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VAT system for foreign entrepreneurs


Passing the Law on Amendments to the Value Added Tax Law (Official Gazette 87/09) as well as the new Regulation on the Value Added Tax (Official Gazette 149/09), in use since 1st January 2010, has introduced certain novelties to the implementation of legal provisions on VAT, which pertain to foreign entrepreneurs (non-residents).

The mentioned amendments include two significant novelties: ˝a tax representative˝ and the possibility of VAT refund to foreign entrepreneurs.

Let's start with a definition of a foreign entrepreneur (a non-resident), who is liable to pay VAT in Croatia. This is an entrepreneur whose seat or place of residence is abroad, and who delivers goods that are subject to VAT within the territory of the Republic of Croatia, and recipients of these deliveries are domestic natural or legal persons who are not entrepreneurs.

In case when foreign entrepreneurs' delivery recipients are exclusively domestic natural and private persons entrepreneurs, the obligation of calculating and paying VAT  ˝falls on them˝. In this case foreign suppliers of goods aren't obligated to register in the VAT payers register.

Otherwise, if a non-resident provides taxable services to residents who are not entrepreneurs, he is obligated to appoint his tax representative in Croatia, who will perform all activities in Croatia in his name which are related to a consistent implementation of legal obligations in connection with VAT calculation and payment.

In this way, a tax representative will submit a request for issuing a resolution on tax representation of a foreign entrepreneur to Tax authorities, after which he'll submit the application for registration in the VAT register in his name, calculate and pay VAT, he'll receive all letters and notifications – in one word: he'll do all the work related to VAT calculations and payments for him. He'll also guarantee payment of taxes by the foreign entrepreneur.

The second novelty for non-residents is the possibilty of a VAT refund, meaning that foreign tax payers, who don't have seat nor place of residence in the Republic of Croatia, nor any type of a business unit, nor do they deliver goods and services, have the right to a VAT refund which they were charged by Croatian VAT payers after 31st December 2009. However, provided that Croatian entrepreneurs have the same rights under the legislation of the country of a refund request applicant.

VAT refund request is to be submitted on the ZP-PDV form, no later than 6 months after expiration of the calendar year to which the submitted refund request applies.


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