minister Zdravko Maric had listened to the proposals of employers for measures to ease their situation after the imposition of tighter anti-COVID restrictions. 

Coric told the RTL commercial broadcaster that the government was fully aware of the adverse impact of the latest epidemic prevention measures on certain businesses and that the government would propose compensatory measures on Monday.

We will continue implementing the scheme of grants in the amount of HRK 4,000 per employee per month, the minister said and that employers will have access to the so-called COVID loans and that some of their fixed costs would be covered through the assistance provided by the government.

All those proposals will be discussed during their meetings on Monday.

HUP expects gov't to accept one of their models of compensation 

The Croatian Employment Association (HUP) said on Monday morning that they would insist on the the acceptance of any of the two models presented by bar and restaurant owners last Thursday to help them survive the new partial lockdown, saying that otherwise many of them would go bankrupt.

The first model envisages long-term compensation by slashing VAT to 5% for three years and to 13% over a longer term, and providing job-retention aid until April 2021, i.e. HRK 4,000 per employee and writing off taxes and contributions until 1 May 2021.

They also proposed compensation of €10 per square metre of their establishment, COVID loans to ensure liquidity for three years and a moratorium on loan payments for businesses which are not allowed to work.

The second model envisages ensuring revenue for entrepreneurs in the amount of 50% of their turnover at the same time last year as a direct grant which would also be used for salaries, including a contribution write-off.

This model also envisages exemption from all fixed liabilities for the duration of the lockdown, including rent and utilities. Exemption from parafiscal levies was also proposed.

Monday, 9 November 2020

Majority of Salaries Will be Taxed 20%, Says Daily

ZAGREB, November 9, 2020 - As of next year, Croatia will tax a majority of salaries only 20%, plus local tax, which is four percentage points less than now, Vecernji List daily said on Monday.

The government believes this change will reduce the tax burden on salaries by HRK 2 billion annually, the paper said.

How much each employed person will benefit from the cut depends on their gross salary and deductions for children and other dependent family members.

Income tax is paid by all employed persons as well as the jobless who do part-time work and pensioners whose allowance exceeds HRK 4,000.

Finance Minister Zdravko Maric says two-thirds of those liable for income tax actually do not pay it because their income is below the taxation threshold when deductions for dependent family members are added to their non-taxable monthly income (HRK 4,000) .

Those not paying income tax cannot expect anything from the tax rate cuts going into force as of January 1, which has been a source of numerous frustrations and dissatisfaction for a long time. From every salary, regardless of its amount, is first deducted 20% for pension contributions, while the rest is considered as income. Those whose gross salary is below HRK 5,000 do not pay income tax, only HRK 1,000 for pension contributions.

Additional deductions make the difference even more pronounced. If a worker with a gross salary of over HRK 10,000 has two children who bring an additional HRK 4,250 in tax deductions, there is nothing to deduct, so they cannot expect the reduction of the income tax rate to 20% will result in a higher salary as of January 1.

Children and dependent family members bring big deductions due to which parents with two or more children generally do not pay income tax. Reducing the income tax rate from 24 to 20% could result, for an employed Zagreb resident with an average gross salary of HRK 9,200 without children or dependents, in a HRK 160 higher monthly salary as of January 1, Vecernji List said.

(€1 = HRK 7.5)

Sunday, 8 November 2020

What Kind of Croatian Tax Relief Awaits Us in 2021?

As Poslovni Dnevnik/Jadranka Dozan writes on the 8th of November, 2020, the Croatian Government has sent proposals to Parliament to amend four laws that provide legal bases for the fifth round of interventions in the tax system. What sort of Croatian tax relief can we expect next year?

The main points of the new round of Croatian tax relief were presented before the second wave of the coronavirus pandemic. In the autumn economic forecasts presented yesterday, the European Commission revised the expectations for respective EU economies and now estimates that a return to pre-pandemic levels by the year 2022 isn't very likely. For Croatia, instead of predicting this year's 9.1 percent GDP decline, it is now counting on a decline of 9.6 percent (a larger decline is expected only in Italy and Spain), with the fact that next year, according to the EC, France should lead the rate growth (5.7%). When drafting the budget, the Croatian Government remained firm in its projection of an 8 percent drop this year, with a 5 percent increase next year.

The deterioration of the epidemiological situation, however, didn't affect the initially announced content of the tax package, nor did it significantly change the public consultation process which was conducted in the meantime, for which various stakeholders submitted about 40 proposals and/or remarks for alterations to the Income Tax Act.

