Croatia has introduced a draft bill to amend the VAT Act, aligning it with EU directives and enhancing efficiency for businesses, particularly small enterprises. Key changes include a special VAT scheme for small businesses, raising the VAT registration threshold to €50,000, and abolishing the reciprocity requirement for VAT refunds to non-EU businesses. The amendments aim to simplify VAT compliance, improve cash flow, and foster cross-border trade
Croatia introduces a new draft bill proposing key amendments to the VAT Act for enhanced compliance and support for small enterprises.
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Croatia
Author: Ivana Picajkić
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Fiscal subject related
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Content accuracy validation date:
29.11.2024
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A new draft bill has been introduced, proposing several amendments to the existing Value Added Tax (VAT) Act in Croatia. These changes aim to align national legislation with European Union directives and improve the efficiency of VAT administration, particularly benefiting small enterprises and international businesses. The proposed amendments were open for public consultation via e-Građani until October 24, 2024.
The proposed changes are as follows:
- Implementation of the EU Directive on Small Enterprises: The bill seeks to transpose EU Directive 2020/285 into national law, establishing a special VAT scheme for small enterprises. This scheme will simplify VAT registration and reporting processes, reducing administrative burdens for eligible small businesses.
- Clarification of Place of Supply for Digital Services: The amendments will clarify the place of supply for services provided over the internet to non-taxable persons. This change aligns with EU regulations, ensuring VAT is applied in the consumer's jurisdiction, particularly benefiting businesses offering digital services.
- Increase in VAT Registration Threshold: The threshold for mandatory VAT registration will be raised from EUR 40,000 to EUR 50,000 in annual turnover. This adjustment aims to lessen the administrative burden on smaller businesses and aligns with broader EU practices.
- Abolition of Reciprocity Requirement for VAT Refunds: The existing reciprocity condition for VAT refunds will be abolished, allowing non-EU businesses to claim VAT refunds on the same terms as EU-based businesses, thereby facilitating cross-border trade.
- Deduction of Input VAT Based on Tax Administration Decision: Businesses will now be allowed to deduct input VAT based on decisions issued by the Croatian Tax Administration. This change is intended to streamline the VAT recovery process and improve cash flow for businesses.
The final version of the bill will incorporate stakeholder feedback from the consultation period before being submitted for parliamentary approval. These proposed amendments reflect Croatia's commitment to enhancing its VAT system while supporting small enterprises and improving compliance for all businesses.
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