The Republic of Croatia has started with the adjustments related to the euro introduction. Namely, the adaptation of the legislative framework of the Republic of Croatia is inevitable, which includes the adaptation of the national legal framework. This ensures legal certainty after switching to the euro as the official currency.
In the previous article, Confida presented the topic of currency conversion during the euro introduction. Today we continue with the series of articles about the euro and inform you about changes in business books, financial statements, and reporting of taxes after the euro introduction.
Changes in business books
Bookkeeping is inevitable in every type of business. The euro introduction as the official currency in Croatia brings changes related to bookkeeping. Namely, it is important to mention that business events, which refers to the period after the day of the euro introduction, will be recorded in the business books in euros. If necessary, records will be kept in other foreign currencies also.
Balances that were stated in kunas and were carried over to the year in which the euro was introduced are converted into euros with the application of a fixed conversion rate and following the rules for conversion and rounding from the Law. The same applies to accounting documents issued before the day of the euro introduction.
In the accounting documents, as well as invoices and legal instruments that are adopted, drawn up and issued after the day of the euro introduction, it is mandatory to indicate prices and other monetary amounts in euros. This also applies to amounts related to the period before the euro introduction, such as, for example, the performance of a certain service.
Due to the application of the rules for recalculation and rounding, there will be differences that must be recorded in the business books following the accounting rules.
For the debtor’s debt to the creditor, which due to the application of the fixed conversion rate and the rules for recalculation and rounding from the Act, is less than one cent, the obligations will cease. This claim is written off ex officio.
Preparation of the annual financial statements
Those obliged to issue annual financial reports whose business year is equal to the calendar year, state the data in the financial statements for the year preceding the euro introduction in kuna. Those taxpayers whose business year is different from the calendar year, and whose last day of the financial year comes after the day of euro introduction, state the data for the previous business year in euros.
Reports in the budget system and with non-profit organizations
It is also important to mentioned the reports that result from the provisions of the regulations governing the budget and by-laws and from the provisions of the regulations governing the financial operations and accounting of non-profit organizations. Such reports that refer to the period ending before the day of the euro introduction are compiled and published so that the values in the reports are expressed in kuna.
In contrast, there are reports refered to the period after the introduction of the euro, and they are compiled and published with values expressed in euros.
Declaration of tax returns and other public duties
Declarations of taxes and other public duties for accounting periods that end before the date of euro introduction are submitted in kuna. For tax periods that begin before the date of euro introduction and end after the date of euro introduction, applications and reports are submitted in euros.
Currencies for submission of tax returns and reporting to the Tax Authorities
For the years 2022 and earlier, tax returns must be submitted in kunas, while for the year 2023, they must still be submitted in euros. Corrections are made in the currency in which the application was originally submitted.
VAT refunds in passengers’ traffic will be reported in kunas until December 31, 2022, and from 2023 in euros.
Profit tax and income tax returns for 2022, which are submitted in 2023, will be expressed in kunas. Income taxpayers whose tax period begins before and ends after the euro introduction will have to submit their income tax return in euros.
Public authorities must state values in kunas on certificates, extracts and other public documents for the period before the euro introduction. For facts concerning the period after the euro introduction, the values are expressed in euros.
We emphasize that there are many changes and segments. However, with regular monitoring and application of the rules, adjustment to the euro arrival will be simpler than it currently seems.
