ZAGREB, April 28, 2020 - The Croatian Employers' Association (HUP) on Tuesday called on the government to reduce the VAT rate on protective products to 5 percent.

HUP welcomed the government's decision to gradually ease restrictions and relaunch economic activity, but warned that protective equipment was essential for numerous businesses that do not have any way of obtaining it, saying that the government should donate such equipment.

"We call on the government to donate protective equipment to employers so they can follow the epidemiological measures and resume work after 45 days. Because of the cessation of their operation, businesses did not have any income, and there is the additional problem of the supply chain in Europe which cannot cover demand so that the majority of enterprises cannot acquire protective equipment on their own," HUP said.

HUP added that a large majority of SMEs that have reopened are faced with the problem of obtaining protective equipment, which incurs costs of several thousand kuna a month and puts a great burden on businesses.

HUP proposed that VAT be reduced to 5% for protective equipment, disinfectant, gloves, masks, overalls and so on, used in the fight against COVID-19.

HUP underlined that the reduced VAT rate would facilitate the health system, businesses and citizens in ensuring appropriate conditions for the efficient fight against the spread of the disease and its negative consequences.

More economy news can be found in the Business section.

ZAGREB, April 26 2020 - The opposition Social Democratic Party (SDP) on Sunday presented measures designed to reduce para-fiscal levies from the register of non-tax contributions.

Presenting the new measures, Social Democrat MP Boris Lalovac and the head of the party's board of advisors on finances and the state budget, Danijel Ferić, said that the most frequent problems encountered by entrepreneurs and citizens were the amount of para-fiscal levies, the fact that they do not get anything in return, the way para-fiscal levies are collected, and the constant changes in the amount of para-fiscal levies.

Ferić said that the government had not done anything since 2016 to update the register of non-tax levies, which was why the SDP proposed, in order to help make savings, that the Croatian Chamber of Commerce (HGK) and the Croatian Chamber of Trades and Crafts reduce their membership fees by 50%.

The party also proposes, among other things, that local tourist boards lower their membership fees by 50% and that the water management contribution be lowered by 40%.

These measures, the two SDP officials said, would help reduce the non-tax burden in the amount of 0.2% of GDP.

More SDP news can be found in the Politics section.

ZAGREB, April 21, 2020 - The Croatian Employers' Association (HUP) on Tuesday called for the reduction of the 20 highest parafiscal taxes, whereas other parafiscal charges should be either revoked or reduced by 70%.

The HUP believes that during the coronavirus crisis it is high time that those charges were thoroughly analysed and most of them revoked or reduced.

The press release signed by HUP director-general Davor Majetić reads that the current crisis imposes an obligation on the authorities to remove all hurdles and costs that make doing business harder and affect the investment potential of companies in Croatia.

The HUP recalls that for the last twenty and odd years it has forwarded requests for the reduction of parafiscal charges to various governments.

"We have underscored on several occasions that those taxes should be suspended and then thoroughly analysed so as to reduce their number to a minimum and within the acceptable frameworks business-wise," Majetić was quoted as saying.

The HUP published a first list of parafiscal taxes in 2007 and the list contained 245 various charges. Since then their number has risen almost twofold.

The press release cites several examples of this burden on businesses in various sectors.

For instance, a manufacturer in the timber industry that employs 2,000 workers is expected to pay HRK 4.6 million kuna annually in parafiscal charges. They include HRK 123,700 as the annual membership fee of the Croatian Chamber of Commerce (HGK), taxes for preservation of listed building in the amount of 47,300 kuna, the television and radio subscription fee in the amount of 54,500, the fee for packaging waste management in the amount of HRK 65,200, water management tax in the amount of 52,500, forest parafiscal charges in the mount of 191,400.

Another example is an agricultural producer with about 100 workers on its payroll who is expected to pay nearly 380,000 in parafiscal taxes annually.

More economy news can be found in the Business section.

ZAGREB, April 18, 2020 - The MOST party on Saturday presented amendments to the VAT Act proposing that VAT on all protective equipment preventing the spread of COVID-19 be slashed to 5%.

