Tax reform for 2019 – VAT

Tax reform for 2019 – VAT

As was the case with previous years, 2019 continues with the changes as a part of ongoing tax reform. Changes being made to value added tax which will come into effect as of 1st January 2019 are presented in continuation of this article.

It is suggested that the general rate of VAT will decrease from 25% to 24%, but this change should come into effect as of 1st January 2020. Considering this, official confirmation of this change could take a while.

Good news for business owners, as well as the general public is that the VAT rate of 13% is going to be broadened to include following products:

  • live animals: cattle, pigs, sheep, goats, horses, donkeys, domestic poultry and rabbits;
  • fresh or refrigerated meat and edible slaughterhouse products from: cattle, pigs, sheep, goats, horses, donkeys, domestic poultry and rabbits;
  • fresh or refrigerated sausages and similar products from meat, slaughterhouse meat products or blood;
  • live fish;
  • fresh or refrigerated fish, mollusks, and other water invertebrates;
  • fresh or refrigerated crabs: lobster, shrimp, prawns;
  • fresh or refrigerated vegetables, roots and bulb;
  • fresh and dry fruit and nuts;
  • fresh poultry eggs;

Also, 5% VAT rate will be applied to all kinds of drugs whether they are drugs on prescription or without prescription.

VAT rate which applies to services and linked copyright of writers, composers and artists who are members of corresponding organizations which are regulated by a special set of regulations regarding copyright and similar areas and have the approval of central government institution responsible for copyright, is going to be decreased from 25% to 13%.

With the purpose of stopping tax fraud, in addition to VAT application, tax payers will have to electronically submit a record showing all of the invoices received. Also, the form INO-PPO will be removed (form used for showing delivered goods and services based on the article 75. paragraph 2. is no longer necessary).

A threshold of HRK 77.000,00 is being introduced for tax payers who are in the business of delivering electronic services to member countries with the purpose of simplifying business. Also, from 1st January this group of taxpayers issues invoices according to the rules of issuing invoices of the member state in which the tax payer has headquarters and not in the member state in which the taxpayer conducts his service.

Furthermore, regulations regarding pre-tax deduction on personal cars (regardless of the HRK 400.000,00 threshold) and pre-tax deduction for vessels and aircraft are being aligned with demands of European commission. If vessels and aircraft in question are being used for transport of passengers and goods, rent, or if they are acquired with the purpose of further sale, the tax payers have a right to use deduction on total amount of pre tax. This also applies to personal cars and other types of vehicles for personal transport which are used for driving lessons, vehicle testing, service, and passenger and goods transportation.

Another change refers to entrance to VAT system. If a tax payer has realized revenue over HRK 300.000,00, he has to enter VAT system with immediate effect. Under current regulations if a tax payer had realized revenue of over HRK 300.000,00 during the year, he would enter the VAT system starting from next year.

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