VAT, GST and Sales Tax in Croatia

Summary

Name of the tax Value-added tax (VAT)
Local name Porez na dodanu vrijednost (PDV)
Date introduced 1-Jan-98
Trading bloc membership European Union (EU) Member State
Administered by Ministry of Finance (http://www.porezna-uprava.hr)
VAT rates
Standard 25%
Reduced 13% and 5%
Other Exempt
VAT number format Prefix HR followed by the eleven-digit personal identification number (OIB) e.g., HR12345678910
VAT return periods
Businesses established in Croatia Monthly or quarterly
Businesses not established in Croatia Monthly
Thresholds Registration
Businesses established in Croatia HRK230,000 (approximately EUR30,200) of taxable supplies in the preceding calendar year (HRK300,000; approximately EUR40,000 as of 1 January 2018)
Businesses not established in Croatia No threshold: foreign businesses should register in Croatia before performing their first taxable supplies in Croatia
Distance selling HRK270,000 (approximately EUR36,000)
Recovery of VAT by non-established businesses Yes (reciprocity required for taxable persons not established within the EU)

Scope of the tax

VAT applies to the following transactions:

  • Supply of goods and services in Croatia for consideration by a taxable person, performed in the course of the person’s business activity, and supplies made in accordance with the provisions of the law or decisions of state bodies
  • Intra-Community acquisition of goods from another EU Member State by a taxable person
  • Import of goods into Croatia

Who is liable

Taxable person. A taxable person is any person who indepen­dently carries out any economic activity, regardless of the pur­pose or results of that activity.

VAT registration is required prior to commencing taxable activi­ties in Croatia.

Taxable persons applying the scheme for small businesses. Taxable persons established in Croatia can apply a special scheme for small entrepreneurs if their taxable supplies in the preceding calendar year do not exceed HRK230,000 (approxi­mately EUR30,200). A new threshold of HRK300,000 (approxi­mately EUR40,000) will apply from 1 January 2018. Taxable persons applying this scheme do not charge Croatian VAT as their transactions are exempt from VAT, but they also cannot deduct input VAT.

Voluntary registration. A taxable person subject to the special scheme for small businesses may voluntarily register for VAT when beginning business activities or may register during the year. In the case of voluntary registration, the entrepreneur must remain a VAT payer for a period of three years.

A taxable person whose taxable supplies exceeded the prescribed threshold is considered to be a VAT payer as of 1 January of the following year and must inform the tax authorities by submitting an application for VAT registration by 15 January of that year. Retrospective VAT registration is not possible.

Group registration. VAT group registration is not allowed under the Croatian VAT law.

Non-established businesses. A “non-established business” is a business that does not have an establishment in Croatia. A non-established business that makes supplies of goods or services in Croatia is liable to account for VAT on these supplies.

However, if supplies are made to a recipient who is either a tax­able person or a legal person that is not a taxable person but registered for VAT in Croatia, Croatian VAT should be calculated by the recipient of the supply.

Consequently, non-established businesses must register for VAT if they make any of the following supplies:

  • Intra-Community supplies
  • Intra-Community acquisitions
  • Distance sales in excess of the threshold
  • Supplies of goods and services that are not subject to the reverse charge (for example, goods or services supplied to pri­vate persons)
  • Export supplies

Tax representatives. A foreign entity (taxable person) that has to register for VAT in Croatia may appoint a tax representative. Taxable persons in Croatia can be appointed as tax representa­tives if they are established or have their permanent address in Croatia and are not a branch or fixed establishment of a foreign company.

A foreign entity (taxable person) that has a seat outside the EU must appoint a tax representative.

Reverse charge. The reverse charge applies to the supply of most goods and services performed by non-established businesses to taxable persons or nontaxable legal persons registered for VAT in Croatia. The recipient of the supply accounts for VAT using the appropriate Croatian VAT rate. When making supplies subject to reverse charge, the non-established supplier is not required to register for VAT in Croatia.

Croatia applies a domestic reverse-charge mechanism for certain supplies. The following activities fall within the scope of the domestic reverse charge:

  • Construction work (repair, maintenance, alteration and demoli­tion services in relation to immovable property) and supply of staff engaged in construction work
  • Supplies of used-material waste, industrial and nonindustrial waste, recycling waste, and partially processed waste
  • Supplies of immovable property if the option to tax is exercised
  • Supplies of immovable property in a compulsory sale proce­dure and similar
  • Transfer of greenhouse gas emission units

Registration procedures. A company becomes liable to register as a VAT payer as of 1 January of the year following the year in which annual taxable supplies exceed the prescribed threshold.

