Prolonged inflation leads Parliament to propose one-year extension of VAT reduction
Croatia’s Parliament is reviewing a new tax code update that would prolong the cut in VAT on heating from 25% to 5%. Gas would also be held at 5% from its usual reduced rate of 13%.
February 2023 inflation is running at 11.9%, down from a peak of almost over 13% late last year.
Oct 2022 – Spiralling inflation prompts cuts on basic foodstuffs, gas and heating
Croatia is the latest country cutting VAT on heating and food as its main inflation rate hits record levels. Its headline inflation rate has hit 12.3%, with heating and other basics being many times higher.
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VAT cuts to fuel until 31 March 2023
The changes, costing Kn 2.1 billion (approx €289m) will be as follows:
- Heating cut from 25% standard rate to 5% reduced rate
- Gas temporarily cut to 5%, and then return to 13%
EU grants more VAT rate freedoms for economic crisis
In December 2021, EU finance minister agreed new reduced EU VAT rate setting freedoms which should come into place before April 2022. The European Commission is though open to earlier derogations from the existing VAT Directive restrictions on reduced rates during this temporary energy inflation spike. It has already provided permission to Spain.