Mazars Extraordinary Tax Newsletter 8th March 2021

The Governing Board of the Croatian Employment Service (“CES”) on their meeting held on 3rd March 2021 has issued decision on the new aid for the job preservation in activities affected by COVID-19 and recent earthquake disaster for March 2021.

Conditions for the use of aid have remained more or less the same as for the previous aid (January – February     2021. Details on previous measure can be found in our previous issue of newsletter).

As opposed to the previous aid, changes refer mostly to a reduced list of activities for which aid can be granted, the addition of co-owners and founders to the target group of workers, and proof of a decline in income.

In continuation, we briefly present the new aid.

• Availability of the aid

CES aid is available to the following employers:

a) Employers who are not restricted or prevented from performing their business activity by the Decisions of the Civil Protection Headquarters and have more than 10 employees, can receive aid only if they operate within the following business activities:

• Agriculture, forestry and fishing - only crop and livestock production, hunting and related service activities and fishing;
• Transport and storage - transport of passengers (land, air, water) and air transport of goods;
• Transport service activities;
• Accommodation, food and beverage service activities;
• Administrative and support service activities - only rental and leasing activities, travel agencies, tour operators, other reservation services and related activities;
• Arts, entertainment and recreation sector - only creative, artistic and entertainment activities, entertainment and recreational activities, production and screening of films and video films, sound recording and music publishing activities and distribution;
• Other service sectors - repair of computers and personal and household goods and other personal service activities;
• Organizers of cultural, business and sports events, organizers of fairs and weddings, and related activities such as companies for equipment rental, audio and video recording, ticket sales, hall rental and other companies that generate most of their income from events and public gatherings;
• Translation activities and interpreter services;
• Publishing - publishing of books and other publishing activities.

b) Employers who are restricted or prevented from performing a business activity due to the Decisions of the Civil Protection Headquarters or if they have less than 10 employees, can receive aid regardless of the activity they perform.

Also, aid is available to employers who are business-related as suppliers with employers who are closed by the Decisions of the Civil Protection Headquarters.

c) Employers which felt the consequences of the disaster caused by the earthquake in Sisak-Moslavina, Zagreb and Karlovac counties.

Employers from these areas whose business processes are significantly reduced or disabled by the objective reasons will be entitled to receive an aid in the amount of HRK 4,000 per full-time employee, or a proportional part for part-time employee according to the number of part-time hours, regardless of their activity and turnover.

Namely, the objective reasons for obtaining aid are: significant damages caused by an earthquake at business or production facilities and / or the inability of employees to come to work so that normal business process or production cannot be established.

d) Additionally, legal entities in the sports system also have the right to aid, as follows:

• sport associations referred to in Article 14 of the Law on Sports;

• sport clubs referred to in Article 28 of the Law on Sports.

It is important to note that the right to use the aid, regardless of the basis on which they apply, have employers who have registered the activity and registered in the system of insured persons of the Croatian Pension Insurance Institute by December 31, 2020.

• Employees eligible for aid

The aid in March is available for all employees employed by 28 February 2021.

Further, aid is available for all employees employed by employers that is eligible to receive aid (regardless of whether the worker is a fixed-term employed or indefinite employed, whether they are citizens of the Republic of Croatia, the EU or third countries, full-time or part-time or have some status such as single parent, Croatian war veterans and posted workers) and employees employed in branches / representative offices of foreign companies in the Republic of Croatia.

Moreover, aid cannot be received for the following:

• Pensioners;
• Foreign workers from third countries whose residence and work permits have expired.

• Criteria

The employers have two options for determining criteria for obtaining aid.

Option 1:

Cumulative income / receipts for the period from 1 April to 30 September 2020, compared to the same period in 2019. For taxpayers of quarterly reports, cumulative of II and III quarter of 2020 is compared with the same period in 2019.

Option 2:

Month for which aid is requested (i.e. March 2021) and comparative month in 2020.

Exceptions:

• If the employer has been operating for less than 12 months: the month for which aid is requested is compared to September 2020.
• If the employer was established after October 1, 2020: the month for which aid is requested is compared to January 2021.

More information on the measure itself can be found on the official CES website.

• Submission of application for aid

To use the aid, a new application must be submitted regardless of whether the employer is currently using any of the aids available.

Requests for payment of monthly salary costs for March 2021 can be submitted from April 01, 2021 to April 24, 2021.

• Aid amount

The amount of aid is a maximum of HRK 4,000.00 per month for full-time employee, i.e. a proportional part per employee according to the number of part-time hours according to the percentage of decline in income / receipts:

a) from 40% to 44.99% - HRK 2,000.00

b) from 45% to 49.99% - HRK 2,500.00

c) from 50% to 54.99% - HRK 3,000.00

d) from 55% to 59.99% - HRK 3,500.00

e) from 60% to more – HRK 4,000.00

*increased by the contribution for pension insurance based on individual capitalized savings, i.e. the amount of the obligation of additional contribution for pension insurance based on proportion to the amount of aid.

Employers who cannot perform the activity in accordance with the Decisions of the Civil Protection Headquarters (national, county, local self-government units) or the Decision of the epidemiologist are entitled to the aid in the following amount:

a) HRK 2,000.00 per full-time employee, i.e. a proportional part per employee according to the number of part-time hours if the employer is closed for 1 to 14 days by the Decisions of the Civil Protection Headquarters or the Epidemiologist's Decision

b) HRK 4,000.00 per part-time employee, i.e. a proportional part per employee according to the number of part-time hours if the employer is closed by a decision of the Headquarters or a decision of an epidemiologist for 15 days onwards.

* increased by the contribution for pension insurance based on individual capitalized savings, i.e. the amount of the obligation of additional contribution for pension insurance based on proportion to the amount of aid.

Employers which felt the consequences of the disaster caused by the earthquake in Sisak-Moslavina, Zagreb and Karlovac counties are entitled to receive an aid in the amount of HRK 4,000 per full-time employee, or a proportional part for part-time employee according to the number of part-time hours (increased by the contribution for pension insurance based on individual capitalized savings), regardless of their activity and turnover.

Employers in sport system are entitled to receive an aid in the amount of HRK 4,000 per full-time employee, or a proportional part for part-time employee according to the number of part-time hours (increased by the contribution for pension insurance based on individual capitalized savings), regardless of their turnover.

• Reimbursement of fixed operating costs

The employers who have submitted a request for the preservation of jobs because their work has been prevented by a decision of the Civil Protection Headquarters or an epidemiologist will be entitled to receive an additional full or partial reimbursement of the fixed costs under certain conditions.

More information on this option can be found in the Tax Authority’s instruction.