Croatia is set to grant its government emergency powers to adjust VAT rates on fuel and energy products without parliamentary approval, as surging prices from Middle East conflicts threaten economic stability. The proposed law, currently under public consultation until 25 April 2026, would allow rapid intervention through government decree during market crises.
The Croatian Parliament is moving to adopt urgent amendments to the Value Added Tax Act that would authorise the government to temporarily modify VAT rates on energy products during market crises, bypassing the standard legislative process.
The proposed legislation comes as Croatia faces continued uncertainty in energy markets following conflict in the Middle East. Before the war began, diesel prices ranged from EUR 1.37 to EUR 1.73 per litre between 1 January 2026 and 24 March 2026, while gasoline prices fluctuated between EUR 1.38 and EUR 1.62 per litre.
Since the outbreak of hostilities, the government has already intervened by adjusting excise duties and imposing retail price caps through trading margin restrictions.
Croatia’s current VAT system, aligned with European Union directives since the country joined the EU on 1 July 2013, applies a standard rate of 25% with reduced rates of 0%, 5%, and 13%. The new Article 38a would temporarily override these fixed rates for energy products subject to excise duties.
Under the proposed amendments, the government could issue decrees establishing alternative VAT rates for limited periods during severe market disruptions, supply chain difficulties, or other exceptional circumstances. Each decree would require periodic review to assess its effectiveness and continued necessity.
The legislation targets protection for farmers, fishermen, transport operators, and other economic sectors directly affected by fuel price increases. Officials argue that unpredictable international energy prices make traditional legislative procedures too slow for effective crisis response.
While implementation requires no additional state budget allocation, the Tax Authority acknowledges potential revenue reductions when lower VAT rates are applied. The financial impact cannot be estimated in advance, as it depends entirely on the specific measures adopted, their scope, and duration.
Parliament is considering the bill under urgent procedure provisions to prevent supply disruptions and cascading price increases across the broader economy that could result from delayed action.
Croatia’s proposed VAT amendments are currently under public consultation until 25 April 2026.
The legislation will follow an urgent parliamentary procedure due to ongoing global energy market disruptions. Once approved, the law will take effect immediately—on the first day following its publication in the Official Gazette.
