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VAT consequences Croatia’s accession to the EU (part 2)

As communicated in our previous newsletter on July 1 2013, Croatia is to become the 28th Member of the European Union. The Croatian VAT Authorities have issued the VAT Act; however there is still a lack of clarity that will need to be cleared up through so-called VAT regulations, which are expected in about 90 days.

Some of the most important changes/facts to consider are as follows:

  • As from July 1, 2013 business-to-business sales of goods from Croatia to other EU Member States will no longer be exports of goods, but are treated as intracommunity sales. On the other hand purchases of goods by businesses in Croatia from other EU Member States will follow the rules for intra Community acquisitions. There will no longer be export and import, nor import formalities at the borders.
  • In addition, the place of supply rules as applicable in the EU will also apply to Croatian service providers or Croatian businesses receiving services from other EU service providers.
  • Supplies of goods to private individuals based in Croatia from other EU MS will be taxable in Croatia once the thresholds for distance sales are exceeded or other rules apply (e.g. electronic services)
  • In relation to the above Croatia has also introduced an Intrastat Return and an EC Sales and Purchase listing for goods and services.
  • The VAT returns (incl. EC Sales and Purchase Listings) need to be submitted by the 20th of the following month (VAT Return is usually due on a monthly basis), where payment is due by the end of the following month. The annual VAT return for a calendar year has to be submitted by the end of February of the following year. Intrastat returns are due the 15th day following the reporting month (unless this is not a working day).
  • The Croatian VAT registration numbers will consist of the country code HR followed by 11 digits (the co-called OIB).
  • Note that trade with non-EU Member States will continue to be considered as import and export.
  • The standard VAT rate of 25% will remain. A reduced VAT rate of 5% will apply to for example newspapers and magazines published daily unless more than 50% of the contents is used for advertising, food (bread/milk), admission tickets to cinemas. Another reduced VAT rate of 10% will apply to certain accommodation services, admission to concerts, preparing and serving food and beverages (non-alcoholic drinks, beer and wine) in restaurants and similar place.

Businesses will need to prepare reporting and invoicing systems in order to be ready for 01.07.2013. In ERP systems the country flag for Croatia will have to be set to EU as from the July 1, 2013. In addition, taxation rules will probably need to be reviewed and amended and transition rules need to be assessed (when goods are shipped before July 1 but reach Croatia after July 1 for example).

As from July 1, 2013 Pincvision will add Croatia to its service countries for VAT.

Please feel free to contact us in case you have any questions or need further assistance.

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