A foreign entrepreneur who doesn't have a seat or a business unit on the territory of the Republic of Croatia, and who makes deliveries of goods or services which are subject to taxation, is liable to pay Value Added Tax (VAT) in Croatia, unless he makes these deliveries to Croatian entrepreneurs (trades and companies). In this case, domestic recipients of services are liable to calculate and pay VAT on received deliveries, instead of the foreign entrepreneur who made these deliveries.
Before starting with their activities, foreign entrepreneurs are obligated to appoint a TAX REPRESENTATIVE in Croatia. Out of everything stated so far, it turns out that those foreign entrepreneurs who make deliveries that are subject to taxation in Croatia to persons who aren't entrepreneurs (natural persons) need a tax representative.
A tax representative has to be authorized by a foreign entrepreneur to receive legislative documents and to calculate and pay VAT in his name, either through a Power of Attorney or a Representation Agreement. Power of Attorney has to be notarized at the Public Notary Office. A tax representative then submits a request for issuing a decision on tax representation to Tax authorities, with the following attachments:
1. notarized Power of Attorney,
2. confirmation issued by Tax authorities of the country where a foreign entrepreneur (who he's planning to represent) has a seat, that the foreign entrepreneur is also a registered taxpayer
3. a statement or another document, or proof of intention to make deliveries on the territory of the Republic of Croatia, with detailed description and explanation
of deliveries he's planning to make in Croatia.
A tax representative has to register a foreign entrepreneur into the VAT system (by filling out a special form, P-PDV-2), no later than 8 days before commencing with the activities.
As a tax representative is jointly liable for calculation and payment of foreign entrepreneur's tax burden, it's necessary to make a Representation Agreement, in order to define terms and conditions of representing a foreign entrepreneur, especially in order to determine ways of collateral for future tax burden.
After the following has been obtained: Tax authorities decision to a tax representative that he can represent a foreign entrepreneur and OIB (tax number) of a foreign entrepreneur, a foreign entrepreneur can start with his activities. For taxation purposes, a tax representative keeps all required tax records for a foreign entrepreneur. He also calculates and pays VAT.
Should he quit making deliveries in Croatia, a foreign entrepreneur has to submit the final VAT calculation to Tax authorities, no later than 3 months after termination of activities. After Tax authorities have received the final VAT calculation and after the final tax burden has been paid, they issue a decision on liquidation of a foreign entrepreneur.
Certainly, along with registering a foreign entrepreneur into the VAT system, it's necessary to obtain his tax number, i.e. OIB. In order to file a request for receiving OIB, one needs to obtain the following:
1. Decision of the competent registry on registration of a foreign entrepreneur,
2. Power of Attorney by which a foreign entrepreneur authorizes a domestic entrepreneur to pick up the assigned OIB from Tax authorities in his name,
3. To fill out the application form for issuing OIB.
Only an entrepreneur registered inland as a VAT payer can be a tax representative. An entrepreneur who has been punished based on the final ruling on offense or has a due unpaid tax debt or other public charges recorded cannot be awarded a decision for tax representation.
Published: 24/11/2011