In addition, the Croatian Government only took note of, but didn't take into account the position of the Fiscal Policy Commission, which, due to the uncertainty and risks associated with the pandemic, suggested to the government to postpone the implementation of the planned income and profit tax reduction. We'll be proceeding with the introduction of this Croatian tax relief, therefore, only at the beginning of 2021.

According to the government's calculations, this means that next year's income taxation will be reduced by around HRK 2 billion.

In contrast, after the previously extended plan for a reduced VAT rate for all food, budget concessions have been reduced to a more flexible taxation process for enterprises, while the end consumers, in mid-2021, will mostly face price increases for small online purchases from abroad. From the second half of the year onward, namely, the import of small value goods (up to HRK 160) will no longer be spared the payment of VAT, ie Croatian VAT will need to be paid on these deliveries, in accordance with the corresponding EU directive. Thus, VAT will be calculated next year with a positive fiscal effect of around HRK 250 million.

Upon presenting the new tax package, the government recalled that the effects of the past four rounds of Croatian tax relief (since 2017) exceed 8.2 billion kuna, and for 2021 they carry an additional HRK 1.9 billion. "The government is thus continuing the policy of relieving both citizens and enterprises, and with this new wave, we'll be at over HRK 10 billion of relief," stated Prime Minister Andrej Plenkovic. When everything is added up, Minister of Finance Zdravko Maric says that the relief for citizens reaches almost HRK 11 billion.

Howeverm some economists share the Fiscal Commission's reservations about the plan to cut income tax rates from 36 down to 30 and from 24 down to 20 percent from January the 1st, 2021. Although the tax burden in Croatia should generally be reduced, they warn that other countries, due to the circumstances surrounding the pandemic, mostly aren't reducing their room for maneuver in this way. Circumstances have changed significantly compared to the time before the elections and during the drafting of the Government's programme, and in these conditions of an increased need for the financing public services, there is usually no relief for citizens with a higher income,'' pointed out Zeljko Lovrincevic from the Institute of Economics.

At the same time, the Croatian Employers' Association (HUP) welcomed the announced Croatian tax relief, but due to the increased costs for preventive epidemiological measures, they consider them insufficient and have additional requirements.

They are satisfied, they say, that their proposal to treat the cost of vaccination against infectious diseases as non-taxable has been accepted. However, they insist that the retroactive application of this relief be envisaged, starting on March 11th, 2020, and that the measure be extended to testing workers. "Due to coronavirus, the costs for preventive measures have increased significantly, from protective equipment and the installation of physical barriers to maintaining the cleanliness of facilities and workplaces, and depending on the activity, they range from one hundred to as much as HRK 2,000 per worker," they explained.

HUP CEO Damir Zoric said that "it is the right time to reduce all unnecessary parafiscal levies and fees, the removal of which has been delayed for years.''


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Monday, 2 November 2020

Zdravko Maric Highlights EU Funds as Key to Croatian Recovery

As Poslovni Dnevnik/Jadranka Dozan writes on the 1st of November, 2020, in an environment dominated by the unpredictable course of the ongoing coronavirus pandemic, it's very difficult to predict and plan, so even with the state budget proposal for next year adopted yesterday, the Government session strongly pointed out that it reflects only the basic scenario. Do EU funds provide the answer to Croatian recovery?

The government has more or less remained on the trail of macroeconomic assumptions from the September Budget Guidelines, based on the epidemiological picture from the end of August, which has meanwhile deteriorated globally. However, the assumptions in the budgeting reflect the expectation of a return to last year's level of economic activity at the end of 2022.

After this year's 8 percent drop in GDP, a growth rate of 5 percent is expected in 2021, and then Croatian recovery and economic growth of 3.4 percent and 3.1 percent over the next two years, respectively. The biggest contribution to growth next year should come from the recovery of exports of goods and services (primarily tourism), which, like this year's decline, should be in the double digits.

However, as imports are expected to grow at the same time, the contribution of net exports to Croatia's enfeebled GDP growth will ultimately be lower than what is expected from personal consumption. Household spending is expected to rise 4.5 percent next year after falling 6.3 percent this year, according to government expectations.

When it comes to investing, the expectations are somewhat more modest; after an estimate of the decline for this year, the expectation for 2021 is growth of less than four percent.

The total budget revenues for 2021 are planned at 147.3 billion kuna or 12.3 percent more than the new plan for this year. When compared to last year, it's been eventually reduced by almost nine billion, as a result of 12 billion kuna less revenue from taxes and contributions, but with a simultaneous increase in revenues owing to very welcome EU assistance.

