Računovodstvo, IT rešitve in davčno svetovanje

Unija Smart Accounting d.o.o.
Tržaška cesta 515
1351 Brezovica pri Ljubljani
+386 1 360 20 00
+386 3 060 30 01

Kapucinski trg 11

4220 Škofja Loka

+386 4 506 04 00

Sončni Log 7

1370 Logatec

+386 1 360 20 47

Ljubljanska cesta 28

8000 Novo mesto

+386 1 360 20 26

Petrovče 256

3301 Petrovče

+386 3 424 43 11

Titova cesta 2a

2000 Maribor

+386 2 205 88 37

Rožna ulica 4

5280 Idrija

+386 5 777 55 00

Pristaniška ulica 8

6000 Koper

+386 5 777 40 10

+386 1 360 20 00

fb fb fb fb
8. maja, 2020

CROATIA: Update about salary execution in a crisis caused by the COVID-19 pandemic

The Execution Act regulates the procedure in which courts and notaries public conduct involuntary collection of claims on the basis of enforcement title documents and trustworthy documents (execution procedure) and the procedure in which courts and notaries public conduct the securing of claims (security procedure). The exception to this Act (since 1st of January 2011) is when the execution creditor submits an application for direct collection based on Writ of execution to the Financial Agency (FINA). This is permitted only in the case of monetary claim (direct collection).

The Act defines types of earnings exempt from execution and the amount of average net salary that cannot be enforced (protected part). This amount is 3/4 of the debtor’s average net salary.

In practice, problems have arisen regarding payment of part of the salary that is protected from execution. Even though the employer, when calculating the salary, made sure that the protected part was paid to the employee’s account, FINA would immediately suspend all paid funds, regardless of the fact that these funds were the remaining protected amount of the salary that was exempted from execution. This left the debtor with nothing in his account and his account was blocked.

In order for this not to happen, a protected account may be opened. A protected account is a bank account to which funds are exempt from execution. A protected account can only be opened after FINA has received a Writ of execution. When an employer receives a notification that a protected account is opened, they will make a payment of protected part of the salary to a protected account as opposed to a regular account.

The calculation of the protected part of the salary depends on:

  1. if the execution debtor receives a salary equal to or higher than the average net salary in the Republic of Croatia or less than that – the average net salary for 2020 is HRK 6.434,00
  2. which claim is settled from the salary of the execution debtor

Article 173. of Execution Act states that if the execution for the purpose of forced payment of monetary claim is carried out on the salary of the execution debtor whose salary is equal to or greater than HRK 6.434,00, the amount exempted from the execution is HRK 4.289,33. If the salary is less than HRK 6.434,00 and more than HRK 5.719,11, HRK 4.289,33 is excluded. If the salary is less than HRK 5,719.11, than 3/4 of the net salary is excluded.

Nowadays, employers often receive multiple Writ of execution for their employees. In such cases, it is necessary to determine the order of priority, and act on the document whose date is the earliest. The exception is execution regarding child support.

In order to minimize the consequences caused by the pandemic of the COVID-19 and to enable private individuals to more easily overcome the time of the special circumstances caused by the pandemic, the Act on Amendments to the Act of Execution on Monetary Funds was issued. This amendment entered into force on 18th of April 2020. It states that FINA is pausing the executions of financial assets against the execution debtors. This Amendment is valid for three months and can be extended to additional three months.

This Amendment did not regulate executions that employers conduct.

So on 1st of May 2020 The Act on Intervention Measures in Execution and Bankruptcy Proceedings for the duration of special circumstances entered into force. This Act stipulates that all execution proceedings are suspended, this means that the employer will not execute any further claims or pay the execution creditor the monetary amounts for which the execution was ordered. Employer will pay the entire salary to the employee. The exception is execution proceedings for child support, other claims for enforcement of a settlement to pay future installments on maturity, claims on arrears, and unpaid salaries, salary or severance pay and measures of protection from criminal proceedings.

During special circumstances, the employer will still receive a new issued Writ of execution for the purpose of acquiring priority in settlement, but will not execute them. During this time, no default interest is due.
The Act is valid from the entry into force of the Act on 1st of May 2020 until the expiry of the three-month period. The Act can be extended by three months by the decision of the Government of the Republic of Croatia.

During COVID-19, most employees who have foreclosures (with the above-mentioned exceptions) will have at their disposal a part of the salary that goes to enforcement, meaning the salary will be transferred to their account to which the funds for enforcement otherwise go, and will have access to.