COVID-19 Countermeasures in Croatia

1. Employment retention incentive for temporary introduction of shortened working hours 

• Incentive criterion: 
  • Employers with 10 or more full-time employees. 
  • Basic eligibility criterion: 
    • Decrease in monthly working hours fund for all full-time employees for at least 10%. 
    • If business activities are divided by business units, decrease in monthly working hours fund for employees within given business unit for at least 20%. 
  • Additional eligibility criterion: 
    • Revenue decline of at least 20% in the month of application compared to the same month previous year. 
    • Credible documentation proving business related difficulties such as cancelation or amendment of contracts with customers, a written statement of customers on decline of orders for the month for which the incentive is requested, inability of contracting new jobs during the COVID-19 epidemic and similar. 
• Incentive amount: 
  • Up to HRK 3,600 per employee per month. 
  • Up to HRK 1,642.5 per related social security contributions per employee per month. 
• Deadline for application: in the current month for the following month (this incentive applies until 31 December 2021). 
• Incentive repayment: employer will be obliged to repay the incentive if in the period from the incentive receipt until 31 December 2022: 
  • Pays dividends, profit share and similar receipts; 
  • Provides stock options or own stocks or shares, as well as pays bonuses or rewards for work results above the non-taxable amount and other similar receipts to members of the management board, executive directors, procurators and similar; 
  • Acquires own stocks or own shares. 

2. Employment retention incentive for specific business sectors, microentrepreneurs, entrepreneurs from areas where an earthquake related disaster has been declared and for legal entities from sports sector, are available for March and April 2021

• Incentive criterion:

A. Sectoral employers (i.e. employers performing business activities in specific sectors)

• Business activities in the following sectors:

• Agriculture, forestry and fishing,
• Transport and storage - land, air and water passenger transport, and air transport of goods;
• Services incidental to transport;
• Providing accommodation, preparation and serving food and beverages;
• Administrative and support activities - rent and lease, travel agencies, tour operators and other reservation services as well as related activities;
• Arts, entertainment and recreation;
• Repair of computers, personal and household goods and other personal service activities;
• Organization of cultural, business and sports events, fairs and weddings as well as related ancillary service activities;
• Translation activities and interpreter services; and
• Publishing of books, periodicals and other publishing activities.

B. Microentrepreneurs (regardless of sector/ business activity)

• Employers with 9 or less employees.
• Revenue drop (based on VAT forms or financial projections):
  • in the period from 1 April 2020 to 30 September 2020 compared to the same period previous year or in March or/and April 2021 compared to the same month in 2019.
• in March 2021 compared to September 2020 if established after 1 April 2019, or January 2021 if established after 1 October 2020.
• exceptionally, employers who were established after or before 1 April 2019 but did not perform business activity, compared to the first entire month in which the business activity has been performed and first invoices were issued.

• Incentive amount (A and B):
  • Up to HRK 4,000 per full-time employee or pro rata amount per part-time employee in accordance with the percentage of revenue drop:

  -from 40% to 44.99% - HRK 2,000;
  -from 45% to 49.99% - HRK 2,500;
  -from 50% to 54.99% - HRK 3,000;
  -from 55% to 59.99% - HRK 3,500;
  -from 60% and above - HRK 4,000.

  • Exemption from payment of pension insurance contributions for second pillar (MIO II) proportionate to the incentive amount (up to HRK 250 per employee).

C. Entrepreneurs from areas where an earthquake related disaster has been declared (regardless of sector/ business activity and revenue drop)

• If business and/ or production processes are significantly reduced or disabled due to objective, including:
  • Significant damage caused by the earthquake on business or production facilities and/ or
  • Inability of employees to arrive to work due to which regular business or production activities cannot be established. 

D. Legal entities from sports sector

• Sports organisations and sports clubs - sports joint stock companies
• Do not necessarily be CIT payers
• Drop in revenue is not relevant, full incentive of HRK 4,000.00 is granted
  
  

• Deadline for application: until 23 April 2021 for March incentives and from 1 April 2021 until 21 May 2021, for April incentives.
• Incentive repayment: employer who applied for the incentive for 50 or more employees will be obliged to repay the incentive if in the period from the incentive receipt until 31 December 2021:

• Pays dividends, profit share and similar receipts;
• Provides stock options or own stocks or shares, as well as pays bonuses or rewards for work results above the non-taxable amount and other similar receipts to members of the management board, executive directors, procurators and similar;
• Acquires own stocks or own shares.

3. Employers whose business activities are suspended or limited in accordance with the Decisions of the Civil Protection Board (regardless of sector/ business activity)

• Incentive criterion and amount:

A. Business activities are suspended

Incentive criterion

• Employers whose business activities are suspended in accordance with the Decisions of the Civil Protection Board do not need to prove revenue decline.
• Incentive is awarded only for the month in which business activities are suspended in accordance with the Decisions of the Civil Protection Board.

