In cases where the reverse charge mechanism is applicable, the responsibility to report and pay VAT in Croatia is transferred from the supplier to the taxable recipient. If the recipient is only engaged in taxable supplies, there is no cost involved, as the input tax and output tax offset each other.
However, if the recipient also makes exempt supplies, only a portion of the input tax credit can be recovered in line with the “deductible proportion” rules.
Read more about Reverse Charge and “Call-off stock” in Croatia in our comprehensive guide below.
Call-off stock, typically, refers to goods that a supplier has delivered to a warehouse or storage facility that a pre-identified customer can retrieve whenever needed. The warehouse is usually owned or controlled by the customer.
The foreign consignor is subject to a registration obligation when consignment stock is transported to Croatia. The transaction is treated as an import or intra-Community acquisition by the foreign suppliers of their own goods, followed by a domestic supply of a consignee.
Sales of call-off stock involving the transfer of goods into Croatia are subject to registration requirements for the same reason. Nonetheless, suppliers of call-off stock who are registered in EU Member States can avoid registration in Croatia if certain conditions are met, through a simplification scheme. Various simplification methods have been implemented before and as of January 1, 2020.
From January 1, 2020, the Croatian legislation incorporates one of the “Quick Fixes” outlined in Article 17a of the EU VAT Directive through Article 7a of the Croatian VAT Act. This change unifies call-off stock agreements across the EU.
If a supplier transports goods to a warehouse in another EU Member State with the intention of making a subsequent supply to a known purchaser, specific regulations apply. Under the simplification rule, the transfer of goods to the warehouse is not subject to taxation. However, the subsequent transfer of ownership of the goods to the recipient is a taxable event.
On January 1, 2020, call-off stock arrangements were standardized across EU member states. Croatia incorporated the guidelines for these arrangements into several articles under the Single Market Regulations. According to the simplification rule, the movement of goods in another EU Member State will not result in a taxable transaction, but the subsequent transfer of ownership of the goods will be subject to taxation. The supplier’s movement of the goods will be considered an intra-community supply, while the recipient’s acquisition of the goods will be deemed an intra-community acquisition.
If all the conditions are complied with, there is a mandatory application of the call-off stock regime.
When goods are imported, the VAT liability arises at the time of importation. However, the same VAT result can be achieved when services are supplied from another EU Member State by using either the place of supply rules or the reverse charge mechanism, which shifts the VAT payment responsibility to the recipient.
According to Article 11 of the Croatian VAT Act, importing goods refers to bringing commodities into free circulation within the EU in accordance with customs legislation. If Croatia is the point of first entry into the EU, the transaction is subject to VAT under Article 32 of the VAT Act. The importer, customs debtor, or recipient designated under customs legislation is liable to pay the import VAT.
If a business has the original import tax document, it can recover the import tax it has already paid. If there are no taxable sales in Croatia, the company can claim a refund through its VAT return or the VAT refund procedure.
There are goods imported in Croatia that are exempt from import VAT. These are goods that, when sold domestically, are also exempt from VAT. Additionally, certain types of goods, subject to certain conditions and restrictions, are exempted from import VAT under the Croatian VAT Act. Some of these are:
Import VAT payment is generally required within the timeframes established by customs legislation. However, in some cases, VAT-registered importers, including non-resident taxable persons with a Croatian VAT ID number, may be eligible to use the postponed accounting system. This system allows them to record and deduct the import VAT on their VAT returns instead of paying it upfront.
The fundamental need for postponed accounting is that the importer has the power to deduct input VAT in its entirety, rather than adopting pro-rata percentage standards.
Postal parcels and low-value commodities up to 150 euros are not eligible for postponed accounting.
Last Updated: 29/12/2023
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