EU VAT guide – Croatia

How much is VAT in Croatia? 

The Standard VAT Rate(Porez na dodanu vrijednost(„PDV”)) in Croatia is 25%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and banking services.

The exact list of taxable transactions and allocated Croatia VAT rate can be found in VAT Croatia regulations. 

VAT thresholds in Croatia 

Valuable information about the VAT threshold in Croatia and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: 40,000 EUR.

VAT registration threshold for non-resident businesses: No registration threshold.

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Croatia

A taxable person by Croatia VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Croatia VAT: 

• The supply of goods and rendering of services in Croatia for consideration;
• Receipt of reverse-charge services by a taxable person in Croatia;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Croatia VAT on their transactions. 

Tax Representative in Croatia 

For non-EU established businesses, having a tax representative for all VAT compliance-related activities is mandatory. 

For EU-established businesses, having a tax intermediary isn’t mandatory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Croatia 

Electronically Supplied Services 

The European Union’s VAT Directive 2006/112/EC introduced and defined the concept of Electronically Supplied Services (ESS). Defined as services rendered via the Internet or ancillary digital means where automation is indispensable for their processing. The manual input is often minimal or not present at all.  

Croatia has incorporated the EU VAT provisions that cover the definition of Electronically Supplied Services.

It can often be challenging to comprehend what is meant in the world of digital commerce with terms such as “digital services,” “digital products,” and “electronic services.” On the first look, it could look like we are talking about entirely different types of underlying services or goods. 

These descriptions are sometimes merely a consequence of the non-existence of the uniform perspective of the same type of services. On other occasions, it covers different types of supply and different treatment of the transactions.  

Taxability Rules for ESS

B2B supply of electronically supplied services – Regarding this type of transaction, where the purchaser is a legal person, the general place of supply rules should be applied

B2C supply of electronically supplied services – Non-resident companies should apply EU-harmonized VAT rules specifically designed for this purpose, i.e., the VAT rate of the consumer’s place of residence

B2C supply of electronically supplied services – Non-EU based suppliers should follow the EU harmonized rules regarding place of supply without possibility to leverage the threshold of EUR 10,000

Place of supply rules for distance sales of goods and B2C ESS – If the annual turnover of the supplier is less than EUR 10,000, the EU merchant has the possibility to apply VAT rules of his country of residence or follow the OSS rules

Place of supply rules for distance sales of goods and B2C ESS – If the annual turnover of the supplier is above the threshold of EUR 10,000, the seller should impose the VAT rate of the country where the goods are dispatched or where the customer receiving the services is based

How much is VAT in Croatia for Electronically Supplied Services?

VAT rate Croatia: A standard VAT rate of 25% is applied in most cases on sales of Electronically Supplied Services in Croatia

E-Commerce VAT Rules in Croatia 

On July 1, 2021, the European Union made an important step towards modernizing VAT for digital commerce by launching the E-Commerce Package. This legislative package harmonized the e-commerce rules at the EU level, and as such, it became part of the Member State’s regulatory framework.

The essence of these reforms is twofold: First, to lessen the administrative complexities accompanying cross-border e-commerce transactions. Secondly, to foster a cohesive and unified regulatory landscape across the European Union for digital commerce operations.

Key Transactions Addressed by the 2021 E-Commerce Reforms:

Cross-Border Sales of Low-Value Goods: The package introduced VAT obligations to distance sales of low-value goods imported from third countries or third territories with a threshold of EUR 150. 

Intra-Community Distance Sales: The update of rules governing intra-community distance sales of goods between Member States has addressed points of:

• Intra-community distance sales threshold;
• Introduction of Deemed Supplier status for digital marketplaces under specific conditions.

Domestic Sales by Deemed Suppliers: Sales conducted within a single Member State, where both parties, i.e., the deemed supplier and customer are based. 

Provision of B2C Services: The VAT implications for B2C supply of services, particularly those provided by taxable persons outside the customer’s residence, have been widened in scope and streamlined. 

Evolution of VAT Special Schemes:

The update of the VAT Directive with the E-commerce package in mind is more than what has been explained above. The revision of the simplified schemes and introduction of the IOSS scheme represents an equally significant move by EU regulators. 