Entrepreneurs whose taxable supplies do not exceed threshold may also apply for VAT registration. After registering, such entre­preneur is obliged to remain in the VAT system for the next three years.

In case a Croatian VAT payer intends to perform supplies within the EU, it should request a Croatian VAT ID number 15 days before the first supply is made.

Taxpayers in all cases mentioned above should file the request for VAT registration with the Croatian Tax Authority by submit­ting a hard copy of the application in person. The registration procedure may be initiated in person by a third party legally authorized by the company applying.

All accompanying documents (which should be filed in hard copy) with the request should be translated to Croatian by the official interpreter. A VAT ID number should be assigned within 8 days from the day when all documentation is submitted.

Registration for MOSS purposes should be done through the HR-MOSS internet portal of the Croatian Tax Authority. HR-MOSS application is available on the following link: https://eusustavi.porezna-uprava.hr/wps/myportal.

Late-registration penalties. Penalties for non-registration range between HRK1,000 and HRK200,000 (approximately EUR135 and EUR26,300) for the company and between HRK500 and HRK40,000 (approximately EUR66 and EUR5,300) for the responsible person within the company.

Digital economy. As of January 2015, the place of supply of tele­communication, broadcasting and electronically provided ser­vices to nontaxable persons (B2C) is where the customer is established.

Mini One-Stop Shop. The Mini One-Stop Shop (MOSS) is a spe­cial scheme for suppliers established in EU (EU suppliers) and as well as those established outside EU (non-EU suppliers).

The Member State of identification is the Member State where the taxable person is registered for MOSS and where it declares and pays the VAT due in respect of the Member State of con­sumption. It obliges taxpayers to stay in the scheme two years following the year of registration.

Non-EU suppliers. Non-EU suppliers that choose Croatia as the Member State of identification apply by filing the application electronically with the Croatian Tax Authority. The application should include the following information:

  • Name of the non-EU supplier
  • Postal address
  • Electronic address including web pages
  • National tax number (if any) and the statement that it is not registered within EU for VAT purposes.

The non-EU supplier should inform the Croatian Tax Authority if the initially provided information is subsequently amended. The Croatian Tax Authority assigns the identification number and electronically informs the applicant. The non-EU supplier is not required to appoint a fiscal representative. The non-EU supplier will not be able to deduct input VAT through the respective VAT return but will have to apply refund procedures prescribed by 13th Directive 86/560/EEZ (no reciprocity requirement).

EU suppliers. The EU supplier who has established its business or has a fixed establishment in the EU can register for MOSS. If the EU supplier does not have a head office or permanent estab­lishment within the EU, the Member State of identification is a Member State where the EU supplier has a fixed establishment. Where the EU supplier has more than one fixed establishment in the EU, that taxable person can choose any Member State in which it has a fixed establishment to be its Member State of identification. In that case it is bound to that decision for the cur­rent calendar year, plus the two following calendar years.

 

The EU supplier that does not have establishment in the Member State of consumption, and chooses Croatia as a Member State of identification will have to apply for MOSS, electronically filing the application with the Croatian Tax Authority using the Croatian VAT ID number.

Registration for MOSS purposes should be done through the HR-MOSS internet portal of the Croatian Tax Authority at this link: https://eusustavi.porezna-uprava.hr/wps/myportal.

Deregistration/cancellation of VAT ID number. Taxpayers regis­tered for VAT (because the VAT threshold was reached in past periods) may submit written application for deregistration to the Croatian Tax Authority until 15 January if the threshold in the preceding year was not reached.

Foreign taxpayers who have obtained a Croatian VAT ID number and cease the economic activities in Croatia for which they were registered should notify the Croatian Tax Authority about the ces­sation of business activities within eight days.

Croatian VAT payers who also perform intra-Community transac­tions may apply for cancellation of their VAT ID number if they cease to perform such transactions. The cancellation of a VAT number does not automatically mean that taxpayer is erased from the VAT register in Croatia.

