Tax news in Central European countries
Croatia VAT Act and regulations amended
A new VAT Act and regulations, which became eectiveon 1 January 2010, made signicant changes to urtherharmonize Croatian VAT legislation with EU rules inanticipation o Croatia’s accession to the EU. Therules aect nonresidents making both supplies andacquisitions in Croatia.
Taxation o oreign enterprises
Under the new VAT Act, oreign enterprises carryingout taxable supplies in Croatia are required to registeror VAT purposes and appoint a tax representativeauthorized to carry out unctions related to thecalculation o tax and payment on behal o thenonresident. The tax representative must be a Croatiantaxpayer (under the regulations, the oreign enterprisemay appoint more than one representative) and mustguarantee the payment o tax. The regulations urtherprescribe that the tax representative be authorized witha power o attorney rom the oreign enterprise. Thetax representative then must submit an application ortax representation to the tax authorities and requestthat the oreign enterprise be registered in the registero VAT payers. The regulations also provide that thetax representative is liable or the payment o taxes,penalty interest and any other penalties in respecto transactions carried out in Croatia and that therepresentative is jointly liable or the calculation andpayment o oreign enterprise VAT.
VAT reund or oreign enterprises
VAT reunds are available to oreign enterprises that donot have a head oce or place o residence, businessestablishment, subsidiary or other business unit inCroatia and that do not carry out any supplies ogoods and services in Croatia in the relevant tax period.However, a reund will be available only under thecondition o reciprocity, i.e. that Croatian taxpayers areentitled to a VAT reund to the same extent and underthe same conditions in the country where the oreignenterprise is resident.
Amended place o supply rules
According to the new VAT Act, the ollowing serviceshave been added to the list o services deemed tobe supplied at the place where the head oce othe recipient is located: the provision o access toand transport or transmission through distributionsystems o natural gas and electricity and otherdirectly related services, telecommunications services,radio and television broadcasting services andelectronically provided services. The regulations dene“telecommunications” and “electronically providedservices” in more detail.The regulations also make changes to the place osupply rules. Previously, rules by which those servicesprovided by a domestic enterprise that were deemedto have the place o supply as the place where therecipient was resident also applied when the serviceswere provided to a nonresident that was notan enterprise (i.e. the place o supply was the placewhere the individual had his/her habitual abode).This provision in the VAT Act has been abolished and,under the VAT regulations, such services provided tononresident individuals will be subject to VAT under thegeneral rule, i.e. where the supplier is located.I services are provided by a nonresident enterprise toindividual customers in Croatia, the oreign enterprisemust register or VAT in Croatia under both the VAT Actand regulations.Abolition o general VAT exemption or nancialinstitutions/companies: The VAT Act abolishes theexemption or banks, savings and credit institutionsand insurance/reinsurance companies. An exemption isnow available only in respect o specic nancial andinsurance transactions. As a result, specied nancialand insurance services will be exempt rom VATregardless o the provider, and nancial institutions willbe able to obtain a VAT reund to the extent related totaxable supplies.The regulations dene in more detail specic nancialand insurance transactions services that are generallyexempt or all enterprises under the new VAT Act.Input VAT deduction or enterprises with VAT-able andexempt deliveries: Enterprises making supplies that arein part VAT-exempt and in part taxable can deduct inputVAT only with respect to the taxable supplies. Deductibleinput VAT related to taxable supplies is calculated atyear end as a ratio (pro rata) o the total VAT-ableand total exempt output supplies. The regulations setout the ormula or calculating the ratio and denethe calculation o the temporary ratio and year-endreconciliation o VAT liability.
Deloitte Central Europe