The laws are complemented by measures taken by, among others, the Croatian National Bank and the Croatian Government. This update outlines the amendments to tax law and measures affecting the financial sector.
The most prominent measure in respect of tax law is the introduction of the concept of extraordinary circumstances into the General Tax Act (Opći porezni zakon). Circumstances are extraordinary if they could not have been foreseen and influenced, but which endanger the life and health of citizens' assets of significant value; substantially adversely impact the environment; impact economic activity; or cause substantial damage to the economy.
If such extraordinary circumstances affect the ability to settle tax obligations (both for companies and individuals), (i) the maturity of tax obligations may be deferred; and/or (ii) the payment of tax obligations in instalments may be agreed to. No interest will occur during the time of the deferral.
Amendments to the Income Tax Act (Zakon o porezu na dohodak) speeds up the process of paying out tax returns to taxpayers. Furthermore, payments received to decrease the impact of extraordinary circumstances shall not be considered as income from independent business activities (and are therefore not taxable).
Similarly, amendments to the Corporate Tax Act (Zakon o porezu na dobit) state that the basis for calculating taxes shall not include aid received as a measure to decrease the adverse effects of extraordinary circumstances.
Pursuant to amendments to the Utility Management Act (Zakon o komunalnom gospodarstvu) representative bodies of the local self-government may decide to exempt entities from the obligation to pay public utility charges during the period of extraordinary circumstances.
Furthermore, amendments to several acts allows the redirection of funds acquired through various charges into decreasing adverse effects of extraordinary circumstances.
Banking & Finance
So far, no legislative measures have been introduced which are directly aimed at the banking sector. However, the Croatian National Bank has announced that it would take certain measures to decrease the burden of the adverse effects of the COVID-19 crisis on credit institutions. Among other things, it announced the suspension of certain supervisory activities (e.g. stress test supervision, direct business supervision) and a deferral for fulfilling supervisory measures. The Croatian National Bank also stated that it would ease maintenance requirements for liquidity coverage, as well as requirements for exposure classification for certain clients whose business has been or will be affected by the coronavirus pandemic.
The Croatian Government has also announced far-reaching measures in relation to commercial banks. Banks shall suspend the execution of all enforcement measures against all debtors (companies and individuals) for three months. The Croatian Government also encourages liquidity and working capital loans and reprogramming of loans. How such measures will be implemented is yet to be seen.
This article is part of our coronavirus-focused legal updates – visit our coronavirus infocorner to get more info!