Flexible VAT rate on energy products

On Friday, 10 April 2026, the Proposal for the Amendment to the Value Added Tax Act was published under an urgent procedure and foresees the introduction of a legal framework enabling the determination of the VAT rate applicable to energy products in special circumstances based on the Regulation of the Government of the Republic of Croatia (without parliamentary procedure).The proposed amendment introduces the so-called “floating VAT”, i.e. a mechanism under which the Government may, for the purpose of market stability, for a limited period of time, in special circumstances, and in particular in the case of disruptions in the energy market, for the protection of consumers, market regulation or other justified reasons, amend the VAT rate applicable to the supply of energy products that are subject to excise duties.A standard VAT rate of 25 % applies to energy products, and since Council Directive 2006/112/EC on the common system of VAT prescribes a minimum standard VAT rate of 15 %, this rate represents the lower limit of a possible VAT rate applicable to energy products.

The proposal is available for public consultations until 19 April 2026, after which it is expected to be adopted.