December will be a turbulent month in terms of legislation in Croatia, according to Miskovic & Miskovic Partner Iva Miskovic, as the parliament is addressing considerable changes in the fields of labor and trade law, while the transition to the euro enters into force on January 1.
"As we speak, the Croatian parliament is discussing an important set of laws introducing legislative updates in many different fields," Miskovic says. "Among those, the major update is related to the adoption of the euro as Croatia’s currency as of January 1, 2023. The transition period has created a considerable financial burden for companies, predominantly affecting banks and financial institutions," she notes. During the past five months, she says, companies were required to make major changes in their processes, for example providing a dual display of prices and conversions. "From the beginning of next year, further obligations are to be fulfilled," Miskovic adds.
"The companies will have to convert their share capital into euros in the next years. Among others, it includes changes to documentation within the court registry and, although the state has waived the payment of court administrative fees, companies will still have to bear the significant cost of public notaries and lawyers," she notes. "In line with the trends of the Croatian business climate for the past two years – tending to resist various impositions that burden businesses" – she says "business associations have reacted to it and announced that they will boycott these obligations, aiming to put pressure on the government to find a better solution."
According to Miskovic, another major novelty is related to the change of labor legislation, aiming to provide better protection for employees. "One part of the law introduces the suspension of undeclared work, which harms the Croatian economy," she notes. "If the law is passed according to the current proposal, it will define undeclared work in a broad sense and will likely include work that in fact is declared, but where part of the salary is paid without taxes and social contributions."
Additionally, Miskovic highlights that the law will, for the first time, officially regulate the work provided through digital platforms, usually providing transport and delivery services in Croatia. "People providing personal work through digital platforms but without an employment agreement, according to the current proposal, shall be considered employees of the platform or intermediary company if that work fulfills certain characteristics of the employment relationship." According to her, "while this seems to be a win on the social side for the workers, there probably will be mechanisms to avoid this presumption, for example through the reduction of monthly engagement and income, so the workers might feel the impact of this change on the economic side." Miskovic also says that "the new regulation will impose an obligation on employers of undeclared workers to register these workers to the pensions fund for the period of six months prior to the supervision conducted – and pay all the duties accordingly – as well as impose other fines for each particular case of unreported work."
Lastly, Miskovic highlights a set of amendments related to trade law. "It is a huge economic and ideological topic in terms of restrictions on working on Sundays," she notes. "It is expected that, if the law is passed, shopping centers will be the ones affected the most, because they generate the largest portion of their income on weekends." As for the employees, according to Miskovic, "except for more personal time on weekends, the situation might change for the better also economically, since the law provides a 50% higher hourly rate for every hour of working on Sundays. Hopefully, spending habits will spill over from Sunday to other days, and store employees will truly benefit from their legal entitlements, without having to fear for their position."