"The Croatian government is a bit under fire right now for not implementing stricter measures to deal with the uptick in Covid cases,” reports Kallay & Partners Partner Mara Terihaj Macura. Still, she concedes it’s a difficult problem. “There are still businesses that are open and operating despite the numbers being higher now than they were in the spring – but according to the economic experts another lockdown would be disastrous for the economy, so it’s difficult to find the balance.”
In an effort to stimulate the economy, Croatia’s government has proposed to amend the tax regime by lowering the tax burden for individuals and empowering the authorities to become more stringent in finding those that evade and avoid paying their dues. “Amendments of four laws have been proposed – the VAT, the fiscalization in cash transactions, the income tax, and the profit tax frameworks are subject to amendments,” Terihaj Macura says, in an effort to provide tax relief. According to the Croatian government, “the volume of expected changes should amount to around HRK 2 billion. In addition, banks will get more incentives such as write-offs for loans.”
The total relief for Croatian citizens, Terihaj Macura reports, is expected to be around HRK 10 billion (around EUR 1.32 billion). “Of course,” she says, “the government is poised to apply a more rigorous treatment of cases where there is suspected evasion or avoidance, for example where there is a large discrepancy between assets and reported income.”
Terihaj Macura says that there is a “new Foreigners Act in the works that is designed to create a more lenient framework for foreign nationals working in Croatia.” She says that the new act, currently in parliamentary proceedings, should liberalize the labor market.
Finally, the EU is expected to funnel relief and aid funding to the country in order to keep key projects moving forward. “The reconstructions of the Dubrovnik Airport and the Peljesac Bridge are still underway,” Terihaj Macura says, “co-financed by the EU in an amount of almost HRK 4.5 billion.” That’s not all. “Also, a new waste management center is to be constructed in the northwestern part of Croatia – the tender documentation for this EUR 60 million project is being prepared as we speak and it will be 70% funded by the EU.” She says that this new plan falls within the new energy policy the country has adopted, which focuses heavily on green energy and renewables.