June 2013
Tax Alert
New Croatian
VAT Act enacted
The Croatian Parliament has concluded
the session on the new Croatian Value
Added Tax Act. It was voted on and
enacted on 14 June 2013. The VAT
Act will be in application from the date
of the EU accession of Croatia, i.e.
1 July 2013.
In several previous Alerts we have
outlined the changes introduced by
this Act. Following numerous public
discussions, the draft of the Act was
amended several times. In this Alert we
summarize significant changes brought
by the new VAT Act and highlight some
additional amendments that were
introduced compared to previous
drafts of the VAT Act.
Intra-Community acquisitions (ICA)
We remind that, in addition to taxable
transactions in the scope of the current
VAT legislation (supply of goods
and services, and importation), new
taxable event has been introduced –
the intra-Community acquisition of
goods (i.e., ICA of goods).
In general, ICA represents purchase of
movable property and their dispatch
from other EU member state to
Croatia. The transfer of goods that
form part of the business assets of a
taxpayer from another EU member
state to Croatia for its business
purpose is also considered as ICA.
When purchasing goods from another
EU member state, the acquirer will be
obliged to self-charge VAT and report
the acquisition. It will have to do this
no later than 15th day of the month
following the month in which the sale
occurred. Such acquisition VAT could
be deducted in the same VAT return
(insofar the acquirer has the right to
deduct VAT) meaning that there is no
cash-flow impact.
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Importation of goods
A new definition of importation has been
introduced. Each entry of goods into the
EU from third countries or third territories
will now be considered as an import. That
member state on whose territory the goods
are located upon their entry into the EU
will be considered the place of importation.
Dependant on the receipt of approval
from the Tax Authority, there will also be
possibility of deduction of VAT at import
without paying it first.
The importation of goods from third
countries to Croatia should be exempt
from Croatian VAT if the goods in question
are intended to be transported to another
Member State (this is known as Procedure
42). The goods should be dispatched to
another Member State as soon as they
are imported and the importer should
have upfront evidence that the goods are
intended to be transported or dispatched
Inter-Community supplies (ICS)
In general, the supply of goods made by
a taxable person to another EU member
state will be exempt from Croatian VAT.
Generally, VAT should be calculated by the
acquirer in line with the VAT legislation of
the country in question. For the exemption
to be applied, the supplier should keep
proof in its records that the goods really
left the country.
Distance selling of goods
In general, such supplies will be taxable
in Croatia, unless the value of the supply
in question exceeds the distance selling
threshold prescribed by the respective
member state.
The threshold for Croatia is HRK 270,000
(approximately EUR 35,700). Therefore,
if supplies of goods made by the supplier
from another member state exceed HRK
270,000, the place of supply would be in
Croatia and the supplier should register
in Croatia for VAT purposes. If the same
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decides not to be the subject of application
of prescribed threshold, i.e. that the place
of supply for all supplies is in Croatia,
should submit a request to Croatian Tax
Authorities and should apply the respected
rule at least two years.
to another Member State (this evidence
should be an invoice, contract of carriage,
the VAT identification number of the
recipient).
Triangulation
So-called triangulation simplification has
been introduced for chain transactions
(2 sales in a chain) of buying and selling
of goods between three different taxable
persons registered for VAT in three
different member states, provided the
goods are transported directly from the
first seller to final recipient. If prescribed
conditions are met, the simplification will
enable to the intermediary to avoid the
registration for VAT purposes in Croatia.
The same simplification also applies in most
other EU countries. However, businesses
involved in chain transactions need to
be aware that, the Croatian VAT Act
prescribes that triangulation simplification
may be used exclusively in cases when the
“acquirer” (i.e. the taxpayer in the middle)
is neither established nor registered
for VAT purposes in Croatia. This rule
is stricter than the practice of other EU
Member States, which require only that
the “acquirer” is not established in the
destination country (i.e. the country of the
final customer, in this case Croatia).
self charged by the service recipient to
be deducted without actually making VAT
payment (insofar the service recipient
has the right to deduct VAT). According
to current legislation, the precondition for
making deductions is that payments are
made to the Tax Authorities.
Reduced VAT rates
The new Act still prescribes the application
of two reduced rates of VAT – 5% and
10%. Further to the numerous proposals
and discussions related to application
of reduced rates on printed media, the
5% VAT rate will be applied only on daily
newspapers printed on paper containing at
least 25,000 words, except on those which
wholly or mainly serve for advertising. The
rate of 10% will apply to other newspapers
and magazines, except those which wholly
or mainly serve for advertising
As of 1 July 2013 reduced rate of 10%
will apply also to accommodation services
in vessels for nautical tourism, tickets
for concerts and magazines for arts and
culture.
Place of supply for services
In line with the general rule prescribed by
the current Croatian VAT legislation, VAT
is payable based on where the registered
seat of the service provider is located (with
certain exceptions). However, the new VAT
Act changes the rules in respect of the
place of supply of services in such a way
that services (with certain exceptions)
will be taxable based on the seat of the
service recipient. It will be possible for VAT
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In the event that the service is provided
to a non-taxable person, VAT should be
charged by the service provider.
