VAT in Croatia

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Croatian VAT

Croatia joined the EU as the 28th member state on 1 July 2013.  As part of its accession it brought in a number of changes to its VAT regime in order to comply with the EU VAT Directive.

Croatia VAT law

Croatian VAT law is administered by the Croatian Tax Administration (Porezna Uprava) under the Ministry of Finance.

New rules on intra-community trade with EU countries

Many of the changes made prior to 1 July 2013 meant that Croatia was already largely compliant with EU VAT rules on invoicing, rates, place of supply and related VAT compliance issues.  The biggest change for Croatian taxpayers on entering the EU is that imports from or exports to companies in other EU member states are reclassified as 'arrivals' and 'supplies/despatches', respectively.  This means there is now no VAT charge - the customer instead accounts for the VAT through the reverse charge, so reducing the cash-flow impact.

There is still import VAT on goods arriving into Croatia from a non-EU country but there is provision for the deferment of this if the goods are immediately moved to another EU state where they will clear into free circulation.

Croatia VAT registration and tax representation

Under Croatian VAT legislation, an enterprise carrying out deliveries of goods or services in Croatia without having a registered office, business unit, permanent residence or habitual abode in Croatia will be treated as a Croatian VAT payer - unless the Croatian service recipient is liable to self-assess and pay VAT (i.e. if the reverse charge mechanism applies).  The rule also applies where a foreign enterprise acquires goods in Croatia and makes further deliveries in Croatia. The foreign enterprise is required to register for VAT purposes and may appoint a tax representative authorised to carry out functions related to the calculation of tax and payment on behalf of the non-resident.  Non-EU companies obliged to VAT register in Croatia must appoint a local tax agent.

The VAT registration threshold for non-resident traders selling directly to Croatian consumers is HRK 270,000 (about EUR35,000) per annum. Non-resident companies have to apply for a VAT registration number before the value of supplies sold in Croatia exceeds HRK 270,000.

Typical situations where foreign companies must register as a non-resident trader for Croatian VAT include:

  • buying and selling goods locally (domestic supplies)
  • importing goods
  • sales via the internet or catalogues to Croatian consumers (distance selling) if threshold is exceeded
  • organising live events with paid admission
  • intra-community supplies directly to Croatian consumers over the local reporting threshold
  • services to consumers in connection with real estate located in Croatia
  • providing accommodation and selling food and beverages to consumers.

The tax representative must then submit an application for tax representation to the tax authorities and request that the foreign enterprise be included in the register of VAT payers. For non-EU companies, the tax representative is liable for the payment of tax, penalty interest and any other penalties relating to transactions carried out in Croatia, and is jointly liable for the calculation and payment of foreign enterprise VAT.

The obligatory VAT registration threshold in Croatia for resident companies is HRK 230,000 (approximately €30,000). Once this threshold is crossed within the fiscal year, the company is obliged to submit an application for registration by 15 January on the following year. An enterprise may, if it wishes, voluntarily apply on the basis of the expected turnover.

Croatian VAT compliance

There are detailed rules controlling the recording and processing of Croatian VAT. These include guidelines on:

  • Croatian invoice requirements
  • application of the self/reverse charge procedure which includes actual payment of the input VAT on foreign services
  • foreign currency reporting and translation
  • correcting errors from prior returns
  • credit notes and corrections
  • what accounting records and registers must be maintained.

There are very limited situations where companies must register for Croatian VAT for the supply of services. The place of supply is regarded as the location of the recipient and the reverse charge is applied.

Croatian VAT rates

The standard VAT rate in Croatia is 25%.

There is a reduced VAT rate of 13% for accommodation, food and newspapers. VAT at a rate of 5% is applicable for to selected foodstuffs, books and medical equipment.

Croatian VAT returns

Companies with a Croatian VAT number must submit periodic returns detailing all supplies (sales) and inputs (purchases). VAT returns in Croatia are submitted on a monthly or quarterly basis depending on turnover.  The deadline for submission of monthly returns is the 20th of the following month.  Companies trading below CRO 800,000 (€105,000) per annum may opt for quarterly returns instead.  There is also a requirement for an annual return, due by the end of the February following the year end.

Croatian VAT refunds

Non-resident tax persons that have no legal seat, fixed establishment or place of residence in Croatia, are entitled to a refund of Croatian VAT - provided that they have not made taxable supplies for which they are liable to account for VAT in Croatia and that there is a reciprocity agreement for Croatian business.  Following Croatia joining the EU in July 2013, EU companies may use an 8th Directive VAT recovery claim. Non-EU companies can apply for a VAT refund through the 13th VAT Directive process.

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