Incentive amount

• Business activities limited for a period up to 14 days:
  • HRK 2,000 per full-time employee (or pro rata amount per a part-time employee) increased for pension insurance contributions for second pillar (MIO II) proportionate to the incentive amount (up to HRK 125 per employee).
• Business activities limited for a period longer than 15 days:
  • HRK 4,000 per full-time employee (or pro rata amount per a part-time employee) increased for pension insurance contributions for second pillar (MIO II) proportionate to the incentive amount (up to HRK 250 per employee).

B. Business activities are limited

Incentive criterion

• Incentive is awarded only for the month in which business activities are limited in accordance with the Decisions of the Civil Protection Board or there is a close business relationship with entrepreneurs whose business activities are suspended in accordance with the Decisions of the Civil Protection Board, in the amount depending on the percentage of revenue drop.

Incentive amount

• If active longer than one year
  • Revenue drop (based on VAT forms or financial projections):
    • in the period from 1 April 2020 to 30 September 2020 compared to the same period previous year or in March 2021 compared to the same month in 2019.
  • in the month for which incentive is requested compared to September 2020 if established after 1 April 2019, or January 2021 if established after 1 October 2020.
  • exceptionally, employers who were established after or before 1 April 2019 but did not perform business activity, compared to the first entire month in which the business activity has been performed and first invoices were issued.

• Deadline for application: until 23 April 2021 for March incentives, and from 1 April until 21 May 2021, for April incentives
• Incentive repayment: employer who applied for the incentive for 50 or more employees will be obliged to repay the incentive if in the period from the incentive receipt until 31 December 2021:
  • Pays dividends, profit share and similar receipts;
  • Provides stock options or own stocks or shares, as well as pays bonuses or rewards for work results above the non-taxable amount and other similar receipts to members of the management board, executive directors, procurators and similar;
  • Acquires own stocks or own shares.

4. Reimbursement of fixed costs for March 2021 for entrepreneurs whose business activities are suspended in accordance with the Decisions of the Civil Protection Board

• Incentive criterion:
  • Business activities are suspended or limited in accordance with the Decisions of the Civil Protection Board on 1st March 2021.
  • Revenue drop of at least 60% compared to the same month previous year if active longer than one year, or compared to November 2020 if active less than one year.
  • If business activities began during December 2020 or in 2021, employers are not eligible for reimbursement of fixed costs.
  • Entrepreneurs who are registered as VAT payers are eligible on reimbursement of fixed costs in net amounts, exclusive of VAT.
• Incentive amount:
  • If revenue drop is from 60% to 90% fixed costs are reimbursed in the amount proportionate to revenue drop.
  • If revenue drop is above 90% fixed costs are reimbursed in total amount.
• Deadline for application:  15 April 2021 to 17 May 2021.

• All imported goods required to fight COVID-19 disease (e.g. protection equipment, medical equipment and similar) are exempt from customs duties and VAT until 30 April 2021. The VAT on import of such goods will be reported based on the reverse-charge mechanism, i.e. input/output VAT will be included and netted off in the same VAT return.

2. Coronavirus test

• The cost of testing for coronavirus or other infectious diseases paid by employers for their employees is not subject to personal income tax and social security contributions.

3. Extended deadline for filing financial statements

• Entrepreneurs whose business activities are prohibited, suspended or limited in accordance with the decisions of competent authorities during the special Covid-19 circumstances file financial statements for business year 2020 within the following deadlines:
  • The deadline for filing annual financial statements for statistical purposes is 30 June 2021.
  • The deadline for filing annual financial statements for public announcement is 31 August 2021. For those entrepreneurs who have a different business year from the calendar year, deadline for filing of annual financial statements is 8 months from the business year-end.
  • The deadline for filing consolidated financial statements along with related audit reports for public announcement is until 31 October 2021. For those entrepreneurs who have a different business year from the calendar year, deadline for filing consolidated financial statements is 10 months from business year-end.
  • The deadline for reporting obligation for consolidation of the financial statements to the Register for Annual Financial Statements is 30 June 2021.
  • Branch offices of foreign companies from other EU Member States can file annual financial statements for public announcement in line with the deadlines prescribed in these EU Member States applicable during the special Covid-19 circumstances, if these deadlines are longer than the deadlines prescribed in Croatia.
  • The deadline for filing Statements on non-performing business activities for entrepreneurs who during the business year did not perform any business activities nor have recorded any assets or liabilities in their accounting records is 30 June 2021.
• The deadline for filing CIT return for 2020 and all other tax forms and reports which are filed along with the CIT return or within the same deadline is extended from 30 April to 30 June 2021. For those taxpayers who have different business year from the calendar year, deadline for filing CIT return remains the same.

4. Postponement of payment of taxes and contributions

• Employers whose business activities are suspended in accordance with the Decisions of the Civil Protection Board can postpone payment of tax liabilities due for payment during the period of suspension for a maximum period of 24 months.
• During this period interest will be calculated at the lower interest rate of 2.75% p.a.