These changes are instrumental in simplifying the VAT compliance process, especially for businesses engaging in cross-border e-commerce.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes 

The Non-Union Scheme can be leveraged by:

Non-EU established businesses and those without fixed establishments in the EU. 

The Non-Union Scheme covers B2C supplies of all services where the place of supply is within the Member State. If foreign businesses adhere to this scheme, it should be used to report all B2C supply of services. 

The Union Scheme can be leveraged by:

Taxable persons established in the EU for supplies of B2C services and intra-community distance sales of goods. The indispensable parameter for using this special scheme is that the customer is based in a Member State that is different from the one where the supplier is based.

Taxable person not established in the EU for intra-community distance sales of goods 

Digital Marketplace established or not established in the EU for intra-community distance sales of goods and certain domestic supplies of goods

Import Scheme can be leveraged by:

Any taxable person who carries out distance sales of goods imported from third countries or third territories in consignments not exceeding the threshold of EUR 150 

Taxable persons established in the EU, taxable persons non-established in the EU, and electronic marketplaces are eligible to use this type of special scheme. 

OSS Return and Payment 

Foreign businesses providing electronically supplied services to Croatian residents cannot adhere to any simplified domestic reporting tool. However, they can benefit from the EU-wide OSS schemes. 

The possibility of using these schemes depends on the nature of the service or product the business offers to end customers. 

If what the merchant is selling doesn’t fit into the categories these EU rules talk about, the merchant should go through the standard process of registering for VAT and following the usual tax rules in Croatia, just like everyone else.

Electronic Platform and Deemed Supplier Rules 

In alignment with the European Union’s efforts to harmonize VAT regulations, Croatia has adopted the EU’s VAT provisions into its domestic legislation, introducing the concept of the “deemed supplier” and setting forth its scope, advantages, and liabilities. 

Under these provisions, taxable persons facilitating transactions through digital marketplaces assume the role of deemed suppliers, provided specific criteria are fulfilled. When conditions are met, the digital supplier becomes, from a VAT perspective, a “real” supplier. 

The marketplace facilitator becomes deemed supplier for the below-indicated transactions: 

• When goods valued below EUR 150 are imported into the EU from non-EU countries or territories and are subsequently sold to EU consumers by the original vendors;
• When the goods, already within the EU and in free circulation, are sold to EU residents by vendors based outside the EU, with no restrictions on the goods’ value.

This regulatory framework introduces additional responsibilities for deemed suppliers, vastly changing this sales model’s VAT obligations for taxable entities. In this multi-sided business model, we have two separate transactions: 

1. The initial supply from the original vendor to the digital platform is recognized as a business-to-business (B2B) transaction.
2. The subsequent supply from the platform to the final consumer is classified as a business-to-consumer (B2C) transaction.

Online platforms acting as deemed suppliers must carefully record all their VAT responsibilities, just like any business would. Plus, if they’re using the EU’s simplified tax reporting options (OSS schemes), they’ve got to make sure they’re keeping records correctly.

Invoice Requirements in Croatia 

General invoice information:

• Date of invoice issuance;
• Date of the transaction if different from the date of invoice issuance;
• A unique sequential number.

Seller information:

• Business Information;
• Full address;
•  VAT number.

Customer information:

• Name;
• Full address;
•  VAT number;

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Net amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information.

Foreign Currency Invoice in Croatia  

In Croatia, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR. If the supplier doesn’t do this, the invoice is invalid. 

VAT Return in Croatia 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Croatia rules should submit monthly or quarterly declarations depending on their turnover. 

Penalties for late reporting and omitted declarations 

Taxpayers should unequivocally charge Croatia VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted timeframe. 

A taxpayer will be fined for a misdemeanor in the amount of EUR 260 to 66,360 if:

• It pays late the owed VAT to the prescribed account;
• It doesn’t issue an invoice, or if it issues the invoice but outside the prescribed period; 
• It does not disclose all prescribed information in the VAT return; 
• If the merchant doesn’t correct the submitted return after receiving the notice about erroneous details within the allocated period. 

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