Croatia joined the European Union as the 28th member state on 1 July 2013. As part of its accession, it brought in a number of measures of changes to its Value Added Tax regime in order to comply with the EU VAT Directive.
CROatian 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 previously 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 on entering the EU is that imports from or exports to companies in other EU member states were re-classified 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. Although there is provision for the deferment of this Croatian VAT if the goods are moved immediately to another EU state where they will clear into free circulation.
CROATIAN 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 (who is a Croatian taxpayer) authorized to carry out functions related to the calculation of tax and payment on behalff of the non-resident. Non-EU companies obliged to VAT register in Croatia must appoint a local tax agent.
There is no VAT registration threshold for non-resident traders operating in Croatia. The exception is 'distance sellers', providing goods to Croatian consumers via the internet or catalogue. In this case, the VAT registration threshold is CRO 270,000 (about Euro 35,000) per annum.
Typical situations where foreign companies must register as a non-resident traders for Croatian VAT include:
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 CRO 85,000 (Approx. EUR 11,600). Once this threshold is crossed in particular fiscal year, the company is obliged to submit an application for registration by 15 of January on the following year. An enterprise may, if they wish, apply voluntarily 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:
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%. Click here to read about the 2% VAT increase in March 2012.
There is a reduced VAT rate of 13% for:
1. Accommodation services;
2. Daily and periodic newspapers and magazines printed on paper.
VAT at a rate of 0% is applicable on a range of goods.
There are many variations to the rates above, including exempt and zero-rated taxable supplies. Please contact us to learn more:
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 month following. 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.