What Does the New VAT Law Bring?

Entrepreneurs have only four working days left before entering the European Union, after which the new VAT Law will come into effect.

The changes to the Law are thorough and numerous, with one of the major novelties being the assignment of a VAT identification number without which doing business in the EU will not be possible. The Tax Administration today sent unique identification numbers to the addresses of 32,000 entrepreneurs.

Each entrepreneur will thus become part of the European VIES payment control system, one of whose purposes is to combat VAT evasion on issued invoices.

The Director of the Tax Administration, Nada Čavlović Smiljanec, stated that VAT is the most significant tax in the structure of state tax revenues and that due to the application of new rules on tax refunds to citizens from other EU member states, the state budget will lose up to one billion kuna in the coming years. However, on the other hand, citizens and entrepreneurs will be able to request VAT refunds from member states. Refunds can be requested on the Tax Administration portal through a very simple procedure.

– The new Law follows EU directives and will provide entrepreneurs with significantly better legal protection, as judgments from the European Court of Justice will be applied in VAT disputes. What is good for entrepreneurs is that from July 1, all fiscal and customs barriers within the EU will be abolished, making them more liquid and allowing for cheaper financing – said Čavlović Smiljanec.

Among other novelties, it should be mentioned that VAT payers will become state and local bodies if they engage in economic activities, while citizens and legal entities will have to pay VAT if they purchase vehicles in the EU. Additionally, citizens will be required to pay VAT on the acquisition of goods from the EU valued at more than 77,000 kuna, while foreign entrepreneurs will pay VAT in Croatia on the delivery of goods worth more than 270,000 kuna. Export and import as categories will also cease to exist, replaced by the terms dispatch and receipt of goods and services.

It is already known that the reduced VAT rates are set at five and ten percent, and regarding the taxation of printed media with authorial texts longer than 25,000 characters at a lower rate, in addition to the Tax Administration, the Ministry of Culture will also conduct control twice a year, while publishers will have to indicate how many words each issue contains.