On Friday, May 13th, 2022, the Act on the Introduction of Euro as the official currency in the Republic of Croatia entered into force.
This Act regulates the rules for conversion, supply and exchange of kuna into euro, dual circulation, dual display of prices, application of the principle of continuity of legal instruments, budgets, financial plans, financial records, financial reports and taxes in the process of introduction of euro, process supervision and misdemeanour provisions for non-compliance with the Act.
To address certain issues, the Coordination Committee for Economic Adjustment and Consumer Protection has issued unofficial guidelines on the application of the mentioned Act.
A summary of the most important guidelines and preparatory actions for business entities is provided below:
- Adaptation of the information system, since this is the basis for the operations of a business entity, especially in the accounting and financial sector, which includes
- invoicing, cash register operations, vending machines, payroll, inventory control applications, systems for processing financial data, etc.,
- performing conversion by using the prescribed fixed conversion rate and prescribed rounding rules,
- enabling comparative reporting (in kuna and euro)
- enabling the conduction of processes in kuna for those processes that relate to the previous business year, but are executed in the current year
- testing the system in a timely manner.
- It is necessary to adjust the accounting documents, i.e. invoices, payment slips, payment statements, delivery notes, purchase orders, etc
- In the period of dual display of prices, the employer is obliged to state the total amount paid to employee on his payslip in euro as well as in kuna
- Business entities, which are obliged to submit annual financial reports whose business year is equal to the calendar year, have to prepare and submit annual financial reports in accordance with the deadlines in year 2023 for the business year 2022 in kuna. Business entities whose business year is different from the calendar year, and whose last day of the financial year occurs after the date of introduction of euro, have to submit data for the previous business year in the financial statements in euro
- Tax returns for year 2022 and for previous years are submitted in kuna. From 1.1.2023. tax returns are to be submitted in euro. Corrections of tax returns are submitted in the currency in which they were originally submitted
- On the date of the introduction of euro, banks and other payment service providers are obliged to convert funds on accounts from kuna to euro free of charge according to the prescribed fixed conversion rate
- It is especially important to educate employees about the introduction of euro and the process of introduction of new currency should be made clear to all employees.
Code of ethics initiative
All entities that work with consumers directly will be invited to join this initiative. The goal of this initiative is the correct conversion and price-stating and avoidance of unjustified increases in retail prices. Entities that join the code of ethics will receive a label that will signal consumers that they are a reliable business entity.
- Mandatory display of dual prices starts on 5.9.2022. and lasts until 31.12.2023.
- The obligation of dual display of prices applies exclusively to direct relationship with consumers
- Conversion of prices and other monetary statements of value will be performed exclusively according to the prescribed fixed conversion rate in the form of direct quotation EUR/HRK in its full numerical amount
- There are some exceptions in the obligation of dual display of prices (totems, vending machines, deposit-refunds, coupons, tickets, gift cards, etc.)
- In accordance with the principle of continuity of contracts, existing contracts with amounts stated in kuna are still valid. The same applies to employment contracts.
This newsletter used deadlines with the presumption that Croatia would adopt the euro as its official currency on 1 January 2023, but the deadlines will be set with regards to the date of publication of the EU Council decision on the adoption of euro, which cannot be predicted at this time.
Please keep in mind that legislation is subject to frequent change. This newsletter is therefore necessarily based on our understanding and correct interpretation of the law and practice at the time of publication of this newsletter. This newsletter will not be updated due to changes in legislation that occur after the issuance of this letter.