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  • An overview of the euro introduction process in Croatia
Article:

An overview of the euro introduction process in Croatia

10 June 2022

On 20 May 2022, the Act on the Euro Introduction as the Official Currency in the Republic of Croatia was published. The law regulates the rules for the euro introduction as the official currency, the rules for converting, supplying, and exchanging cash from kuna to euro, dual circulation, double reporting, application of the principle of continuity of legal instruments, budgets, financial plans, business books, financial statements, and taxes. To remove all doubts about the euro introduction, the BDO has prepared an overview of the facts and detailed instructions.

When does the euro become the official currency in the Republic of Croatia?

From 1 January 2023, the euro will become the official currency of the Republic of Croatia and then the current currency of the kuna will cease to exist. This means that in all documents (including invoices) and all legal instruments issued, drawn up, and issued after the day of the euro introduction, the amounts must be stated in euros.

The Croatian National Bank, instead of publishing the exchange rate of the kuna against other currencies, will begin to publish the exchange rate list for the euro.

Also, every business entity that does business directly with consumers will be able to join the initiative for the correct recalculation and presentation of prices. Creating a safer environment for consumers is the main goal of the initiative. Businesses will be able to access the Code of Ethics, which will enable the reliable and transparent introduction of the euro.

In protecting consumers in this situation, it is important to emphasize that it is forbidden for businesses, credit institutions, credit unions, payment institutions, electronic money institutions, and financial service providers to increase the price of goods or services without justification.

The general rule for recalculation and rounding of prices

Price recalculation and rounding are the items of concern to Croatian citizens. Namely, the full numerical amount of the fixed conversion rate will be applied when converting the kuna into euros.

The rounding of the amount will be done to two decimal places. If the third decimal is less than 5 then the second decimal remains unchanged, and if the third decimal is equal to or greater than 5 then the second decimal is increased by the number. An example of the conversion of the amount using the assumed exchange rate of 1 EUR is 7.53450 HRK can be seen in the table.

Price in kunas

Price in euros before rounding

Price in euros after rounding

69,99 kn

9,289269360 EUR

9,29 EUR

189,99 kn

25,2016006370 EUR

25,20 EUR

10 kn

1,327228084 EUR

1,33 EUR

0,03 kn

0,00398168 EUR

0,00 EUR

0,04 kn

0,00530891 EUR

0,01 EUR

 

Double pricing

The period of double reporting of prices of goods and services lasts from September 5, 2022, to December 31, 2023. Then the prices must be expressed in euros and kunas as well as the fixed conversion rate, as follows:

  • In business premises at the point of sale, goods or price list,
  • On the website,
  • In the notices given to the consumer before or during the conclusion of off-premises and distance contracts,
  • In the offer on a permanent medium,
  • During the advertising conduct in any form, offering the sale of goods or services, and through other forms of price expression.

Double pricing does not apply to radio advertising and voice messaging in other forms of advertising. Exceptions also exist for sales channels such as vending machines, kiosks, stands, and the like.

All those who issue documents to the end consumer must double the prices: eg merchants, restaurants, hotels, and the like. In addition to the private sector, this also applies to public sector entities (eg pensions and utility bills). Public administration bodies and public sector companies, for example in decisions on tax refunds, tax debt, certificates of payment of salaries to civil servants and civil servants, must also adhere to double disclosure of prices.

Exceptionally, double pricing does not apply to consumers acting as co-owners of residential buildings or representatives of co-owners of residential buildings; within the framework of political activity and/or political promotion and/or within the framework of economic activity outside the registered trade, business, craft or professional activity.

Dual currency circulation and exceptions

The dual circulation of currencies, ie the simultaneous use of the kuna and the euro in cash transactions, lasts for 14 days from the date of the euro introduction. Consumers can pay in cash in kunas and euros these days. During this period, the payee is obliged to return the rest of the money in euros to the consumer who paid in cash in HRK.

Exceptions to dual circulation are slot machines, amusement machines, and self-service devices for the sale of goods and services that can use ready-made new ones in kunas or euros.

It is important to note that ATMs and other self-service devices in the banking business have been paying out almost all money in euros since the introduction of the euro.

After these 14 days, the euro becomes the only legal tender.

Exchange of kuna for euros

At the earliest one month before the day of the euro introduction, banks will start supplying consumers and businesses, housing savings banks, credit unions, payment institutions, electronic money institutions, and the provision of financial services.

It will be possible to exchange cash from kuna for euros:

  • Within 12 months from the date of introduction of the euro,
  • In banks, FINA and Croatian Post d.d. no charge,
  • Up to 100 kuna banknotes and up to 100 kuna coins per transaction,
  • Exchange of kuna cash with a deposit on a euro transaction account.

If someone wants to exchange more than 100 banknotes and 100 coins in one transaction, then the bank can charge a fee.

What will happen to legal acts created before the euro?

The validity of existing contracts and other legal instruments, which specify the national currency, must not be affected by the euro. This applies to, for example, administrative acts, court decisions, contracts, payment instruments with legal effect such as enforcement orders, securities, payment security instruments, and documents issued to secure a claim.

The euro introduction does not entitle either party to unilaterally terminate a valid contract or change certain contractual provisions. Contracted amounts in HRK will be considered amounts in euros with the application of a fixed conversion rate and accordance with the rules for conversion and rounding.

Changes in accounting

Changes in accounting until 31 December 2022 contain some important information. Annual financial statements and corporate income tax returns for which the business year is equal to the calendar year state the data in HRK. Those for which the business year is different from the calendar year, and when the last day of the financial year occurs after the euro introduction, then the data are given in euros.

Business books are kept in HRK and according to the event in another currency. The VAT form for December 2022 (or quarterly) submitted on January 20, 2023, is stated in HRK. As for invoices, those issued after January 1, 2023, for delivery in December 2022 will be issued in euros but will be included in the VAT form for December in HRK.

After 31 December 2022, the accounting balances are converted into euros using a fixed conversion rate and following the rules for conversion and rounding. Business books will then be kept in euros and according to the event in another currency.

What about salaries?

At the time of double presentation of currency, the employer is obliged to double state the total amount paid to the employee on the account on the document on payment of salary, salary compensation, severance pay, and other material rights with a fixed conversion rate. In addition, the employer can double the amounts stated on the certificates.

The calculation and payment of salaries (including the salary for November 2022) paid in December 2022 is made in HRK. From 1 January 2023, the employer is obliged to convert the amount of salary and other benefits into euros using a fixed conversion rate.

Payroll information system adjustment will also be needed. Namely, for the double presentation of the Forms according to the Ordinance on amendments to the Ordinance on the content of salary calculation, salary compensation, or severance pay, it is necessary to adjust the accounting documents for salary payment or compensation (IP1 form), for severance pay (IO1 form), for unpaid or partially unpaid salaries, ie salary compensations (form NP1) and for unpaid or partially paid severance pay - form NO1.