Marija Zuber Answers the 10 Biggest Doubts of Entrepreneurs Regarding the Loss of State Support

Entrepreneurs responded in large numbers to Lider’s survey on what they should (not) do to avoid losing state corona support. Within a week, 1177 of them clicked on their greatest concern among the ten provided answers. We presented these ten doubts to the esteemed tax advisor Marija Zuber, who agrees that there is significant confusion in the interpretation of the new rules of the game in public and among entrepreneurs. To clarify key uncertainties, Marija Zuber patiently and thoroughly answered all ten questions. Here are the complete answers to the question of what is allowed and what is not:

1. Will I lose the right to support of 4000 kuna per employee if I reduce the number of employees and terminate someone’s employment contract?

The loss of the right to state support depends on how much the number of employees has decreased. An employer loses the right to support if they significantly reduce the number of workers in the period after March 20 until the end of special circumstances. A significant reduction in the number of workers is considered a decrease in employment by:

• more than 40 percent – for employers who employ up to 10 workers
• more than 20 percent – for small enterprises
• more than 15 percent – for medium enterprises
• more than 10 percent – for large enterprises.

In determining the decline in employment, workers whose employment has ceased due to the expiration of a fixed-term contract, retirement, and termination due to the employee’s misconduct will not be taken into account.

2. As a user of monthly support, can I pay non-taxable bonuses and other non-taxable rewards?

State support is granted to employers as a targeted support for wage payments aimed at preserving the level of employment, but its realization does not annul the employer’s obligations defined by collective agreements, employment contracts, and work regulations. The employer is obliged to fulfill all monetary obligations to employees prescribed by the sources of labor law that bind them, including the payment of Easter bonuses, lump-sum allowances for meals, vacation bonuses, jubilee awards, various aids, etc. These are monetary rights of employees that are enforceable within a limitation period of five years. The payment of such receipts is not prohibited and does not affect the realization of support from the Employment Service.

3. I received monthly support, but not a contract from HZZ. Will I need to return the support?

Due to the large number of requests, HZZ was unable to promptly process all requests before payment, so many employers received support before signing a contract. In some cases, an amount greater than the submitted request was paid. For example, for March, some employers received full monthly support for part-time workers even though they are only entitled to a proportional part, and payments were also made for retired employees, users of sick leave funded by HZZO, and for employees on maternity and parental leave for whom the employer is not entitled to support. According to the announcement, after processing and control of overpaid amounts, the employer’s support payments will be reduced for the following months.

Given that the conditions for using the support are publicly announced, and the employer provides a statement on the intended use of funds in accordance with those conditions, the employer should notify the relevant HZZ service by email about the overpaid amounts of support.

4. Do I have to return previous supports if someone from the employees resigns?

No, the employer does not need to return the support that relates to the period while the employee was employed. However, they are obliged to notify the Employment Service of the termination of the employee’s employment within eight days of the termination, stating the reason.

5. Can I receive monthly support for opening new jobs?

This support is not intended for new workers. The employer can hire new workers without restrictions, but they cannot receive support intended to mitigate the effects of the COVID-19 pandemic for them. Only exceptionally, if a new worker is hired as a replacement for a worker for whom the employer has started receiving monthly support for wage payments, then the employer is entitled to support for that new worker as well.

6. Am I allowed to pay out profits for this year later if I have used support measures?

The realization of the right to state support intended for wage payments in special circumstances does not affect the payment of profits. Members of the company can be paid profits both during the period they receive state support for wage payments and in the period after the special circumstances have expired. Moreover, the same individual can receive a salary funded by state support and profits from the same payer on the same day in unlimited amounts. In this respect, the conditions for realizing support aimed at mitigating the effects of the pandemic in Croatia differ from those in other European countries.

7. Do I have to pay transportation costs in Zagreb to employees for April?

If employees came to work at the employer’s headquarters or another location where they usually work during April, and the employer pays them transportation cost allowances according to the sources of labor law that bind them, it should be paid for April, even though public transport did not operate that month. The right of workers to transportation cost reimbursement for coming to work, even during the period when public transport operates regularly, does not depend on whether the worker uses that transport or comes to work in a personal organization. The price of public transport is only a parameter for determining the amount of the allowance and for determining the non-taxable amount of that allowance.

For workers who, based on the employer’s decision, did not come to the usual work location throughout April, either because they worked from home, took annual leave, paid leave, days off, justified absences, etc., and thus objectively had no transportation costs, the employer is not obliged to pay the transportation allowance.

8. What salary does an employee go on unemployment with if they are terminated after receiving a salary equal to state support for two months?

The right to cash assistance due to temporary unemployment is determined in relation to the average gross salary that the worker earned in the three-month period preceding the termination of the employment relationship. The average gross salary includes amounts that the employer paid to the worker from funds received from HZZ.

Cash assistance for the first 90 days of use amounts to 60 percent of the average gross salary earned by the worker in the three-month period before the termination of the employment relationship, and for the remaining time, 3 percent of that amount. The maximum amount of unemployment cash assistance is limited, so in the first 90 days it amounts to a maximum of 4519.90 kuna per month (70 percent of the average net salary in Croatia), and in the remaining period, a maximum of 2259.95 kuna per month (35 percent of the average net salary in Croatia).

9. What if I cannot pay taxes after the three-month deferral expires?

For all deferred tax obligations for which the right to exemption has not been realized, the taxpayer will be able to use the measure of installment payment for a period of 24 months, without interest calculation. The taxpayer intending to use the measure of installment payment for contributions and taxes must submit a Request for Installment Payment to the Tax Administration. The request must be submitted in writing, must be justified, and can be submitted within five days of the due date of the obligation that the entrepreneur is unable to pay.

Not all deferred obligations will be due on the same day. For example, for a salary paid on April 5, the public dues obligation is deferred to July 5, for a salary paid on May 15, the obligation is deferred to August 15, etc. In the Request for Installment Payment, the applicant specifies which of the deferred due tax obligations this request relates to, and can choose one of the following options:

• installment payment only for the due deferred obligation, whereby the approval of the Request excludes the possibility of approving installment payment for deferred tax obligations that become due later or
• installment payment for all deferred tax obligations, both due and not due at the time of submitting the Request, in which case the not due deferred tax obligations become due and installment payment for their payment is approved, instead of further deferral.
If the taxpayer granted installment payment does not comply with the payment deadlines for due installments, the installment payment will be revoked.

10. Is there a possibility that my already approved tax write-off will be suspended?

Yes, there is that possibility. The tax authority may subsequently verify the facts that the entrepreneur stated in the Request for deferral and/or exemption from tax obligations. If the tax authority subsequently determines that the applicant falsely represented the facts and/or acted contrary to tax regulations and/or abused tax payment measures in special circumstances with the aim of obtaining unlawful property benefits, they will notify the entrepreneur, revoke the deferral and/or exemption, and charge them statutory default interest.

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