Statute of limitations (Croatian: zastara, Latin: prescriptio, German: Verjährung, Italian: prescrizione) is the expiration of a time period after which the debtor has the right to withhold the fulfilment of his obligation. This right arises from the creditor’s passive conduct, since the creditor may request the fulfilment of his claim within the statute of limitations period.
Upon the expiration of this period, if the buyer REFERS TO THE STATUTE OF LIMITATIONS (the debtor must raise the objection of limitation), the creditor loses the right to collect.
The statute of limitations is regulated in details by the Civil Obligations Act (Official gazette 35/05 to 41/08).
The general limitation period is 5 years, while for mutual claims arising from commercial agreements on turnover of goods and services, the limitations occur within 3 years from their due date.
Claims regarding electrical and thermal energy, gas, water, chimney sweep services and cleaning (if those services were provided for households), as well as claims arising from use of radio and TV sets, telephones, PO boxes, and subscriptions to occasional publications, limitations occur after the period of 1 year.
The limitation period commences on the first day following the last day during which the creditor is allowed to demand the fulfilment of his claims.
The limitation period may be suspended or interrupted by occurrence of some unpredictable circumstances, due to which the limitation period is either unable to start or gets interrupted.
One of the examples of interruption of the limitation period is the recognition of debt made by the debtor (for example: by certifying the creditor’s excerpt of open items). The creditor may interrupt the limitation period by taking any action against the debtor before the court or other authorised body with the aim of ensuring and collecting his claim.
The reasons for abeyance of the limitation period may be different objective circumstances such as mobilisation, war or direct war threat, force majeure and other.
Upon interruption, the limitation period may only recommence.
The tax statute of limitations, defined as the right of the tax authority to determine the tax obligation and interest, to start the procedure for collection of taxes, interest and enforcement expenses, and the right of the tax payer to returns of taxes, interest and enforcement expenses, shall occur 3 years from its commencement. The same period shall apply for starting the offence procedure against the offender.
The tax limitations period commences upon the expiration of the year in which the tax obligation should have been determined, while the limitation period for returns commences upon the expiration of the year in which the tax payer acquired this right.
Regarding the calculation of the limitation period, it is important to distinguish yearly taxes (where the obligation is determined for the whole year) – income tax, profit tax and value added tax, from other taxes (where the obligation is determined and declared at the occurrence of a certain fact).
The limitations period for yearly taxes commences on January 1st of the year following the year in which the tax should have been determined. For example, the period to submit the profit tax return for 2009 is April 30th 2010, and the limitation period commences on January 1st 2011.
For other taxes, if the obligation should have been determined during the year, the limitations period commences on the next January 1st.
The absolute tax statute of limitations occurs upon six years.
Regulations regarding the tax statute of limitations are prescribed by the General Tax Act (Official gazette 147/08).
This article provides the explanation of general terms regarding the general and tax statute of limitations. More detailed analysis of subjects regarding the relation of tax payers and tax authorities shall be given in articles to follow.
Posted on May the 11th, 2011
