Croatia joins the VAT Union

On 1 July 2013 Croatia acceded to the European Union.

As a result, Croatia is now a full member of the EC VAT Union.  This has an international effect in terms of VAT, notably for those UK businesses with transactions involving Croatia.  Examples include the following.

  • Goods transported from the UK to Croatia, which previously qualified as an “export”, have now become an intra-Community supply.  These supplies might be classified as “Dispatches”, or “Distance Sales”, or might even require the UK supplier to register for VAT in Croatia.
  • Goods transported from Croatia to the UK, which previously qualified as an “import”, might now become an “Acquisition”.
  • Most services supplied to business customers in Croatia will fall under the Reverse Charge mechanism for the first time.
  • Certain services (e.g. advice) supplied to non-business customers in Croatia, which previously qualified as “outside the scope” of UK VAT, might now attract a UK VAT charge.
  • Those businesses which hold goods in Croatia should consider the transitional rules for those goods having now entered the EC.

UK businesses which trade with parties in Croatia should be considering their VAT position, as they might be required to record their transactions differently, draft their sales invoices differently, and in some cases apply for full VAT registration in Croatia.

For further information on the VAT rules for cross-border supplies, please contact the TaxDesk on 0845 4900 509 and ask for Kevin Hall.