Finance Minister Marko Primorac said on Wednesday that the threshold for companies wishing to enter the VAT system will be raised to €60,000. He emphasised that this "will be a good step forward for small businesses, especially in the initial phase of business development".

Speaking on Croatian Radio Television (HRT), he said it was necessary to protect the integrity of VAT as the main source of tax revenue, adding that this threshold “cannot be increased indefinitely”

An important step towards strengthening small and medium-sized enterprises

Earlier on Wednesday, the Croatian People’s Party (HNS) announced that a joint initiative by the party and the Croatian Social Liberal Party (HSLS) had been adopted. On the basis of this initiative, the Domovinski pokret (DP) party has submitted an amendment to the VAT Act, which proposes raising the threshold for companies entering the VAT system to €60,000.

The HNS believes that raising the threshold is an important step towards strengthening small and medium-sized enterprises, given the current inflationary pressures, and that this measure will help them to operate under more favourable conditions, reduce operating costs and invest more in business development.

“We believe that this measure will significantly contribute to creating a more favourable business environment and increase the resilience of companies to market challenges,” said HNS President Krunoslav Lukacic.

A slight price increase could occur

Primorac also said that GDP growth, especially if fuelled by increased consumption, could lead to a slight increase in the prices of goods and services due to higher market demand.

Thanks mainly to the increase in consumption and investments, the Croatian economy grew again in the third quarter of this year, marking the 15th consecutive quarter of growth with a year-on-year increase of 3.9%, which is faster than in the previous quarter.

“If we compare ourselves with other EU member countries, based on the current data, this is the highest growth in the third quarter. That is encouraging. We are also satisfied with investments,” Primorac said, adding that this also reflects government investments, including efforts to fulfil the National Recovery and Resilience Plan.

He said the increase in consumption was largely a result of government measures – aid packages, tax policies and rising wages.