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Croatia’s accession into the EU on 1st July 2013
07-05-2013

Croatia

On 1st July 2013, Croatia is to become the 28th Member of the European Union, almost 20 years after the EU was established. Croatia will be obliged to bring its’ current VAT system in line with the EU VAT Directive by this time, and the Croatian VAT Authorities have already issued a draft VAT Act.

Some of the most important changes to consider are as follows:

Once Croatia is a Member of the EU, B2B sales of goods from Croatia to other EU Member States will no longer be exports of goods, but shall be intracommunity deliveries. In the same way, B2B purchases of goods from other EU Member States into Croatia shall be intracommunity acquisitions of goods, rather than imports.

Where a good is dispatched prior to accession, but is delivered following this, the vendor and purchaser will need to ensure that there is one uniform VAT treatment of the supply, in order that, for example, one accounts for the dispatch of the good, and the other the acquisition, rather than the movement of the good being declared as an export and a subsequent acquisition. Customs duty will no longer apply, which will result in lessened costs for freight forwarders.

The dispatch of goods from Croatia shall need to be accounted for in intrastat reports and ECSL, and the acquisition of goods into Croatia, in intrastat reports and ECPL.

As of 1st July 2013, the place of supply rules in the EU shall apply to services provided by Croatian service providers. Whereby under the current rules, a Croatian supplier providing services to a non- resident customer must charge Croatian VAT, the place of supply post accession for services which fall under the general rule shall be where the recipient is based. The Croatian supplier shall issue his invoice with 0% under the reverse charge mechanism. Services provided in Croatia which are exceptions to the general rule shall remain taxable where they are provided (Croatia).

With regards to sales made by EU vendors to private consumers in Croatia, these shall no longer be exports of goods outside of the Community, but, in keeping with the EU distance selling regulations, shall be taxable in Croatia, once the distance seller threshold of HRK 270.000 (approx. EUR 35.600) has been exceeded. In the same way, Croatian distance sellers who exceed the distance seller threshold on sales to private consumers in other EU Member States shall be required to VAT register, and account for VAT in that Member State.

Any EU based supplier of electrical or telecommunications services to private consumers will have to start to account for VAT on these transactions in Croatia as of 1st July 2013, which will have an effect on the current cost of the supply to the customer. Suppliers will either need to consider whether they increase their prices by the current VAT rate in Croatia of 25% (standard rate), or whether they shall absorb this additional cost themselves.

Further points must be taken into consideration, such as ERP configuration, to ensure that the ERP system is programmed to register transactions with Croatian suppliers and customers with the country code HR.

Invoicing regulations shall also change, and Croatian suppliers will be obliged to issue a valid VAT invoice within 15 days of the month following the month in which the supply takes place. EU businesses trading with Croatian companies must be able to include Croatian VAT ID Numbers (HR + 11 digits) on their invoices, in relation to supplies which fall under the reverse charge mechanism, or where a VAT exemption for an intracommunity supply of goods is to be granted.

EU Travel Agents trading within TOMS will be required to review the VAT treatment of their package holidays to Croatia, as there may be an additional VAT cost to them post accession.

Meridian will be able to assist with any queries relating to the entry of Croatia into the EU, and will be providing VAT registration and compliance services in Croatia

Should you wish to discuss this or if you would like further information please contact us by:

Tel: +44 208 601 4600

E-mail: info@meridianglobalservices.com

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