The Tax Authority can ex officio cancel the VAT ID number in certain cases, such as when the taxpayer has not performed busi­ness activities in the EU for more than one calendar year; the taxpayer has acquired goods valued at less than HRK77,000 (EUR10,130) in the previous two calendar years; the taxpayer has not received services within the EU for more than one calendar year; or a foreign taxpayer has not performed supplies in Croatia for more than one calendar year.

In the case of fraudulent activities, deregistration occurs almost automatically.

The Tax Authority can also cancel the VAT ID number if it deter­mines that there is no further reason for VAT registration in Croatia or if the taxpayer has misused the VAT ID number.

Tax authorities may suspend the VAT ID number if they suspect it has been misused. A suspended VAT ID number can be reacti­vated if the taxpayer submits evidence that eliminates the reason for the suspension within one year. Failure to do so will result in cancellation of the VAT ID number.

VAT rates

The term “taxable supply” refers to supplies of goods and ser­vices that are liable to any of the VAT rates, including supplies that are exempt with the right to deduct input VAT.

The following are the VAT rates in Croatia:

  • Standard rate: 25%
  • Reduced rates: 13% and 5%

The standard rate of VAT applies to all supplies of goods or ser­vices, unless a specific measure provides for a reduced rate or exemption.

Examples of goods and services taxable at 5%

  • All types of bread
  • All types of milk
  • Books containing professional, scientific, artistic, cultural and educational content
  • Drugs on doctors’ prescriptions and authorized by relevant agency
  • Medical products, implants and other orthopedic devices
  • Cinema tickets
  • Scientific magazines
  • Newspapers and magazines published daily unless they are used for advertising purposes

Examples of goods and services taxable at 13%

  • Room only, bed and breakfast, half board or full board accom­modation services in all types of the listed commercial catering facilities and agency commission services for all the above mentioned services
  • Daily and periodic newspapers and magazines printed on paper with the exception of those subject to 5% or that, in their entirety or mainly, contain advertisements or serve advertising purposes
  • Oils and fats for human consumption, of either vegetable or animal origin, in accordance with special legislation
  • Car seats, baby food and processed grain food for infants and small children, in accordance with special legislation
  • Supply of water, with the exception of water sold in bottles or any other packaging
  • White sugar produced from sugar cane or sugar beet
  • Concert tickets
  • Art and cultural magazines
  • Electricity supply to another supplier or end-user, including related fees
  • Public service of collecting mixed municipal waste, biodegrad­able municipal waste and separate waste collection under spe­cial regulations
  • Urns and coffins
  • Seedlings and seeds
  • Fertilizers and pesticides and other agrochemical products
  • Animal food, excluding food for pets

The term “exempt supply” refers to all supplies of goods and services that are not liable to VAT. Exempt supplies do not give rise to the right of input VAT deduction. Supplies that are “exempt with the right to deduct input VAT” include exports of goods outside the EU and related services and intra-Community goods and services supplied to another taxable person established in the EU or to a recipient outside the EU.

Examples of exempt supplies of goods and services

  • Public interest activities
  • Postal service
  • Hospital services and health care services
  • Social care services
  • Financial services
  • Insurance transactions
  • Real estate transactions

Option to tax for exempt supplies. An option to tax is available for the provision of credit that is connected with the taxpayer’s sup­plies of goods or services. The taxpayer may also opt for taxation of supplies of real estate and land (except construction land) to another taxpayer who is fully entitled to input VAT deduction for the respective acquisition. The option may be exercised at the moment of supply.

Time of supply

The time when VAT becomes due is called the “chargeable event” or “tax point.” Under the general rules the chargeable event occurs when goods are delivered or when services are performed.

If no invoice is issued for supplied goods or services, VAT is due on the last day of the tax period (month) in which the goods are delivered or the services performed.

Intra-Community acquisitions. Tax point is the moment when goods are acquired within the EU. VAT is due the moment the invoice is issued. The invoice should be issued no later than the 15th day of the month following the month in which the goods are delivered. If the invoice for the supply is not issued in time, VAT is due on the 15th day of the month following the month in which goods were acquired.

Prepayments. If a payment is made before the supply (prepay­ment), VAT is due the moment the prepayment is received. A regular VAT invoice must be issued when a prepayment is received. The above rules do not apply to prepayments in connec­tion with intra-Community supplies and acquisitions and in case of import.

