If your company is not based in Croatia but sells goods or services here, the first dilemma is almost always the same: do you need a Croatian VAT number or not? The answer isn’t always intuitive, because Croatian rules apply a fairly broad simplification, so in many situations you don’t have to register at all, while in others the law expressly requires it.
Below is an overview of when VAT registration is mandatory, what the procedure looks like, which tax obligations follow after registration, and one concrete example showing how decisive the difference can be between a customer who is a business and a customer who is a private individual.
Why you need to ask yourself whether you need to register at all
Croatia applies a simplification in VAT taxation: in a large number of situations, foreign taxable persons (both from the EU and from third countries) do not have to register in Croatia when they sell goods or services to Croatian taxable persons, because the tax obligation is taken over by the buyer instead of them. This mechanism derives from the VAT Act, more precisely from Art. 75, para. 2, which obliges Croatian taxable persons (including small taxable persons) to self-assess the VAT on what they buy from you.
The problem arises the moment your customer is not a taxable person but a private individual, or a legal entity without an assigned Croatian VAT number. Then there is no one to take over the obligation in your place, so you must take it on yourself, after registering first.
When you must register for VAT in Croatia
You must register before your first supply in Croatia, in the following situations:
- you supply goods or services whose place of taxation is in Croatia, and the customer is a person to whom the tax obligation cannot be transferred (most often a private individual),
- you provide services under Arts. 18 to 23 of the VAT Act to a person who cannot take over the tax obligation, for example a service related to real estate in Croatia,
- you export goods from Croatia,
- you acquire goods from the EU or move them from the EU to Croatia,
- you sell goods or services at a distance and are not registered for the special One-Stop Shop (OSS) scheme in your country of establishment,
- you supply goods from Croatia to another EU member state.
In all other cases, where the Croatian customer can and must take over the tax obligation, you do not need to register.
One point deserves particular emphasis: the €10,000 threshold (excluding VAT) for distance sales and electronically supplied services to private individuals within the EU is relevant only if you have not opted for OSS in your home country. If you exceed that threshold without an OSS registration, the obligation to register in Croatia becomes unavoidable.
What the registration procedure looks like
The procedure has two steps, and the order matters.
1. First you need an OIB. Without a Croatian personal identification number (OIB) you cannot obtain a VAT number either, so you first apply for an OIB. A foreign individual attaches a passport to the application (or, exceptionally, another identification document), while a foreign legal entity attaches its founding act or an extract from the relevant register, translated into Croatian by a certified court interpreter if it is not originally in Croatian.
2. Then you submit the VAT registration application (Form P-PDV). The application is submitted at one place only: the Tax Administration, Zagreb Regional Office. Together with the form you attach:
- a certificate from the Tax Administration of your home country confirming that you are registered there as a taxable person,
- a statement or other proof of your intention to carry out supplies in Croatia,
- all documentation translated into Croatian, if it is not originally in Croatian.
The Tax Administration issues the decision on the allocation of the VAT number immediately, and no later than 8 days from submission of the application, and at the same time enters you in the VAT taxpayers’ register. The assigned number has the structure HR + OIB.
You can download the complete notice on the procedure and the required documentation from the Tax Administration’s page.
Which tax obligations follow after registration
As soon as you receive a Croatian VAT number, your tax position changes, but not equally for all transactions:
- for goods and services whose place of taxation is in Croatia, you act as a Croatian taxable person: you issue Croatian invoices, charge VAT, recognise input VAT, keep the prescribed tax records of incoming and outgoing invoices, and submit the VAT return and other prescribed forms,
- for services taxed under the general (basic) rule, you continue to issue invoices under the rules of your home country (the reverse charge applies), and the Croatian taxable person reports the acquisition of the service in its own return.
Two things are worth remembering in particular:
- as a foreign taxable person, you cannot apply the taxation based on payments received (cash accounting scheme), even if your turnover would otherwise meet the conditions,
- you can only be a monthly VAT filer, never quarterly, regardless of the amount of turnover.
If you stop carrying out activity in Croatia, you must notify the Tax Administration within 8 days so that your VAT number can be cancelled. If you fail to do so, the Tax Administration may cancel the number ex officio if the available data show that you have not carried out any activity for more than two years.
Example: same service, different customer, different obligation
An entrepreneur from Italy carries out construction work on a property in Croatia.
- If the customer is a Croatian taxable person: the Italian entrepreneur does not need to register for VAT in Croatia. The tax obligation is taken over by the Croatian customer, in accordance with Art. 75, para. 2 of the VAT Act.
- If the customer is a private individual: the Italian entrepreneur must register for VAT in Croatia and issue an invoice under Croatian rules.
An identical service and an identical amount, but a completely different tax obligation, depending solely on who is on the other side of the invoice. That is exactly why it is essential to check the customer’s status in advance, before the first supply in Croatia.
What does this mean for you, in practice?
If you plan to do business on the Croatian market, we recommend that you:
- Before your first supply, establish who your customers in Croatia are: taxable persons or private individuals.
- Check whether your transaction falls under one of the situations in which registration is mandatory (supplies to private individuals, export, intra-EU acquisition, distance sales above the threshold without OSS registration).
- If registration is needed, start the procedure in good time: first the OIB, then Form P-PDV.
- Prepare all documentation in Croatian in advance, so you don’t lose time on subsequent translations.
- After registration, set up proper keeping of the prescribed tax records of incoming and outgoing invoices and regular monthly VAT returns, because quarterly filing is not an option for you.
Need help with registration in Croatia?
Registering a foreign taxable person in Croatia can be demanding because it depends on the details of your transaction, the type of customer and the type of service. The experts at CONEO Croatia will help you assess whether you need to register for VAT in Croatia and what that means for you in practice. Contact us.