On the other hand, total expenditures from all sources are planned for less than 158 billion kuna next year, which is an increase of two billion or 1.3 percent more than the rebalanced plan for 2020.

However, Minister Zdravko Maric emphasised that expenditures financed from sources that affect the deficit (from general revenues and receipts) are planned at 118.4 billion, which is 3.6 billion kuna less than the new plan for 2020.

Unlike this year, when 5.4 billion of payments under coronavirus measures 5.4 were financed from sources that affect the deficit, according to the plan for next year, 2.1 billion kuna under these measures are planned to be financed from EU funds (React EU), and from sources that affect the deficit - only 100 million.

Katanciceva also calculated that, when the impact of the government's coronavirus measures is excluded from the expenditures, total expenditures financed from general revenues and receipts of the general government budget will increase by 1.7 billion kuna or 1.5 percent next year.

''The further deepening of the coronavirus crisis represents a great risk that is currently difficult to assess, and it would have a negative impact on budget revenues as well as on the needs of the economy for additional measures,'' pointed out the Minister of Finance, Zdravko Maric.

In the planning of the state budget, Maric explained that the goal remains the sustainability of public finances, with the control of expenditures and continued tax relief. In terms of Croatian recovery, European Union funds are generally gaining in importance.

In addition to the EU budget in the coming years, these funds which will greatly aid Croatian recovery as a whole include a combination of grants and loans from the recovery fund under the EU Next Generation instrument, and in the Croatian case there are significant funds from the Solidarity Fund for Post-Earthquake Reconstruction available.

Croatia will thus have a total of 23.5 billion euros or about 176.3 billion kuna available for strategic, development and reform projects at its disposal, while it can count on 5.1 billion kuna from the Solidarity Fund for the reconstruction of earthquake-damaged areas.

The baseline scenario of macroeconomic and budgetary developments should also result in a return of the level of public debt and deficit to a downward trajectory.

When it comes to budget expenditures that affect the fiscal balance, the largest increases next year (compared to the rebalanced plan for this) are expected as a result of tax relief in income tax, the effect of which is estimated at two billion kuna.

Therefore, the budget envisages 1.5 billion kuna more in the name of compensation to local and regional self-government units.

Expenditures for employees (including education) are planned to increase by almost half a billion (493 billion kuna) next year, with these expenditures being increased by approximately the same amount as part of this year's rebalance. A little less than 435 million kuna increase refers to participations for EU aid.

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Thursday, 22 October 2020

Croatia to Receive €1.02bn from EU SURE Instrument

ZAGREB, October 22, 2020 - By the end of this year Croatia will receive €490 million from the EU SURE instrument for temporary support to mitigate unemployment risks in an emergency following the outbreak of the coronavirus pandemic, the government said on Thursday, adding that a total of €1.02 billion has been approved for Croatia.

At today's cabinet meeting, Finance Minister Zdravko Maric was authorised to sign a loan agreement with the EU for this temporary support.

The SURE instrument was established by decision of the Council of the EU in May with the aim of providing financial assistance of up to €100 billion in the form of loans from the EU to affected member states to address sudden increases in public expenditure for the preservation of employment.

To finance these loans, the European Commission will borrow money on financial markets and lend it to member states under favourable terms. The first tranche of €17 billion was conducted a few days ago, and the interest was ten times higher, Maric said.

"The instrument is designed for short work time schemes and similar measures to help member states protect jobs and employed and self-employed people from the risk of unemployment and loss of income. All member states have signed a guarantee agreement to date, whereby the SURE instrument has become operational," Maric said.

He said that Croatia had applied for this funding to address sudden and serious increases in expenditures connected with subsidies to preserve jobs and support for shorter work time.

"A loan of €1.02 billion is available to Croatia, with a maximum average maturity of 15 years and an availability period for financial support of 18 months. Financial support can be used through a maximum of eight instalments which can be paid by one or more tranches. These are very favourable loans, and a total of €490 million will be paid to Croatia by the end of this year, which will be included in the budget revision and which is about 48% of the allocation," Maric said.

The government also decided to include micro and small businesses in the state aid programme for the sea, transport and transport infrastructure sector to help them cope with the crisis caused by the coronavirus pandemic.

Wednesday, 30 September 2020

Croatia Initiates Procedure to Conclude Double Taxation Convention with USA

ZAGREB, Sept 30, 2020 - The Andrej Plenkovic government on Wednesday launched procedures to conclude the double taxation convention between Croatia and the USA for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Finance Minister Zdravko Maric told the press before the government's meeting that the conclusion of the Convention would lead to many benefits in the taxation of all kinds of income and to the improvement of conditions for boosting bilateral trade.

