Mazars Extraordinary Tax Newsletter - December 29th 2020

The Governing Board of the Croatian Employment Service (“CES”) on their meeting held on 21th December 2020 has issued decision on the new aid for the job preservation in activities affect by COVID-19 for January and February 2021.

Conditions for the use of aid have remained more or less the same as for the previous aid (October – December     2020).

As opposed to the previous aid, changes refer mostly to the criteria for receiving an aid.

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.

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 November 30, 2020.

• Employees eligible for aid

The aid in January is available for all employees employed by 31 December 2020, while aid in February is available for all employees employed until 31 January 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:

• Co-owners with more than 25% owner's participation, founders. This does not apply to employers who employ up to 10 workers and to self-employed owners and persons who perform independent activities, agriculture and forestry, regardless of the number of employees.
• 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 July to 31 December 2020, compared to the cumulative for the period from 1 July to 31 December 2019. For taxpayers of quarterly reports, cumulative of III and IV quarter of 2020 is compared with the same period in 2019.

Option 2:

Month for which aid is requested (e.g. January 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 December 2020.
• If the employer was established after July 1, 2019 and has been operating for more than one year:

a) The month for which the aid is requested (e.g. January 2021) and the comparative month 2020.

b) If the payer of quarterly reports: IV quarter 2020 compared to IV quarter of 2019.

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 January and February 2021 can be submitted from January 26, 2021 to February 25, 2021, and payment of monthly salary costs for both January and February 2021 will be approved under certain conditions.

Requests for payment of monthly salary costs for February 2021 can be submitted from February 26, 2021 to March 25, 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.

In addition, employers who are unable to perform their activities in accordance with the Decisions of the Civil Protection Headquarters are also entitled to reimbursement of fixed operating costs in the event that in December 2020 they achieve a revenue decline of 60% compared to December 2019.

• 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.

Other news

• Interest rate on loans between related parties

The new Decision on the interest rates on loans between related parties was adopted for 2021 and it defines that such interest rate should amount to 3% which represents a decrease compared to the previous year, when it amounted 3,42%.