Enforcement Vulturing and Collection of Other People’s Taxes

From issue to issue, more and more readers are complaining about the enforcement seizure of money from bank accounts, and tax authorities persist in collecting VAT on invoiced but never collected realizations.

Mijo Turkalj from Zagreb has reached out, prompted by previous writings about the abuse of enforcement due to legally questionable seizure of money from account holders in commercial banks without the knowledge of the client and the commercial bank to which the money was entrusted. Reader Vinko Keškić from Vukovar has also reported that Croatian tax authorities are threatening him with enforcement for VAT debt on invoiced but never collected realizations.  Ivan Pavličević, as the director of Pavlos, Varaždin, offered to purchase land from Mijo Turkalj in the cadastral municipality of Resnik with a total area of approximately 10,000 square meters. On December 28, 2005, they concluded a pre-contract for the sale without an obligation for a down payment, with the validity period of the pre-contract until December 6, 2006.

Court Fraud
Although the pre-contract stipulated ‘the actual jurisdiction of the Municipal Court in Zagreb’, Pavlos d.o.o. initiated proceedings at the Municipal Court in Varaždin with a proposal for a temporary measure – a ban on the alienation of the disputed land a year and a half after the expiration of the pre-contract. In a two-instance hearing, the County Court in Varaždin accepted Mijo Turkalj’s appeal and returned the case to the first-instance court, after which the first-instance court declared itself locally incompetent.

Hunting for 200,000 kuna
Pavlos d.o.o. then initiated a dispute before the Municipal Court in Zagreb. The Municipal Court in Zagreb ordered Mijo Turkalj to sell the land as stated in the pre-contract, which had expired two and a half years ago. This ruling was also confirmed by the County Court in Zagreb (number: 25 Gž-4126/08-4).
Under various pressures, Mijo Turkalj finally relented and agreed to sell the disputed land. However, Pavličević withdrew from the purchase.
This torment for Mijo Turkalj is not over. He realizes that the two court farces, in Varaždin with a temporary measure and in Zagreb with a forced court sale from which the plaintiff withdrew without explanation, were actually orchestrated to ‘inflate’ the so-called court costs of several hundred thousand kuna.
The law firm Škarica and partners submitted an ‘enforcement proposal based on an enforcement document’ on March 3, 2011, for the reimbursement of ‘litigation costs in the amount of 195,074 kuna’ (not counting interest). To make a long story short, Fina seized his money without Mijo Turkalj’s knowledge as the account owner. It turns out that the entire court farce in Varaždin and Zagreb was staged so that the lawyers and Pavličević could appropriate over 200,000 kuna from Turkalj.

A Typical Croatian VAT Story with Payment of Other People’s Taxes

Reader Vinko Keškić also wrote: ‘Four years ago, I completed a construction job for Bojoplast from Pula. They did not pay me, so I initiated legal proceedings. Since I had no money, and the jobs stopped, I became a debtor to the tax administration for VAT that I did not collect for the first time. I won in court, however, Bojoplast went bankrupt in the meantime. In addition to this debt, I have several other debtors, and I am in a legal dispute with one and have registered a claim on their property. The principal debt is 131,901.05, and the interest is 38,230.25, totaling 170,132.05 kuna. How can I fight against the tax authorities’ enforcement for income tax that I never even earned (VAT on invoiced but not realized payment)? I hope you will read this and get back to me; I only have two days left to file an appeal against this tax enforcement.’
From Vinko Keškić’s letter, it is unclear whether the mentioned debt may be statute-barred after four years. The only advice possible is to request ‘mercy’ from the Tax Administration for a deferral of the debt, or possible installment payments. This is a case of so-called justified reasons: it was not paid to the taxpayer, so the taxpayer had nothing to pay VAT with. The fact that tax authorities collect VAT on an unpaid invoice, i.e., someone else’s debt, is a typical ‘Croatian story’.
An appeal against enforcement, in order to be accepted, must be based on the law. In this case, I do not see a legal basis. The reader issued an invoice, the one to whom it was invoiced (mis)used the input tax and then went bankrupt. Now the reader, according to Croatian regulations, must pay VAT on the amount he never earned.

We invite entrepreneurs to share their problems. Following your writings, by pointing out the absurdities in individual cases, we will highlight the shortcomings of the system as a whole and thus support the readers of Lider as individuals in their unequal disputes with the cumbersome state administration.

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