Amendments of Croatian value added tax (“VAT”) legislation
Tax Alert, March 2014
Amendments of the Croatian VAT legislation came into force on 1 January 2014. The respective amendments introduced: mayor changes in taxation of travel agents, simplify deduction of the input VAT and increase of reduced VAT rate of 10% to 13%
Tour operator margin scheme („TOMS“)
Following the ECJ ruling in case Commission vs. Spain and seven other Member States on their interpretation of TOMS rules, Croatia amended its VAT regulations accordingly. In particular, as of 1 January 2014 a definition of traveller was extended to any person to whom travel agent provides its service (until 1 January 2014, only natural persons were regarded as travellers). As a result, Croatian travel agents have to apply TOMS on their wholesale supplies.
In addition to the above, as of 1 January 2014 it is sufficient to provide one service in relation to a journey such as transportation or accommodation to apply TOMS. On the other hand, until 1 January 2014 TOMS applied only when travel agent provided at least two services (transport, accommodation or any other tourist service).
Deduction of input VAT
The respective amendments introduced new procedure for input VAT deduction. Specifically, if invoice for the incoming supply is obtained until deadline for filing of monthly tax return, taxable person has a right to deduct input VAT in the accounting period in which the goods and services were supplied. Otherwise, it has a right to deduct input VAT in the accounting period in which it received the respective invoice.
Other significant amendments
Since 1 January 2014, reduced VAT rate of 10% (applied on accommodation and hospitality services, baby food and other prescribed supplies) has been increased to 13%.
Due to different interpretations of rules on currency of invoices, the amended VAT Regulations clarifies that invoice may be issued in foreign currency under the condition that total invoice amount and amount of VAT to be paid are denominated in HRK.
Changes in the VAT forms (VAT return, annual VAT return, incoming and outgoing invoices ledgers) were also introduced as of 1 January 2014.