The value added tax, or VAT, is a consumption tax assessed on the value added to goods and services. VAT is applicable to all goods and services bought and sold in the European Union. As a member of the EU, Croatian VAT compliance – registrations, returns, ESLs, Intrastat - follow the European Union VAT Directives. The General Tax Code provides the legal framework for the implementation of VAT in Croatia. Our specialists in company registration in Croatia can give you further details on the matter.
Situations that require registration for VAT in Croatia
According to the EU VAT rules, a Croatian company has to register for VAT in a number of trading situations. These include the following:
• Importing goods into Croatia – if the customers of these goods are not Croatian companies already registered for VAT purposes;
• Buying and selling goods in Croatia, if the customers are not Croatian companies with a local VAT registration;
• Holding goods on consignment warehouses in Croatia for a period longer than three months;
• Selling goods to Croatian customers via internet or catalogues (distance selling);
• Holding events, training in Croatia or live exhibitions with paid admission;
• When self supplying a Croatian company with goods.
In 2010, the Croatian authorities have implemented the VAT package changes which allow companies to apply for a reverse charge process if they are providing services to local Croatian companies. All companies that provide electronic, telecoms or broadcast services to local Croatian companies have to register for VAT in one EU state, under the MOSS scheme. This allows the filing of a single return covering all 28 member states. Our company registration experts in Croatia can tell you if you need to register for VAT and what thresholds apply to this registration.
VAT rate in Croatia
The standard VAT rate in Croatia is 25%. This rate can be reduced up to 13% or 5%. All accommodation services and certain newspapers are subject to a 10% VAT rate. No VAT is imposed to bread, milk, medical supplies and certain educational services. Insurance and financial services, medical services, welfare, and education services are VAT exempt in Croatia. Croatian companies with an annual turnover which exceeds HRK 230,000 are subject to VAT registration. All exports in Croatia are exempt from VAT.
The 13% VAT rate in Croatia
The 13% VAT rate applies to specific foodstuff, water supplies, particular newspapers and magazines, hotel accommodation, hotel services, entertainment tickets, particular agricultural inputs, electricity supply, domestic waste collection, etc.
The 5% VAT rate in Croatia
The 5% VAT rate in Croatia applies to particular medical equipment, daily newspapers and scientific periodicals, pharmaceutical products, books and specific food products. Besides the above-mentioned reduced VAT rates, it is good to know that this tax is not imposed to intra-community and international transport, except the road and rail transport. For more details about the VAT rates in Croatia, you may address to one of our company formation agents in Croatia.
How can I register for VAT in Croatia?
The company’s documents, such as the Articles of Association and the Certificate of Incorporation, plus other forms must be submitted to the tax administration and the Ministry of Finance of the city in which the business is registered. An extract provided by the Croatian Trade Register of the foreign entitled authority showing the company is registered for business needs to be submitted when the VAT registration starts. The VAT registration of a company in Croatia must be considered as soon as the incorporation is made, and with at least 8 days before the operations commence. One of our specialists can give full support for VAT registration in Croatia. They can also help you obtain the EORI number if you want to develop trading activities within the EU territory. Plus, you can watch the folowing video presentation:
The Croatian VAT number format
The VAT number in Croatia is unique for each company registered in this country and it is formed of 11 digits and the country’s prefix, HR.
VAT compliance in Croatia
The post VAT registration rules must be respected by companies with activities in Croatia. Firms can issue invoices, including electronic ones with the legal signature. Invoice correction and other credit notes can be made, in compliance with the Croatian VAT Act. Another important aspect refers to the maintenance of company records and accounts which need to be kept for at least 10 years.
VAT threshold registration in Croatia
Foreign investors in Croatia should know that there is no VAT threshold registration, except for companies dealing with distance selling. E-commerce companies selling products and services to clients in Croatia must observe and respect the VAT threshold of EUR 36,000 per year or approximately HRK 270,000. Additional information about the VAT threshold can be obtained from one of our consultants.
There are certain goods and services that are exempt from the Croatian value added tax. They are divided into seven categories and our Croatian lawyers can help you determine on which category your goods and services fall:
activities involving public interest,
transactions done within the community,
specific transport services,
those provided by special laws.
VAT returns in Croatia
There are two types of VAT returns in Croatia. These are the monthly VAT returns and the annual ones. For monthly VAT returns, the filing is done by the 20th of the month following the transaction it pertains to. For the annual VAT return, filing must be done by the end of February of the current year.
Short facts about company registration in Croatia
Local and international entrepreneurs can easily register companies in Croatia, as the lack of complex formalities is a major business advantage. The incorporation process of a firm in Croatia starts with the Trade Register and the submission of the Articles of Association with information about the owners, business address and representative, activities, rules, etc. The limited liability company suits most of the needs of both domestic and foreign entrepreneurs in Croatia, as this is a simple structure which can be registered if a minimum share capital of HKR 20,000 for a private LLC is deposited in a local bank account. In the case of public limited liability companies, the minimum share capital is set at HRK 200,000. The next steps before a company starts the activities in Croatia involve the business license approvals, VAT and social contribution registration, plus the issuance of the company seal.
In terms of investments, Croatia is quite appealing to international financiers and investors in sectors like manufacturing, agriculture, tourism, engineering, IT and telecommunication, etc. The skilled workforce and the appealing tax structure are other important business benefits for foreigners in Croatia. The following facts and statistics can show the business direction of Croatia:
Around 29.9% of the total FDI registered in Croatia in 2018 were directed to the financial services sector.
According to the 2019 Doing Business report issued by the World Bank, Croatia ranked 58th out of 190 economies in the world.
The Netherlands, Austria, Germany and Italy are the main investors in Croatia.
Around USD 32,884 million was the total FDI stock for 2018 in Croatia.
For more details about the VAT registration procedure, you may contactour specialists in company formation in Croatia.
Call us now at +385 95 9981 628 to set up an appointment with our consultants in Zagreb, Croatia. Alternatively you can incorporate your company without traveling to Croatia.
As a Law Firm Ivan Župan client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Croatia.
The team from CompanyFormationCroatia.com is very qualified and benefits from extensive expertise in this area. I would definitely recommend them to any entrepreneur decided to start his own business here.
Mihai Cuc, Partner of Enescu&Cuc; Law Firm www.romanianlawoffice.com