Imported goods. VAT on import is due when goods are imported, or when the goods leave the duty suspension regime and are released for free circulation. Exceptions should apply as of 1 January 2018, for import of explicitly listed machinery and equipment amounting above HRK1 million (approximately EUR133,300) imported by the taxpayer that has a full right of VAT deduction. For the above import of machinery and equip­ment, the reverse charge would apply (no cash flow effect).

Cash accounting. All taxpayers whose supplies in the preceding calendar year did not exceed HRK3 million (EUR395,000) may apply the cash accounting scheme. Taxpayers who choose to apply the cash accounting scheme are not able to deduct input VAT on invoices received from their suppliers until they have paid them.

Reverse-charge services. The supply of services becomes gener­ally taxable when the service is supplied, i.e., consumed by the recipient. The tax point for the supply taxed under the reverse-charge procedure is the end of the month following the month in which supply takes place. If the invoice is issued before this date, the tax point is the date on which the invoice is issued.

Continuous supplies of services. If the service is being provided continuously through several tax periods, VAT becomes due at the end of each tax period in which the service is provided, regardless of whether the invoice has been issued.

Intra-Community supplies of goods. Generally, for intra-Commu­nity supplies of goods, VAT is due when the invoice is issued. Otherwise, VAT is due on the 15th day of the month following the month in which goods are supplied. However, intra-Community supplies of goods are exempt from VAT in Croatia if certain requirements are met, such as cases where the goods left the ter­ritory of Croatia and a VAT ID is obtained from the customer.

Leased assets. VAT law prescribes specific VAT treatment of leasing agreements. It differentiates VAT treatment of lease trans­actions depending on whether the lease in question is an operat­ing or finance lease. In general, a finance lease arrangement is treated for VAT purposes as a supply of goods while an operating lease would be treated as provision of services.

In the case of a finance lease where the lessee bears depreciation costs and may acquire ownership rights over the asset, the VAT liability for total value of the lease arises for the accounting period in which the asset has been supplied to the lessee. In the case of an operating lease where the lessor bears depreciation costs of the leased asset and the lessee does not have the purchase option, VAT liability arises with respect to respective rental fees incurred in the tax period. If rental fees are not determined for the tax period, i.e., a month, it should be calculated for each month.

Recovery of VAT by taxable persons

A taxable person may recover input VAT, which is the VAT charged on goods and services supplied to the taxable person for its business purposes. A taxable person generally recovers input VAT by deducting it from output VAT, which is VAT charged on supplies made. Input VAT includes VAT charged on goods and services supplied in Croatia, VAT paid on imports and self-assessed VAT on intra-Community acquisitions of goods, acqui­sition of goods within the triangulation and reverse-charge services.

Nondeductible input tax. Input VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for the private use of entrepreneurs). In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide some examples of items of expendi­ture for which input VAT is not deductible and examples of items for which input VAT is deductible if the expenditure is related to a taxable business use.

Examples of items for which input VAT is nondeductible

  • Purchase and hiring of boats for pleasure, aircrafts, passenger cars and other means of passenger transportation, including purchase of any goods or services related thereto (as of 1 January 2018, 50% of input VAT should be deductible for car and car-related costs (except in cases of purchase for means of transport in an amount above HRK400,000, approximately EUR53,300)
  • The purchase of goods or services for the purpose of business entertainment, which is defined as payment for accommodations, gifts, holidays, sport or pleasure of business partners, as well as payment for rentals of cars, boats, aircraft, summer houses, etc.

Examples of items for which input VAT is deductible
(if related to a taxable business use)

  • Advertising
  • Purchase, lease, fuel and maintenance of test vehicles, taxis and rental vehicles
  • Telephones
  • Books and newspapers
  • Attendance at seminars and training courses (except food and drinks)
  • Business gifts up to HRK160 (approximately EUR21)
  • Hotel accommodations

Partial exemption. If an entrepreneur uses goods and services in its business activity for which an input VAT deduction is allowed and also uses them with respect to the supply of goods and ser­vices for which input VAT deduction is not allowed, the amount of “mixed” input VAT must be divided between deductible input VAT and nondeductible input VAT.

