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VAT consequences Croatia’s accession to the EU

Croatia will access the European Union at 1 July 2013. Upon accession, Croatia will be required
to adopt the EU VAT Directive, and bring their VAT system in line with the systems as
operated by the 27 other EU Member States.
The adoption of the EC Council Directive will have serious implications for the current VAT
system applied in Croatia. A draft VAT Act was published early 2013. Some important changes
are listed below.

Intra Community sales/acquisitions of goods

Upon accession, the transfer of goods from other EU Member States to Croatia will no longer
qualify as import. Transfers from Croatia to other EU Member States will no longer qualify as
export. Croatia will introduce the system of intra Community transactions. A transfer of goods
between two businesses from an EU Member State to Croatia will result in an intra Community
acquisition in Croatia, which is liable to VAT in Croatia. In general this VAT can be deducted in
the VAT return. Supplies of goods from Croatia to businesses in other Member State will be
following the rules for intra Community supplies and will be exempt in Croatia. The invoice
related to an intra Community supply will have to be issued before the 16th of the following
month.

Intra Community sales/purchases of services

In relation to services, the EU place of supply rules will apply. In general the B2B services will
be taxable where the business recipient of the service is established and these services will
need to be listed in Croatia if the supplier is based in Croatia and the recipient is based in one
of the other EU Member States.

A European Purchase listing for services (and goods) purchased from EU based suppliers
seems also to be implemented. If so, Croatian recipients should include the purchases of
services from EU suppliers in the listing.

B2C services

This type of services to non business customers in other EU Member States will also fall within
the scope of the EU rules, which could lead to a VAT charge where today these services,
depending on the content of the service, could be out of scope of VAT. The standard VAT rate
in Croatia is 25%.

Distance sales of goods

Distance sales to private individuals in Croatia will be liable to VAT in Croatia when the
threshold is exceeded; this will be HRK 270.000 (Euro 357.000) per year. These sales are
currently not taxable as Croatia is outside the EU. The other way around, suppliers based in
Croatia will have to charge 25% Vat to EU based private individuals until they exceed the
threshold in the EU Member State of arrival of the goods.

European Purchases and Sales Listing and Intrastat reporting

Next to the periodic VAT Return and an annual VAT Return, Croatia will also introduce the
European Sales Listing for goods and services. A European Purchase listing for goods and
services purchased from EU based suppliers seems also to be implemented. Furthermore
Croatia will introduce the reporting of statistical data, so called Intrastat reporting. You should
use the country code “HR” for Croatia.

Actions

Businesses will need to prepare reporting and invoicing systems in order to be ready for the
first of July 2013. In ERP systems the country flag for Croatia will have to be set to EU as from
the first of July 2013. In addition taxation rules will need to be reviewed and transition rules
need to be closely monitored.
As statistical reporting will also be a new requirement it might be that not all required
information is yet kept in the system. All new settings will need to be tested before the 1st of
July 2013.

Require further explanation or assistance?

Pincvision can assist in the abovementioned actions. Please contact us in case you require
further explanation or assistance. Send an e-mail to vat@pincvision.com or call us
+31(0)88-4321800.

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