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Binding Opinions, Tax Return Correction, Statistical Reports and Tax Settlement Regulations

Tax Alerts, July 2015

The Binding Opinions, Tax Return Correction, Statistical Reports and Tax Settlement Regulations (“Regulations”) have entered in force on 25 July 2015 (Official Gazette 78/2015). The Regulations were adopted based on the General Tax Act.

An overview of the key provisions follows.

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Tax Authorities’ binding opinions

Under the Regulations, a binding opinion may be issued on the following tax issues:

  • Identification of taxable supplies for the purpose of pro-rata calculation 
  • Application of the tax regulations on investment projects in Croatia whose value exceeds HRK 20,000,000
  • Tax base assessment in business combinations , except for those in accordance with the relevant EU Directives
  • Application of double taxation treaties on the assessment of corporate and personal income tax liabilities

Additionally, a binding opinion may be issued on a tax issue affecting business activities that are, due to their specific features, not typical in the Croatian business environment.

The binding opinion application is prescribed in its content and may be filed by the taxpayer, its proxy or a certified tax advisor.

The Tax Authorities have to issue the opinion within 60 days from the application date. In particularly complex cases, the deadline may be extended for 30 days. The opinion is effective from the date of delivery to the applicant.
The binding opinion is subject to a fee. The fee structure depends on the revenue the applicant declared in its tax return.

Applicant’s revenue (HRK)
Fee (HRK)

Up to 3,000,000
3,000,000 - 7,000,000
7,000,000 - 10,000,000
10,000,000 - 20,000,000
20,000,000 - 70,000,000
70,000,000 - 110,000,000
110,000,000 - 150,000,000
Over 150,000,000

5,000
7,000
10,000
13,000
15,000
20,000
25,000
30,000

 

 

Tax return correction upon Tax Authorities demand

The Regulations introduce an option for the Tax Authorities to, when deemed necessary and within the statute of limitations, request the taxpayer to correct its tax returns.

The correction deadline may not be exceed 30 days from the request receipt. If the taxpayer does not act upon the request, the Tax Authorities will open a tax audit.

Statistical reports – reports on overdue unpaid receivables

The Regulations state that VAT taxpayers that have a balance of overdue unpaid receivables on specific dates have to prepare Reports on overdue unpaid receivables.

The overdue unpaid receivables, for the purposes of this legislation, are those that are based on invoices.
The reports are to be filed electronically (through the ePorezna portal) on the OPZ-STAT-1 form. They should include the data on the balance of unpaid overdue receivables on 31 March (the report is due on 20 May), 30 June (the report is due on 20 August), 30 September (the report is due on 20 November) and 31 December (the report is due until 20 February of the following year).

As derogation from the above, the Regulations prescribe that the first 2015 report should include balance of the overdue unpaid receivables on 31 December 2015 and it should be filed until 20 February 2016.

Tax settlement

Under the General Tax Act, the Tax Authorities and a taxpayer may settle the liabilities and penalty interest assessed during a tax audit. The settlement must be agreed before delivery of the tax audit minutes. The Regulations provide further guidance.

If additional tax liabilities and penalty interest are assessed by the Tax Authorities (because the taxpayer's records do not hold sufficient data for establishing the tax liability), they can be reduced by up to 5% through settlement.

On the other hand, if additional liabilities are assessed based on the taxpayer's records, penalty interest only may be reduced through settlement:

Payment deadline for the new assessment

Newly assessed tax liability paid

Penalty interest reduction

Day of the settlement

10% – 100%

10% - 100% (in proportion to the amount of newly assessed tax liabilities paid)

Payment of a whole or remaining amount of newly assessed tax liabilities within 90 days from settlement

 

50%

 

Newly assessed personal income tax liabilities, city tax liabilities and mandatory social security contributions cannot be settled. Penalty interest imposed on newly assessed private pension contributions (the 2nd level) cannot be reduced by settlement either.

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