"We believe this is an appropriate proposal at the moment and that it would relieve the whole procurement system for those products," the head of the opposition party's economic council, Mislav Kraljević, told reporters.

He said the party hoped the amendment would be put on parliament's agenda as soon as possible and that other parliamentary parties would support it.

MOST leader Božo Petrov said the party had nine bills aimed at helping businesses and citizens cope with the current crisis.

Asked to comment on the government's dismissal of a Social Democratic Party proposal for a moratorium on loans, he said MOST had been proposing that from the start as well as a moratorium on interest rates and the suspension of enforcement proceedings.

Petrov also commented on the next parliamentary election, saying that because "the virus will last... the most adequate thing would be for the government to enable electronic and postal voting."

More MOST news can be found in the Politics section.

ZAGREB, March 25, 2020 - The Tax Administration received about 2,000 applications for tax deferral on the day the government put this measure in place, and about 14,000 businesses applied to the Labour and Pension System Ministry for financing of the minimum wage for 71,000 workers, Finance Minister Zdravko Marić said on Tuesday evening.

The two measures, prompted by the coronavirus pandemic, will require at least HRK 5 billion (€65m) for the next three months and this amount was not provided for in the present budget. "But we will secure it," Marić said in an interview with the public broadcaster HRT, adding that reimbursements would start on Thursday.

Asked why the government did not write off tax liabilities, Marić reiterated that businesses would not have to pay their taxes over the next three months, "and what will happen after that, we will discuss in the coming weeks and months."

"We all expect that this will deal a very strong blow to our economy, and given that we don't know how long it will last, we will be adjusting our measures and introducing new ones accordingly," the finance minister said.

More coronavirus news can be found in the Lifestyle section.

ZAGREB, March 19, 2020 - The price of cigarettes will go up by up to HRK 2 per pack starting April, and there will also be an increase in the prices of alcoholic beverages, soft drinks with higher sugar content and energy drinks, the Croatian government decided on Thursday.

The government adopted regulations governing excise taxes and special taxes on those products. Three regulations were adopted - on excise taxes on tobacco and tobacco products, on excise taxes on alcohol and alcoholic drinks, and on the calculation and variables for special taxes on coffee and soft drinks - to come into force on April 1.

The regulation on excise taxes on tobacco and tobacco products will increase the tax by HRK 35, from HRK 335 to HRK 370 for a thousand products.

The Finance Ministry estimates that the state budget would get an additional HRK 400 million from the increase in the excise tax on tobacco and tobacco products.

The regulation on excise taxes on alcohol and alcohol beverages, the government estimates, would bring an additional HRK 30.3 million.

Excise taxes on beer, wine and other fermented beverages will not change, the government says.

Finance Minister Zdravko Marić said that in the EU Croatia had one of the lowest excise taxes on alcohol, and that it was followed only by Bulgaria.

Underscoring that the regulation on excise taxes had nothing to do with the coronavirus, Marić said that they had been in contact with domestic manufacturers of alcohol and alcoholic beverages.

The government also adopted a regulation on the calculation and variables for special taxes on soft drinks, and the changes were connected to the calculation of the special tax on soft drinks and energy drinks.

Now the excise on soft drinks consists only of a fixed part, HRK 40 per hectolitre, but under the new regulation it will also depend on the volume and sugar content.

The fixed part would remain, but it would be cut to HRK 20 per hectolitre, while the remaining part of the tax would depend on the sugar, taurine and methylxanthine content.

Based on these changes, the state budget should earn an additional HRK 64 million by the end of the year.

More news about taxes can be found in the Business section.

ZAGREB, February 7, 2020 - The Lipa taxpayers' association opposes the Finance Ministry's plan to increase taxes on tobacco, coffee and non-alcoholic beverages as it believes that their sole purpose is to patch holes in the budget caused by the failure to implement reforms and lack of transparency.

"The (planned) government regulations will increase the tax burden. However, the government does not plan to spend the money to be obtained through higher taxes on improving the health sector but rather for patching budget holes. Even though the ministry is referring to an EU directive, we note that the EU has continually recommended that Croatia implement reforms in all segments of its public sector yet those recommendations are ignored to a large extent," the association said in a statement.

