Croatia raises VAT threshold to €60,000 in boost for small businesses

ZAGREB, 28 November 2024 (Hina) – Croatian Finance Minister Marko Primorac has confirmed that the threshold for entering the VAT system will be raised to €60,000, highlighting that this represents a significant step forward for small businesses, particularly in the early stages of their development.

“The decision to raise the VAT registration threshold for entrepreneurs to €60,000 is the result of extensive consultations. (…) We believe this will be a meaningful advancement, especially for small businesses in their formative stages,” Primorac said during the main news broadcast on HRT.

He added that maintaining the integrity of VAT, as the most substantial source of tax revenue, is crucial and cautioned that this threshold “cannot be raised indefinitely.”

The Croatian People’s Party (HNS) announced earlier on Wednesday that a joint initiative by the HNS and the Croatian Social Liberal Party (HSLS) had been accepted.

This initiative resulted in the Homeland Movement (DP) submitting an amendment to the VAT Act, proposing the increase of the VAT registration threshold to €60,000.

The HNS stated that, given the current inflationary pressures, raising the threshold to €60,000 represents a major step towards strengthening small and medium-sized enterprises. This change would help them operate under more favourable conditions, reduce operating costs, and invest more in business development.

“We believe this measure will significantly contribute to creating a more favourable business environment and enhance entrepreneurs’ resilience to market challenges,” said Lukačić.

A Slight Rise in Prices Expected

Primorac also noted that GDP growth, particularly when driven by higher consumption, could lead to a slight increase in the prices of goods and services due to greater market demand.

Thanks to rising consumption and investment, Croatia’s economy continued to grow in the third quarter of this year. It expanded by 3.9% year-on-year, marking the 15th consecutive quarter of growth and outpacing the previous quarter’s performance.

On Wednesday, the Croatian Bureau of Statistics (DZS) released its preliminary estimate showing that the gross domestic product (GDP) grew by 3.9% in real terms in the third quarter compared to the same period last year.

“When compared with other EU member states, this is, according to current data, the highest growth in the third quarter. We are delighted by this. We are also encouraged by the level of investment,” Primorac said, adding that the growth reflects state investment, including efforts tied to the implementation of the National Recovery and Resilience Plan.

He pointed out that the increase in consumption is largely the result of government measures, including assistance packages, tax policy adjustments, and, consequently, wage growth.