Dynamic VAT cuts contingency plan as energy pressures mount
Croatia is preparing legislative changes to allow rapid, temporary VAT adjustments on fuel as global energy prices rise. Prime Minister Andrej Plenković confirmed that amendments to the VAT Act are under consultation, positioning VAT as a contingency tool rather than an immediate intervention.
Any fuel VAT cut will be closely studied by the European Commission, which as already warned on Spanish fuel VAT cut last wee.
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The proposal would enable the government to adjust VAT rates on a biweekly basis, aligned to regulated fuel prices. This introduces a level of flexibility not typically seen in VAT systems, where rate changes are usually fixed and tightly constrained. However, Plenković stressed that VAT remains the “last lever”, with existing measures focused on excise duty reductions and caps on distributor margins.
Croatia has already reduced excise duties and limited fuel margins to cushion consumers. However, further margin reductions risk undermining supplier viability. In parallel, the government has requested approval from the European Commission to lower the EU component of excise duties, a move requiring specific authorisation.
The VAT amendments are expected to pass under urgent procedure by end-April. If adopted, they would provide a legal framework for rapid response to price volatility, although any actual VAT cut would depend on further deterioration in energy markets.
See our Croatia VAT guide for more background.
