Rising Prices Moderated In New Adopted Measure Package

Due to the global increase in energy prices, there has been a new wave of price increases in Europe. Numerous global disruptions such as Russian aggression against Ukraine, climate change, China’s shutdown due to the pandemic, and strong economic growth after two years of the pandemic have caused the energy crisis and rising prices. There have been recorded increases in the prices of oil, gas, electricity, and coal.

Because of this, the Government of the Republic of Croatia adopted a package of measures to protect households and businesses from rising prices. In this article, Confida Croatia will focus on measures related to the economy and entrepreneurship, while highlighting the most important ones.

The rise in electricity prices is easing

Electricity prices for half-yearly consumption of up to 250,000 kWh will be limited for all businesses. The above will be valid from October 1, 2022, to March 31, 2023. The electricity price will be 0.5295 HRK/kWh for all businesses. If there is a half-yearly consumption of more than 250,000 kWh, the price will be 1.356210 HRK/kWh, while the average price will be 180 €/MWh.

For the public and non-profit sectors, cheaper electricity is provided with an average total of 62 €/MWh. For households, it will amount to 59 €/MWh for half-yearly consumption up to 2,500 kWh, or 88 €/MWh for half-yearly consumption over 2,500 kWh.

Measures to mitigate the gas prices rising

For companies, a solution is being prepared at the level of the European Union, where Croatia will propose a limit on wholesale gas prices. Gas prices affected the production of electricity, so there was an uncontrolled increase in prices on the stock exchanges.

Also, the Ministry of Economy and Sustainable Development, in cooperation with HAMAG – BICRO, launched a grant program to reduce gas costs for micro, small and medium-sized enterprises, which we wrote about in May.

What about the thermal energy prices?

Households and entrepreneurs were greeted by positive news about the limited thermal energy price, i.e. the unchanged unit price for all heating systems in the heating season of 2022 to 2023. The price per kWh in central and closed heating systems does not change.

Subsidies for the transition to an energy-efficient economy

Entrepreneurship will be encouraged to transition to energy-efficient economies through the introduction of new energy-saving technologies and investments in the production of electricity, heat, or cooling energy from renewable sources. This support will include grants. Amounts from HRK 750,000 to HRK 7.5 million will be provided for small and medium-sized companies, and HRK 2 to HRK 35 million for medium-sized companies. The submission of project proposals started on September 1, 2022.

Besides that, this year, the Croatian Employment Service adopted the Criteria for determining green and digital jobs and the Grant Manual, which greatly encourages entrepreneurs in corporate social responsibility.

Tax relief and an increase in monetary rewards and benefits

The plan is to adopt the Ordinance on amendments to the Ordinance on income tax, which will increase the tax-free receipts. Such measures open up space for entrepreneurs to stimulate employees through an increase in tax-free receipts.

Planned changes to increase the number of tax-free receipts:

  • Occasional prizes will increase from HRK 3,000.00 to HRK 5,000.00 per year
  • Cash prizes for work results and other forms of additional remuneration for workers from HRK 5,000.00 to HRK 7,500.00 per year
  • A gift to a child up to the age of 15 from HRK 600.00 to HRK 1,000 per year
  • A gift in kind from HRK 600.00 to HRK 1,000.00 per year
  • Lump-sum monetary allowances for meeting the costs of food for workers from HRK 5,000.00 to HRK 6,000.00 per year
  • Charges for using a private car for official purposes from HRK 2.00/km to HRK 3.00/km
  • Severance pay when retiring from HRK 8,000.00 to HRK 10,000.00

What will happen to the loans?

Special measures are laid out for companies in difficulty. In addition to the previously mentioned measures to alleviate the energy crisis, the Croatian Bank for Reconstruction and Development has secured HRK 3.8 billion for companies experiencing difficulties. Namely, this includes subsidized interest rates of 0.5% per year and repayment terms of up to 5 years.

The measures include loans for working capital with an interest rate subsidy and an HRK 3.1 billion guarantee for loans to exporters for working capital with a subsidy of 100% of the guarantee premium.

Introduction of the Law on Special Profit Tax?

By the end of the year, the Government of the Republic of Croatia plans to submit a proposal for a special income tax law. With this measure, it is intended to additionally tax companies that generate a significant level of profit and whose profit has increased especially compared to the period before the extraordinary circumstances occurrence.

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