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Factsheet for case HR-2020-12/317 Updated – measures in Croatia

Interest-free loan from the Republic of Croatia to local and regional units of government, Croatian Health Insurance Institute and Croatian Institute for Pension Insurance

Beskamatni zajam Republike Hrvatske lokalnim jedinicama, HZZO-u i HZMO-u

Country Croatia , applies nationwide
Time period Temporary, 19 March 2020 – 31 December 2020
Type Legislations or other statutory regulations
Category Supporting businesses to stay afloat
– Access to finance
Author Predrag Bejalovic (IJF) and Eurofound
Case created 06 April 2020 (updated 06 October 2020)

Background information

The Croatian Parliament has adopted the Law on Amendments to the Act on the Execution of the State Budget of the Republic of Croatia for 2020 on the 19 March 2020. The aim is to remedy the corona virus pandemic effects by making possible the reallocation of funds in the state budget of the Republic of Croatia to budget items among budget users or between budget users and extra-budget users.

Content of measure

According to the Law on Amendments to the Law on Execution of the State Budget of the Republic of Croatia for 2020 the Republic of Croatia undertakes the obligation to assure needed financial resources to bodies of local and regional government (municipalities, cities and counties) as well as to the Croatian Health Insurance Institute and the Croatian Pension Insurance Institute, in the event that the repayment or deferral of payment and/or installment repayment of income tax and surtax on income tax and social contributions reduce the revenues of government bodies and the Institutes for Social Insurance.

The Republic of Croatia would provide to local and regional government an interest-free loan to overcome the situation arising from different dynamics of inflow of financial funds and maturity of liabilities. The amount of such loan is limited up to the amount of income tax, surtax on income tax and social contributions whose payment is deferred and/or is granted in installment repayment.

Updates

The following updates to this measure have been made after it came into effect.

01 October 2020

The possibility of paying interest-free loans to Croatian counties, cities and municipalities, as well as state funds, was introduced by the state into the Law on Execution of the State Budget for 2020 in two amendments to that particular law, implemented by the Government and Parliament since Croatia introduced extraordinary measures to protect against the spread of COVID-19. The Ministry of Finance prepared Instruction (OG 46/20) applies to all local and regional self-government units, the Croatian Health Insurance Institute and the Croatian Pension Insurance Institute, which have experienced falls in revenue due to deferred payments, reimbursement or exemption from income tax and surtax, in accordance with the special regulation governing the general tax procedure. The Ministry of Finance has published also the proper forms for applying for these aforementioned interest-free loans on its website. According to an announcement from the Association of Cities, the aforementioned assistance offered by the Croatian Government doesn't regard loans from commercial banks, but rather temporary assistance for liquidity from the Croatian state budget itself. According to that same association, the amount of credit or assistance offered will be determined by the Ministry of Finance itself according to the amount of deferred, rescheduled and written-off tax liabilities for 2019. The Ministry of Finance instructions provided for the payment of these interest-free loans to various beneficiaries in two monthly instalments. The first payments of interest-free loans were by the end of April 2020. There are not yet publicly available data on the number of applicants, approved requests and funds spent, but it can be estimated that these figures were significant.

Use of measure

Not yet known at this stage.

Target groups

Workers Businesses Citizens
Does not apply to workers Applies to all businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
Local / regional government
Social insurance
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role No involvement No involvement
Form Not applicable Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: Unknown

Involvement

Due to the nature of the measure, social partners were not involved.

Views and reactions

As mentioned, due to the nature of the measure, social partners were not involved. However, social partners are always supportive for the measure that help cities and state funds to overcome the problems and consequences of COVID-19. This is particularly important having in mind that the measure is related to the Croatian Health Insurance Institute and the Croatian Pension Insurance Institute which provide important service to citizens.

Sources

  • 19 March 2020: Zakon o dopunama Zakona o izvršavanju Državnog proračuna Republike Hrvatske za 2020. godinu (narodne-novine.nn.hr)
  • 15 April 2020: Naputak o načinu isplate beskamatnog zajma jedinicama lokalne i područne (regionalne) samouprave, Hrvatskom zavodu za mirovinsko osiguranje i Hrvatskom zavodu za zdravstveno osiguranje
  • 20 April 2020: Beskamatni kredit za likvidnost
  • 22 April 2020: Gradovima, općinama i državnim fondovima na raspolaganju beskamatni zajmovi države (novac.jutarnji.hr)

Citation

Eurofound (2020), Interest-free loan from the Republic of Croatia to local and regional units of government, Croatian Health Insurance Institute and Croatian Institute for Pension Insurance, case HR-2020-12/317 (measures in Croatia), COVID-19 EU PolicyWatch, Dublin, http://eurofound.link/covid19eupolicywatch

Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process. All information is preliminary and subject to change.