To determine the amount of input VAT that may be recovered, one of the following methods may be used:

  • The deductible input VAT may be determined based on account­ing and other documentation that relates to taxable and exempt supplies.
  • If the taxable person cannot determine the amount of input VAT as described above, a pro rata method can be used to determine the amount of deductible input VAT. Under the pro rata method, the total annual supplies (exclusive of VAT) for which input VAT is deductible is divided by total annual supplies, including supplies for which VAT is not deductible and subsidies.
  • The amount of deductible input VAT may be determined sepa­rately for each business segment of the taxable person. The taxable person must maintain separate accounting records for each business segment and notify the tax authorities before this method is applied.

If a taxable person performing both taxable and exempt supplies of goods and services determines under the pro rata method that it has the right to deduct 98% or more of input VAT, it is entitled to a 100% input VAT deduction.

Capital goods. Capital goods are goods classified according to accounting standards as long-term assets. Input VAT is deducted in the year in which the goods are acquired or produced. In gen­eral, input VAT on the purchase, import or lease of vehicles for personal transportation is not deductible (as of 1 January 2018, 50% of input VAT should be deductible, except in case of the purchase of means of transport in an amount above HRK400,000, approximately EUR53,300).

If the conditions applicable to the deduction of input VAT change within a five-year period beginning with the year in which the goods begin to be used, the amount of input VAT is corrected in the period after the change. For real estate, the adjustment period of 10 years applies.

Refunds. If the amount of input VAT recoverable in a tax period exceeds the amount of output VAT payable in that same period, the taxable person has an input VAT credit. An input VAT credit may be carried forward to the following tax period and used as a payment for future VAT liabilities or may be claimed as a VAT refund. A taxable person is entitled to a VAT refund upon request within 30 days after submitting a VAT return, or, in the case of a tax audit, 90 days from when the audit started.

Repayment interest. The tax authorities must pay interest on delayed repayments of VAT. Until 31 July 2015 the annual pen­alty interest rate was 12%. From 1 August 2015 until 31 December 2015, the annual interest rate was 8.14%. From 1 January 2016 until 30 June 2016, it amounted to 8.05%. Starting from 1 July 2016, annual interest rate is 7.88%.

Preregistration costs. The economic or other activity of the tax­payer begins with preparatory activities undertaken to starting the economy activity. Input VAT in relation to preparatory activities can be deducted if all other requirements for the deduction of input tax are met. In case a taxpayer has applied the special scheme for small enterprises, input VAT could be deducted as of the date of VAT registration (based on the invoice for supplies received from the date of VAT registration).

Write-off of bad debts. In case of subsequent correction of the tax base resulting from withdrawals, various types of discounts or the inability to collect receivables, the taxpayer who supplied goods or rendered services can correct amount of VAT only after the taxpayer to whom supplies have been made has corrected respec­tive input VAT and informed the supplier in writing.

Noneconomic activities. A taxpayer cannot deduct input VAT for his noneconomic activities.

Recovery of VAT by non-established businesses

Croatia refunds VAT incurred by businesses that are neither established nor registered for VAT in Croatia. Non-established businesses may claim Croatian VAT to the same extent as VAT-registered businesses.

Businesses established in the EU can submit a claim for refund with the tax authorities of their country of establishment. Businesses established outside the EU can claim a refund under the terms of the 13th EU VAT Directive. Croatia applies the con­dition of reciprocity with respect to refund claims made by appli­cants from non-EU countries.

Refund application. For non-EU businesses, the deadline for refund claims is 30 June following the calendar year in which the tax was incurred. The application must be completed in Croatian or English.

The minimum claim period is three months, and the minimum claim amount for a period of less than a year is HRK3,100 (approximately EUR400). For an annual claim, the minimum amount is HRK400 (approximately EUR50).

The tax authorities are obliged to make a decision whether the request is approved in full, partially or not approved within eight months of receiving the application for the VAT refund. If the request is approved, the tax authorities must pay the refund within 10 working days following the eight-month deadline.

All claims must be supported by valid original invoices.

The completed application and supporting documents identified above should be sent to the following address:

Porezna uprava

Područni ured Zagreb Avenija Dubrovnik 32 10 000 Zagreb

Croatia

Businesses established in the EU are required to submit claims for VAT incurred in other Member States electronically on a standardized form to the tax authorities in their own state. The deadline for refund claims is 30 September following the calen­dar year in which the tax was incurred.