Domestic reverse charge of VAT for
certain services
New special regime will be applicable as
of 1 July 2013 with respect to certain
supplies received by a Croatian VAT payer.
According to the new rule, no VAT would
be charged by the suppliers on the invoice.
Instead, the recipient would be obliged to
charge respective VAT. Supplies on which
new rule will apply include construction
work (repair, maintenance, alteration
and demolition services in relation to
immovable property), supply of staff
engaged in construction work, supplies of
waste, supplies of immovable property in a
compulsory sale procedure and similar.
The aim of this measure is to avoid or
minimise situations of VAT avoidance.
Invoicing
Land and real estate
As of 1 January 2015, the supply of land
for building will no longer be VAT exempt.
As of that date, supply of buildings and
attached land older than 2 years starting
from first moment of occupation will be
exempt from VAT.
Cash accounting scheme
Invoices for the ICS of goods and services
should be issued no later than 15th day of
the month following the month in which
the sale occurred. Such rule does not apply
to domestic supplies.
New VAT Act prescribes that VAT amount
must be state in Croatian currency
(applying the middle exchange rate of the
Croatian National Bank) while other items
may be stated in other currencies.
Simplified invoices for the supply of
goods and services not exceeding HRK
700 (approximately EUR 90) have been
introduced. It will also be possible to issue
collective invoices for several supplies
made in the same month.
Also, different from the current VAT
legislation, invoices will no longer be
required to be issued for financial services
which are VAT exempt (with exception to
currency conversion services performed in
Croatia).
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Previous drafts of the VAT Act proposed
suspension of the cash accounting scheme
as of 1 January 2014 for VAT payers
whose profits are subject to personal
income tax. Currently, such tax payers
are able to postpone the VAT payment to
period in which consideration is collected
from the buyer. However, the final VAT Act
only prolonged the start of the suspension
until 1 January 2015.
VAT reporting
Taxpayers that supplied goods and services
(including VAT) with a total value not
exceeding HRK 800,000 (approximately
EUR 106,000) in the previous year will
have to apply monthly reporting if they
make supplies within EU.
Besides the current monthly/quarterly VAT
returns that have to be submitted by the
20th day of the month following the end
of the accounting period, and the annual
VAT returns that have be submitted by the
end of February of the current year for
the (previous calendar year), taxpayers
will also be obliged to submit the following
reports (under certain conditions):
• EU acquisition list - report on ICA of
goods and services (to be submitted by
the 20th day of the month following the
end of the accounting period),
• EU sales list - collective report for ICS of
goods and services (to be submitted by
the 20th day of the month following the
end of the accounting period).
Above mentioned forms are available (in
Croatian) for download at the website of
the Croatian Tax Authorities – http://www.
porezna-uprava.hr/
VAT ID number and registration as Croatian VAT payers
Persons who are becoming VAT payers
in Croatia on 1 July 2013 should apply
for VAT registration within 15 days from
entering into force of the new Act.
Also, all VAT payers making intraCommunity supplies or acquisitions should
apply for issuance of the Croatian VAT ID
number (“HR” + Personal Identification
Number) if it is not allocated by the
Croatian Tax Authorities automatically.
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Note that taxpayers who in accordance
with the new Act will cease to be VAT
payers, should within two months from
the date of entering into force of this Act
submit final VAT calculation to the Croatian
Tax Authorities.
Information on taxpayers
Croatian taxpayers should check whether
the information stated on their invoices
(name, address, registered seat)
corresponds with that stated in the
court registry and in the Tax Authorities‘
system, from where such information
will be transferred to the VIES (VAT
Information Exchange System) database
upon obtaining the VAT number. The
VIES database is a network of national
VIES databases for the transmission of
information relating to VAT (validity of VAT
numbers, information relating to supplies
between Member States etc.). The
information stated on invoices should be in
line with that stated in the VIES database.
VAT refund procedures
Taxpayers with registered offices within
the EU will have to submit requests for
VAT refunds electronically through the
electronic portals of the Tax Authorities
in their own countries by 30 September
of the calendar year following the refund
period.
Therefore, Croatian taxable persons will
be able to request VAT refunds in other
member states through the Croatian Tax
Authorities rather than through the Tax
Authorities of the country from which the
refund is requested.
The deadline for VAT refunds to foreign
taxable persons that are seated outside
EU has been extended from six months to
eight months from the date on which the
Croatian Tax Authorities receive the refund
request.
Current procedures relating to VAT refund
to foreign taxpayers will apply related to
refund of VAT incurred until 1 July 2013.
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Contacts
Ernst & Young
Assurance | Tax | Transactions | Advisory
Dénes Szabó
Partner
Tax Services
Tel: +385 (1) 5800 900
E-mail: [email protected]
Maša Šarić
Senior Manager
Tax Services
Tel: +385 (1) 5800 935
E-mail: [email protected]
Marta Glasnović
Senior Manager
Tax Services
Tel: +385 (1) 5800 910
E-mail: [email protected]
Marko Starčević
Manager
Tax Services
Tel: +385 (1) 5800 925
E-mail: [email protected]
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