The payment will start on Thursday and will be made by veterinarians, Agriculture Minister Petar Cobankovic said at the government session.
The amount of the compensation will depend on the type of poultry and will range from eight kuna per chicken to 300 kuna per turkey, which were the market prices in the area before the virus was discovered. Every household will also receive 200 kuna for profit loss.
A total of 17,299 head of poultry has been killed within three kilometres of the Grudnjak fish farm since the discovery of the virus last Friday.
Prime Minister Ivo Sanader thanked the residents of Zdenci municipality for their understanding and reiterated it had been necessary to cull the poultry to prevent the virus from spreading.
He said a laboratory in Great Britain was expected to confirm if swans at Grudnjak had been infected with the lethal H5N1 avian virus, and added the public would be immediately informed of the findings.
The PM also congratulated the bird flu crisis centre on its swift actions to prevent the virus from spreading to poultry.
"Croatia is showing that it can react in crisis situations," he said, adding he was satisfied the European Commission had decided to allow the import of poultry meat from Croatia.
The government also adopted a national influenza pandemic preparedness plan, which is the obligation of every World Health Organisation member state, which also have to set up national pandemic planning committees.
(EUR1 = 7.4 kuna)