The tax authorities processing the VAT refund must notify the claimant of their decision to accept or refuse the claim within four months of the date they first received the application, which can be extended up to eight months from the date it first received the application in cases where additional information is request­ed.

Invoicing

VAT invoices. A taxable person must generally issue invoices for all taxable supplies, including exports and intra-Community sup­plies made to other taxable persons and legal entities that are not taxable persons. Invoices may not be issued for certain exempt financial services and for certain other supplies. A document qualifies as a valid invoice if it complies with the requirements set out in the Croatian VAT Act. A less detailed VAT invoice may be issued for local supplies that do not exceed HRK700 (approx­imately EUR93).

Credit notes. Where the tax base is changed subsequently because of recall, discounts or impossibility of collection, the taxpayer who made a supply or performed a service can correct its VAT liability but only after the taxpayer to whom goods are supplied or services performed corrects its input VAT and informs the sup­plier respectively in writing. Credit notes should provide the same data as the original invoice.

Collective invoices. A taxable person can issue a collective invoice with respect to several supplies of goods and services under the condition that the VAT on those supplies arises in the same cal­endar month.

Self invoicing. When a customer issues the invoice on behalf of the supplier, the invoice must be marked “self invoicing” (“samoizdavanje računa”).

Cash accounting. The invoices from taxpayers that apply the cash accounting scheme have to be marked “cash accounting scheme” (“obračun prema naplaćenoj naknadi”).

Proof of exports and intra-Community supplies. Croatian VAT is not chargeable on supplies of exported goods or on intra-Com­munity supplies of goods. However, to qualify as VAT-free, exports and intra-Community supplies must be supported by evidence that the goods have left Croatia/EU. Acceptable proof includes the following documentation:

  • For an export, a copy of the export document (customs declara­tion) officially certified by the customs authorities
  • For an intra-Community supply, an invoice with the purchaser’s VAT identification number and corresponding transport docu­ment (or other suitable document that clearly refers to the freight of goods specified on the invoice)

Foreign-currency invoices. All amounts stated on an invoice should be in HRK. Amounts may also be stated in any other cur­rency if the VAT liability and the total amount of the invoice are stated in HRK, applying the Croatian National Bank’s exchange rate applicable on the date when VAT liability occurred.

B2C invoices. Mandatory issuance of invoices in B2C transac­tions is not prescribed by the VAT legislation.

VAT returns and payment

VAT returns. Croatian VAT returns are submitted for monthly or quarterly tax periods.

All VAT payers must submit VAT returns electronically. As an exception, VAT returns may be submitted in paper by:

  • The taxpayers who are not established in Croatia, have no per­manent establishment, domicile or habitual residence in Croatia and perform only occasional international road transport of passengers on the Croatian territory
  • Small taxpayers who only receive and perform services for taxpayers from third countries or pay VAT on supplies subject to reverse charge received from taxpayers not established in Croatia

Quarterly tax periods coincide with the months of March, June, September and December. The tax period for a taxable person is determined on the basis of its turnover in the preceding calendar year.

Taxable persons with turnover up to HRK800,000 (approxi­mately EUR105,300) can submit quarterly tax returns if they do not perform intra-Community supplies.

Taxable persons with turnover greater than HRK800,000 (approximately EUR105,300) submit monthly tax returns.

The tax period for foreign taxable persons (non-established busi­nesses) is always a calendar month. VAT returns must be submit­ted by the 20th day of the month following the accounting period.

Special schemes. Croatia applies special VAT treatment to the following schemes:

  • Special scheme for small enterprises
  • Tour operator’s margin scheme
  • Special arrangements for taxable dealers relating to work of art, second-hand goods, antique goods and public auctions
  • Special scheme for investment gold
  • Mini One-Stop Shop (MOSS)

Special schemes mentioned above (except MOSS) apply regular VAT return filing rules.

Electronic filing and archiving. VAT returns should be filed elec­tronically. As an exception, VAT returns may be submitted in paper by:

  • The taxpayers who are not established in Croatia, have no per­manent establishment, domicile or habitual residence in Croatia and perform only occasional international road transport of passengers on the Croatian territory
  • Small taxpayers who only receive and perform services for taxpayers from third countries or pay VAT on supplies subject to reverse charge received from taxpayers not established in Croatia

According to the provisions of the VAT Act, all issued and received invoices either on paper or electronically, credit notes, export and import documents, documents used for the VAT exemption, VAT calculations and all other documents relevant for VAT purposes should be kept for a period regulated by the General Tax Act. According to the General Tax Act, bookkeeping documents should be archived for the period of 10 years from the date when the statute of limitation commences, i.e., from the year following the year in which the tax return should have been filed, unless longer deadlines are prescribed by special regulations.