It believes that the introduction of excise taxes on e-cigarette liquid and heated tobacco products is a very bad measure that will discourage consumers from switching to less harmful products.

Excise taxes already account for more than 80% of the price of cigarettes and they end up in the state budget while hospitals still owe more than nine billion kuna and work in very bad conditions, Lipa says.

It proposes that in order to keep the same level of the tax burden, the state should lower fuel excise taxes while increasing tobacco taxes and introducing special taxes on sugar and coffee.

Tobacco prices are expected to go up soon because the Finance Ministry recently put to public consultation a draft regulation envisaging an increase in tobacco excise taxes by 40 kuna per thousand cigarettes, and it also plans to introduce excise taxes on some new tobacco products, including e-cigarette liquid and heated tobacco products.

The public consultation lasted until February 3.

The government last increased excise taxes on tobacco in 2018, after which the price of cigarettes went up by around 2 kuna per packet.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, November 29, 2019 - The Croatian parliament on Friday voted in a set of nine tax laws making up the fourth tax reform which brings tax reliefs in the amount of HRK 2.4 billion.

The changes bring a lower, 13% VAT rate on food and dessert preparation and serving in and outside catering establishments, and a lower VAT rate for holders of phonographic rights.

As for income tax, the non-taxable income has been raised from 3,800 to 4,000 kuna. Income tax for young people under 25 is reduced by 100% while income tax for young people aged 25-30 is cut by 50%.

As for profit taxation, the limit for taxation with the higher, 18% rate, is raised from 3 to 7.5 million kuna, which means that 93% of entrepreneurs will pay taxes at a rate of 12%, while the current share of entrepreneurs is 85%.

The tax reform also keeps the standard VAT rate of 25%, the total financial effect of that measure being 1.8 billion kuna.

The fourth round of the tax reform brings tax reliefs in the amount of 2.4 billion kuna, and together with the three previous rounds, the total financial effect is 9 billion kuna in tax reliefs.

Parliament today also adopted amendments to the law on ferry transport and occasional coastal transport aimed at creating better conditions for the exercise of the right to transport concessions, particularly for the disabled and children with developmental disabilities.

More tax news can be found in the Business section.

ZAGREB, November 27, 2019 - The government on Tuesday sent to parliament for a second reading amendments to laws from the fourth tax reform round which envisage 2.4 billion kuna in tax relief.

Under amendments to the Value Added Tax Act, the general VAT rate would remain 25% and a 13% rate would be applied as of next year on the preparation and serving of food in and outside restaurants.

It is estimated that the lower VAT rate in the hospitality industry will reduce budget revenues by 900 million kuna annually.

In relation to the first reading, the government is proposing a 13% VAT rate also for phonographic rights owners, said Finance Minister Zdravko Marić.

Also in relation to the first reading, the bill stipulates the taxation of foreign income. If a taxpayer reports a foreign income, interest due to the passage of time will not be charged, which Marić said would stimulate the reporting of foreign income.

Prime Minister Andrej Plenković said the total tax relief in the four rounds of the tax reform totalled nearly 9 billion kuna.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, November 3, 2019 - Finance Minister Zdravko Marić said on Saturday that both monthly and annual income tax calculations for young people were good models and that the most important thing was that young people would feel the tax cuts.

"We'll see how the parliamentary debate (on the government's tax relief proposal for young people) goes. The original proposal was to calculate reduced income tax monthly, but after the comments we received during the public consultation from young people, accountants, employers and others, we opted for annual calculation," Marić told Hina.

He was commenting on media reports that people under 30 will receive high wages because of tax relief only as of August 2021.

He said the proposal to cut income tax by 100% for people under 25 and by 50% for those aged 26-30 elicited great interest already during public consultation, when the bill said the cut would be calculated monthly.

But the bill the government eventually sent to parliament envisages annual calculation. "We believe the result of the measure is better and more effective with annual calculation," Marić said, adding that "both models have pros and cons" and that the government was open to discussion.

"If you opt for monthly calculation, you have a slightly higher monthly pay and slightly higher creditworthiness... Annual calculation makes it possible for the person to get the full amount during the calculation," he said.

More tax news can be found in the Business section.