Croatia passes law on the introduction of the euro as the official currency of the Republic of Croatia
On Friday, 13 May 2022, the Law on the Introduction of the Euro as the official currency of the Republic of Croatia was passed. Although we will write more about this topic in our future News, we begin by listing the key provisions of the newly adopted law.
Starting from 01 January 2023, the official currency in the Republic of Croatia will be the euro. The conversion rate will be fixed, and all conversions will be made using this fixed exchange rate. When calculating, the rule of rounding to 3 decimal places will be used (i.e., if the third decimal place is less than five, the second decimal place remains unchanged, and if it is equal to 5 or more, then the second decimal place is rounded to a higher decimal place).
In the simplified procedure of indirect frontloading, micro business entities (which employ less than 10 employees and whose annual income/assets in the previous year did not exceed HRK 15 million), can obtain an amount not exceeding EUR 10,000 from a commercial bank at the earliest five days before the introduction of the euro.
Other business entities may contract frontloading with a commercial bank, but with the obligatory conclusion of an indirect frontloading contract (where the amount of the frontloading is stated as well).
Entrepreneurs (who are not micro business entities) can contract these funds with commercial banks at the earliest one month before the day of the introduction of the euro.
Irrespective of the frontloading of business entities and citizens, these euro banknotes are put into circulation on the day of the introduction of the euro and may not be used earlier.
The exchange of kuna into euros will be possible at a fixed exchange rate:
- in commercial banks, the Financial Agency and the Croatian Post until 31 December 2023, a maximum of 100 kuna banknotes and a maximum of 100 kuna coins per transaction may be exchanged free of charge. In case of exchange of a large number of banknotes and coins, the commercial bank may charge a fee;
- in the Croatian National Bank for banknotes without a time limit, and for coins until the expiration of 3 years from the date of introduction of the euro.
DUAL CIRCULATION – PAYMENT IN KN AND EUR
The period from 01 January to 14 January 2023 is a period of dual circulation. During the period in question, entrepreneurs are obliged to accept both kuna and euros as a means of payment (in retail), while the rest are obliged to return in euros. In exceptional cases, entrepreneurs can also return kuna (e.g., insufficient funds in euros).
During the period in question, entrepreneurs are obliged to receive up to 50 kuna coins per transaction and the appropriate number of banknotes, bearing in mind the regulations on the prevention of money laundering (HRK 75,000).
PRICE DISPLAY IN ACCOUNTING DOCUMENTS
During the period from the first Monday in the month following the month in which 30 days elapse from the day of the adoption of the EU Council regulation (very likely on 05 September 2022) until 31 December 2023, there is an obligation of dual display of prices. During the period in question, there is an obligation to display prices in HRK and EUR using a fixed exchange rate.
The dual display of prices is also allowed to the entrepreneurs from the date of entry into force of this Law.
The obligation of dual display of prices refers to announcements:
- in the business premises at the point of sale or on the goods, or on the price list if it is a service;
- on the website;
- in an offer or contract on a durable medium;
- in the notice given to the consumer before or during the conclusion of off-premises and distance contracts;
- during advertising in any form, offering the sale of goods or services;
- in the reminder and other notice of outstanding debt delivered to the consumer, the total amount of debt;
- through other forms of price displaying.
When issuing an invoice, and during the period of dual display of prices, entrepreneurs are obliged to display the total amount on the invoice to the consumer both in kunas and euros, with the display of a fixed conversion rate.
Also, there is an obligation of dual display of the total amount on the payroll, as well as on salary compensation, severance pay and other material rights, which are paid to the employee on the basis of regulations, collective agreement, labor regulations and employment contracts, with the display of a fixed conversion rate.
The exception to the dual display obligation is the calculation of the travel order.
Obligations related to dual display also apply to concluded temporary service contracts and copyright agreements, as well as their calculations.
PRICE DISPLAY IN THE FINANCIAL STATEMENTS
The financial statements for 2022 will be prepared in HRK, while the initial balance during the transfer of the business year will be expressed in EUR using the defined fixed exchange rate. The financial statements for 2022 are presented in full in HRK, while the financial statements for 2023 (together with the comparative year 2022) will be presented in EUR.
All tax returns (including corrections), which refer to the period before the introduction of the euro as the official currency, will be made in HRK, and for the periods after 01 January 2023 in EUR.
In case of any questions you might have on this topic, please feel free to contact us.