Bookkeeping documentation, such as invoices, should be archived for at least 11 years starting from the last day of the year following the year to which the business records relate. The bookkeeping documents should be stored in original format (paper or electronic).

Penalties

Penalties are imposed for a range of VAT offenses. A penalty ranging from HRK1,000 (approximately EUR135) to HRK500,000 (approximately EUR66,670 is prescribed for a range of offenses, including late submission of VAT return, late payment of VAT and errors made on VAT returns.

A penalty ranging from HRK500 (EUR66) to HRK50,000 (EUR6,670) can be imposed on individuals who are responsible for indirect tax within the legal entity.

Interest. For late payment of VAT, interest is charged at an annual rate of 7.88% (for periods as of 1 July 2016).

Criminal offenses. The criminal offense of tax evasion in an amount higher than HRK20,000 (approximately EUR2,600), is punishable by a term of imprisonment ranging from six months to five years. However, if the criminal offense causes great dam­age, the term of imprisonment may range from 1 to 10 years.

EU filings

Intrastat. The Intrastat reporting threshold for 2017 is HRK1.7 million (approximately EUR226,670) for arrivals and HRK750,000 (approximately EUR100,000) for dispatches.

The Intrastat reporting period is monthly, and the report covers the month in which receipts or deliveries occur, i.e., that month in which the goods physically enter or leave the territory of Croatia. When no reportable transactions occur in the respective month, a “nil return” should be filed.

The deadline for submission of the Intrastat form is the 15th day of the month following the reporting period. If the 15th day of the month is a nonworking day, the deadline is the first working day after the 15th day of the month.

The Intrastat report is submitted electronically to the customs authorities by Intrastat application.

EC Sales List. All businesses registered for VAT are required to complete and submit the EC Sales List (ESL) if they do any of the following:

  • Make supplies of goods to a VAT-registered customer in anoth­er EU Member State
  • Act as an intermediate supplier in triangular transactions between VAT-registered businesses in other EU Member States
  • Make supplies of services covered by the “general rule” (to which the reverse charge applies in the customer’s Member State) to a VAT-registered customer in another EU Member State.

The ESL should be filed electronically on the prescribed form by the 20th day of the month following the end of the month in which reportable events occurred. There is no requirement to submit the ESL if there were no reportable sales in the respective month.

EC Acquisitions List. All businesses registered for VAT are required to complete and submit the EC Acquisitions List if they receive supplies of goods or services from a VAT-registered sup­plier in another EU Member State.

The EC Acquisitions List should be filed electronically on the prescribed form by the 20th day of the month following the end of the month in which reportable events occurred. There is no requirement to file if there were no reportable supplies in the respective month.

Form PPO. Croatian taxable persons supplying goods and ser­vices for which the recipient is obliged to calculate and pay VAT in accordance with the domestic reverse-charge mechanism report those supplies on Form PPO. Examples of supplies subject to the domestic reverse-charge mechanism are construction works (repair, maintenance, alteration and demolition services related to immovable property), supply of staff engaged in con­struction work, supplies of used material and waste. The form is filed electronically on a quarterly basis.

Form INO PPO. Foreign companies with no registered seat or residency in Croatia that have registered for VAT purposes in Croatia are obliged to file Form INO PPO for the transactions, and the customer must self-assess VAT by applying the reverse-charge mechanism. The form is filed electronically on a monthly basis by the 20th of the current month for the previous month. This form is not required for the months in which the foreign company has not performed supplies subject to the reverse charge.

As of 1 January 2017, a Croatian taxpayer that acts as a VAT representative of a foreign taxpayer involved in customs proce­dures 42 (exemption from VAT for import of goods that are intended for other EU Member States) and 63 (exemption from VAT for reimport of goods that are intended for other EU Member States) should file a report to the Croatian tax authori­ties by the 20th of the month following the reporting month and disclose the information of the foreign taxpayer.