Croatia set for major digital transformation next year

Croatia is preparing for a significant digital transformation that will reshape its tax system and reduce long-standing administrative burdens for businesses.

Finance Minister Marko Primorac has described the digitalisation of the Tax Administration, the introduction of Fiscalisation 2.0 and the creation of a Population Register as historic steps towards modernising the Croatian economy.

Speaking to small and medium-sized entrepreneurs, Primorac emphasised that these reforms aim to cut bureaucracy and boost productivity, HRT reports.

Within the next two weeks, as much as 80 per cent of tax obligations in Croatia will be recorded digitally, marking a decisive move away from paper-based administration that has long frustrated businesses.

A Generational Shift Away from Bureaucracy

According to the Minister, excessive administrative requirements have been a major obstacle for entrepreneurs, particularly smaller firms.

“This was a huge administrative burden and a real struggle for many business owners,” Primorac said.

“With digital archiving, digital invoices and automated bookkeeping, we are transforming society towards one that focuses on products with higher added value. It is not simple, but these digital steps are generational changes.”

The reforms are expected to streamline processes, reduce errors and free up time for businesses to focus on growth and innovation rather than paperwork.

Support Mixed with Concerns Over Penalties

While business representatives largely support the digitalisation of the Tax Administration and Fiscalisation 2.0, there are concerns about implementation, particularly regarding penalties for non-compliance.

Boris Antunović, President of the Croatian Employers’ Association (HUP) Association of Small and Medium-Sized Enterprises, warned that not all entrepreneurs are digitally skilled.

“Not all business owners are IT-literate. We are asking for a grace period during which we can be confident that we will not be penalised for minor mistakes,” he told HRT.

Under the Fiscalisation Act, fines can reach up to €63,360 per offence, which has raised anxiety among smaller businesses adapting to the new system.

Transparency and the Fight Against the Grey Economy

Despite these concerns, employers’ associations stress that transparent businesses should have little to fear.

Irena Weber, Director-General of HUP, pointed out that Croatia’s grey economy remains a serious problem, estimated by some calculations to account for up to one third of GDP.

“This reduces tax revenues and creates unfair competition,” Weber said. “We support Fiscalisation 2.0. Digital payments have been proven to reduce the grey economy and limit unreported transactions.”

Calls for Broader Tax Reform

Employers also argue that digitalisation alone is not enough. They highlight that labour costs in Croatia remain among the highest in the European Union.

The tax wedge on labour income is still high, while taxation on property and rental income remains relatively low. Business representatives are calling for urgent changes to rebalance the tax system and improve competitiveness.

As Croatia moves towards a more digital and transparent economy, the success of these reforms will depend not only on technology, but also on careful implementation and ongoing dialogue with the business community.