Are you ready for the Euro Conversion in Croatia?
I have written a blog about the Euro conversion in Croatia. January 1st 2023 is an extremely important date financially. It is known from other countries that joined the European Monetary Union (Eurozone) over the past 20 years that this conversion will have a major impact and is very complex. Not only for companies in Croatia, but also foreign companies with Croatian subsidiaries.
According to the Croatian governments and European Councils decision as well as available regulatory guidelines, Croatia will finally join the Eurozone. The formal changeover from HRK (Kuna) to EUR is planned as of January 1st 2023.Introducing the Euro will require significant legislative activity – namely, the adoption of a general act governing the introduction of the Euro and amendments to several acts and subordinate legislation such as the:
- Bank and payment system
- Tax system
- Capital market
- Financial system
- Trade law
In this procedure the most demanding and complex step will be the conversion process of the Croatian Kuna to the Euro. The process will start in 2022 with dual pricing in the second half of the year and with technical preparations for the actual Euro changeover. It is expected that 1 Euro will equal 7.53450 Kuna.The conversion from the Kuna to the Euro will be performed using all five decimals and then rounding the amount obtained to two decimal places. The conversion of prices and other monetary values at an exchange rate other than the fixed conversion rate shall not be permitted.
Benefits of introducing Euro
The Croatian economy should become more competitive and resilient. Entering the Eurozone is also expected to boost foreign investments. Borrowing will become more favorable. International trade with the euro area Member States will be made easier. Also, since Croatia has a high level of foreign currency debt, the introduction of the Euro will be beneficial to the country’s finances. Additionally, transaction costs will disappear which will be especially beneficial to Croatian exporters, and the exchange rate risk will be significantly lower.
Converting your SAP environment
All SAP customers in Croatia and foreign customers with Croatian subsidiaries have to convert their current SAP environments. If you haven’t started yet, be aware of the huge impact it can have on your systems and processes. It doesn't only affect the financial modules and processes!
The Expertum approach
But what about the Expertum approach of our local and international team? Generally, our currency conversion project consists of an assessment, two or three test conversions in a test environment and the final conversion in the productive environment.Before starting with the actual Euro conversion project, we will first conduct an assessment of your entire SAP landscape including all integrations and custom developments, and based on this provide an initial effort estimate. In the next step we will conduct a first test conversion to get a clear insight of the impact and to minimize risks. Based on the results of the assessment and test conversion, we will provide our customers with a detailed quotation, a clear project plan which might include additional test conversions, and impact analysis of the Euro conversion. After conducting our solid approach strategy including proper risk management, the actual Euro conversion will be successfully executed on the productive system.
The introduction of the Euro will bring significant changes to the Croatian economy and entrepreneurs. However, the overall effect will be positive. Recent polls show that around 60% of Croatian citizens support the introduction of the Euro. 2023 still seems far away, but before you know it, we will be toasting on New Year’s Eve. The Euro conversion requires a solid approach and timely preparation. So, you have to act now! Don't you think?
Author: Nikolina Cvijetic - Team Lead & Senior Finance Consultant