Croatia’s Parliament is considering a significant change to the Value Added Tax (VAT) registration threshold, proposing an increase from €40,000 to €60,000. If approved by the Sabor Parliament, this new threshold will take immediate effect, providing substantial relief for small businesses and streamlining compliance requirements.
Key Details of the Proposal
Current and Proposed Thresholds:
- Current Threshold: €40,000
- Proposed Threshold: €60,000
This adjustment aims to reduce the administrative burden on smaller businesses, enabling them to operate without the need for immediate VAT registration.
EU VAT Registration Thresholds and SME Special Scheme
EU VAT Registration Thresholds: Croatia’s proposed increase aligns with broader EU trends, where member states have varying thresholds for VAT registration. For updated thresholds across the EU, businesses can refer to tools such as VATCalc’s live tracker.
SME Special Scheme: Beginning in 2025, Croatia will implement a new VAT threshold under the SME Special Scheme, set at €100,000. This will allow Croatian businesses to sell VAT-exempt goods and services across the EU. However, this will necessitate new quarterly sales reports and obtaining an EX number for invoicing.
Eligibility and Limitations
Eligibility Criteria:
- Resident Businesses Only: The increased threshold and the SME Special Scheme are applicable solely to businesses based in Croatia.
- Calculation Basis: The threshold is based on the previous year’s sales of goods and services, excluding VAT. If a business exceeds this limit during the year, it must register for VAT from the following month.
Exclusions:
- Farmers
- Letting of immovable property
- Intra-community supplies of new means of transport
These categories are not eligible for the threshold benefits and must adhere to standard VAT registration rules.
Voluntary VAT Registration
Businesses below the new €60,000 threshold can opt for voluntary VAT registration. This option can be beneficial for businesses that want to reclaim input VAT on purchases or enhance their business credibility.
The proposed increase in Croatia’s VAT registration threshold from €40,000 to €60,000 represents a significant policy shift aimed at supporting small businesses. By easing the regulatory burden, the Croatian government aims to foster a more business-friendly environment. Businesses should stay informed about these changes to ensure compliance and leverage the benefits of the new thresholds and schemes.