"This is a great signal for investors. We are tackling the matter that has been present for more than two and a half decades," the Croatian minister said.

In October, the country's Tax Administration will open preliminary talks on holding negotiations on the document.

The convention will be beneficial to all industrial sectors, notably the IT sector.

Companies' income will be taxed in their countries of residence, the draft convention reads.

It will enable Croatian air and shipping companies that transport goods between the two countries to pay profit tax in Croatia only.

Croatian builders operating in the USA for less than 12 months will not pay taxes in the USA.

The convention regulates the taxation of income from real property, income, and salaries of athletes, artists, and so on.

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Saturday, 26 September 2020

Minister Zdravko Maric: Coronavirus Crisis Will Pass, One Problem Remains

As Novac writes on the 25th of September, 2020, a new round of tax reforms with changes that should take effect early next year will bring a reduction in corporate income tax rates, but a great opportunity for them is to withdraw money from European Union funds, said Finance Minister Zdravko Maric on Friday.

Ahead of the meeting on tax changes, which is usually organised at this time of year in the Croatian Chamber of Commerce (HGK), Minister Zdravko Maric said that he was carrying a "new message of tax relief" in the form of reducing income tax rates, noting that this also opens up a great opportunity for the use of European Union funds designed to help the economy fight the consequences of the ongoing coronavirus pandemic.

''What we're offering in the fifth round of reforms is the lowering of the income tax rate, I think that's more than enough, but I certainly want to hear what you want in terms of parafiscal levies and other burdens,'' said Minister Zdravko Maric, adding that it turned out that lowering tax rates ultimately brings in more to the state budget, but that there's a lower limit and as such it can't just be reduced indefinitely. He warned that the coronavirus crisis will pass, but that we'll be left with a demographic problem that will remain a burning issue.

According to earlier announcements, in the new round of tax reforms, income tax rates would be reduced from 36 percent to 30 percent and from 24 to 20 percent at the beginning of next year. There are also plans to reduce the corporate income tax rate from 12 down to 10 percent, for small and medium-sized companies, ie for all enterprises with an annual income of up to 7.5 million kuna.

Regarding the reduction of VAT rates on all food, Minister Zdravko Maric reiterated that this is part of the government's programme, as is the abolition of property sales/transfer tax, but that the government hasn't committed to any specific date when these measures should take effect.

HGK President Luka Burilovic said that businessmen were "extremely interested" in any tax relief.

He announced that he would ask Minister Zdravko Maric for measures to provide additional liquidity, especially over the next six months, as well as to speed up the procedures dealt with by HAMAG-BICRO in HBOR.

The head of the Croatian Chamber of Commerce also announced talks with the Ministry of Labour and trade unions on amendments to the Labour Law which will start next week. That law, he said, is outdated, and businessmen believe it should be more flexible. Flexibility, as he pointed out, shouldn't be feared by good workers.

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Thursday, 24 September 2020

Zdravko Maric: We Expect GDP Growth in 2021, But Less Than We Envisaged

September the 24th, 2020 - There have been many predictions about the state of Croatia's GDP as a result of the ongoing coronavirus pandemic, with some expectations being worse than others. Finance Minister Zdravko Maric was a guest of the Croatian Radio show "A sada Vlada/And now the Government" recently, during which he spoke about the guidelines for the 2021 budget.

As Poslovni Dnevnik writes on the 23rd of September, 2020, Zdravko Maric said that a document on economic fiscal policy should be adopted at a Croatian Government session on Thursday.

"These will be updated macroeconomic projections for this year and for the next three years. As was the case in May when there was a rebalance, the circumstances are really difficult. In a situation when we don't have a vaccine and it's still difficult to predict that epidemiological-health part of things as well as some other things, we got the best possible quality,'' said Zdravko Maric.

"For this year, our original projection regarding the fall in GDP will be somewhat improved. The drop should be smaller than we expected. We forecasted a decline of about -8 percent for 2020. For next year, we predict growth, but lower growth than we predicted, it will somewhere at the level of 5 percent,'' explained Zdravko Maric.

We will exceed the level of GDP back in 2019 somewhere in the middle of 2023

Zdravko Maric said that one could hear from analysts predicting a recovery in the shape of the letter V. It represents a fall which is significant, followed by immediate recovery.

"It quickly became clear that it all depends on various situations because there are still negative risks for these projections, especially from the health and epidemiological point of view. We'll exceed the level of GDP in 2019 in the middle of 2023,'' he stated.

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