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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 12/12/2013

Croatia – Full harmonization of VAT system due to EU accession 

GITB Croatia
As Croatia joined the EU on 1 July 2013 its VAT legislation has been significantly changed in order that it is harmonized with the EU legal acquis.

In addition to implementing obligatory changes, Croatia has introduced a number of VAT simplification rules which are designed to reduce the VAT compliance burden of taxpayers. These simplifications are as follows:


  • Exemption from payment of import VAT,
  • Consignment/Call off stock simplification, and
  • Domestic reverse charge for construction services

Exemption from payment of import VAT

The new Procedure 42 provides that import VAT does not need to be paid if imported goods are intended to be supplied to another EU member state, (i.e., if the goods are intended for intra-community supply from Croatia). The following conditions, amongst others, should be met.


  • Prior approval should be obtained from the Croatian tax authorities (by Croatian and EU importers).
  • For each import, the following details need to be provided to the Croatian customs authorities.
    • The Croatian VAT number of the taxpayer or the taxpayer’s VAT representative importing the goods.
    • The VAT number of the recipient of the goods in the other EU member state.
    • Documentation showing that the goods will be transported immediately to the other EU member state (invoice, transportation documentation, written statement from the supplier).

Consignment/call-off stock simplification

If a foreign taxpayer, registered in another EU member state, moves and holds its own goods in a consignment stock or call-off stock warehouse of a Croatian customer, who is registered for VAT in Croatia, there is no obligation for such a foreign taxpayer to register for VAT in Croatia subject to meeting the following conditions.


  • The customer needs to self account for VAT on the acquisition of the goods when they are withdrawn from the warehouse
  • The customer needs to retain certain details relating to the warehoused goods.

There is no time limit specified on when the title to the goods needs to be transferred to the customer. It is not clear whether this simplification can be applied when the foreign entrepreneur has multiple customers in Croatia but we hope that clarification will soon be provided on this point.

Domestic reverse charge on constructions services

According to Croatian VAT legislation, construction services are considered to be all services covered by Croatian construction laws. These include services in relation to construction, maintenance, reconstruction or disposal of buildings, including services related to building repairs and cleaning and any other services. Also included is the provision of personnel performing construction services.


A construction service is not provided if the supplier provides only construction materials and not the service itself.


If a construction service is provided in Croatia and occurs between two Croatian VAT registered taxpayers, the supplier of the construction service does not need to charge Croatian VAT on the construction service provided, but rather the recipient of the construction service needs to reverse charge or self account for Croatian VAT. The Croatian VAT authorities have also confirmed that the reverse charge mechanism can be applied by a Croatian taxpayer where the construction service is received from a foreign entrepreneur in Croatia. This means that the foreign entrepreneur can avoid the need to register for VAT in Croatia.


The reverse charge mechanism can result in a cash neutral position for the recipient of the construction services where a certificate of works completion is received by the taxpayer in the same month that the VAT has been self accounted for.

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Global Indirect Tax Brief - December 2013

GITB - December 2013
Global indirect tax brief brief brings together articles on international VAT developments, written by KPMG member firms' VAT professionals worldwide and will be of interest to anyone managing VAT in an international business environment.