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Factsheet for measure HR-2020-12/379 Updated – measures in Croatia

More favourable tax treatment of state subsidies due to special circumstances

Povoljniji porezni tretman državnih potpora zbog posebnih okolnosti

Country Croatia , applies nationwide
Time period Open ended, started on 19 March 2020
Context COVID-19
Type Legislations or other statutory regulations
Category Supporting businesses to stay afloat
– Direct subsidies (full or partial)
Author Predrag Bejalovic (IJF) and Eurofound
Measure added 08 April 2020 (updated 08 November 2021)

Background information

Subsidies and transfers can be used for a number of different purposes: market failures, economies of scale in production, redistribution of income and alleviation of poverty. However, in Croatia it is difficult to evaluate if subsidies and transfers have achieved these objectives. State subsidies in Croatia are relatively high. They have been concentrated in a few sectors, with a high proportion of them going to the national railway company Hrvatske željeznice ((HŽ) and to the agriculture sector. Due to the EU requirement and membership, Croatia has improved policies related to state subsidies and lowered their level.

Content of measure

Amendments to the Act on Personal Income Tax and Amendments to the Act on the Company Income Tax (OG 32/20) introduced novelties regarding the impact of grants on the income tax base and tax liability for entrepreneurs which received grants intended to mitigate the adverse effects of special circumstances. Income tax payers record grants into realized income, but exclude it from the tax base when determining the income tax liability.

According to the amended Act on Company Income Tax, grants obtained due to special circumstances do not affect the threshold for compulsory shift from personal income tax to company income tax. This threshold is HRK 7.5 million (€1 million) of revenue. Furthermore, grants obtained do not affect the threshold of realized annual revenues according to which the tax rate of 12% and 18% is determined (the threshold is HRK 7.5 million (€1 million) of revenue.

It is hard to predict the role of this measure and the number of possible users but from the public discussions it can be assessed that it would be relatively limited. Fiscal experts support the regulation according to which such grants are recorded into realized income but excluded from the tax base when determining the income tax liability.


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

11 December 2020

The government further decreased the tax burden in 2021. According to Income Tax Act (Zakon o porezu na dobit, consolidated text, OG 115/16, 106/18, 121/19, 32/20, 138/20), Article 19, annual income tax is paid according to a rate of 20% on a tax base of up to HRK 360,000 (€47,808.8) and at the rate of 30% (previously 36%) on a part of the tax base exceeding this amount. The new rates have been applied from 1st January 2021, which means for all payments from that date onwards. Therefore, the new rates were applied already in the calculation of the salary for December 2020, which were paid in January 2021. In the Profit Tax Act (Zakon o porezu na dobit, consolidated text, OG 177/04, 90/05, 57/06, 146/08, 80/10, 22/12, 148/13, 143/14, 50/16, 115/16, 106/18, 121/19, 32/20, 138/20), Article 28 defines that the profit tax is paid based on the determined tax base at the rate of: a) 10% if, during the taxation period, revenue has been generated up to HRK 7,500,000 (€996,015.94); or 2) 18% if, during the taxation period, revenue has been generated equal or higher than this amount.

Use of measure

Not yet known at this stage.

Target groups

Workers Businesses Citizens
Employees in standard employment
Does not apply to businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
No special funding required

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:

  • Unknown
  • Main level of involvement: Unknown


Due to the specific nature of the measure, social partners were not involved. However, they always support all measures directed in reduction of the tax burden and simplification of the tax system.

Views and reactions

Social partners were not involved due to the nature of the measure.


  • 19 March 2020: Odluka o izmjenama i dopunama Zakona o porezu na dobit - OG 32/20 (
  • 19 March 2020: Odluka o Izmjenama I dopunama Zakona o porezu na dobit - OG 32/20 (
  • 08 January 2021: Promjene poreznih zakona u 2021. godini (Changes in Tax Legislation in 2021) (


Eurofound (2020), More favourable tax treatment of state subsidies due to special circumstances, measure HR-2020-12/379 (measures in Croatia), EU PolicyWatch, Dublin,

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