It is compulsory to pay taxes if you own a business that legally operates within the country. Aside from paying corporate income tax, the sales of goods and rendering of services are subject to a charge known as VAT. This tax has a rate added to the price of goods and the amount is paid to tax authorities. To carry out a commercial activity that attracts tax, a company must register and acquire a tax number. This number is unique and only used for tax purposes. Failure to register for tax or late registration attracts financial penalties such as fines. Corporations are always advised to register for a VAT number and ensure the timely filing of annual reports.
Looking for information on VAT here, this guide has all there is to know about VAT and how to register for a Value Added tax number.
Types of Value Added Tax (VAT)
There are three forms of VAT rates charged here. They include the standard rate at 25 percent, the intermediary rate at 13 percent, and the reduced rate at 5 percent. The zero percent rate applies to certain goods and services, but it is mostly known as an exemption.
VAT Registration
Every company must register and apply with tax authorities before doing business in the country. When you apply late, you may have to pay fines, which are usually a certain percentage of the amount taxed. Having submitted all necessary documents, and the application is duly processed, a company shall be issued a unique tax number known as the VAT number. This number may be used for tax purposes related to this type of tax.
Processing Time
It takes at least 4 weeks for one to acquire the number after applying. This may take longer if some documents are incorrect or missing. Ensure the documents required are in the Croatian language to prevent delay.
Documents Required
The following documents are required during registration to process the application:
- A completed registration forms
- Extract from the trade register
- Proof of activity within the territory
- Power of attorney for the fiscal representative
- Copy of Articles of Association, etc.
Hiring A Fiscal Representative
Not all companies can directly apply for tax registration. Foreign corporations doing business within the territory and owned by foreigners must hire fiscal agents to represent them for tax purposes. Unlike them, European companies in the country do not require the services of fiscal representatives. One of the roles these agents play is providing business support services that bring ease and comfort to business owners. They are also liable to VAT debts owed by the businesses they represent.
Filing VAT Returns
Every company must account for its VAT position by filing monthly VAT returns. There is no quarterly reporting period for non-established taxpayers who have registered for VAT in the nation. Returns should be filed electronically through ePorezna before the 20th day of the month, succeeding the tax period it relates to. They must be filed in time to avoid financial penalties and fines. Likewise, annual reports should also be filed during this process.
Invoice
The general rule is that all companies involved in the supplies of goods and services are subject to giving out invoices with VAT to their customers. The directive lists the least information that must be on each invoice issued. In some countries though, additional information thought to be necessary is added. When issuing an invoice, pay attention to the conversion rates when the currency used for the transaction varies with that of where the invoice is being issued, and to some statement that can justify the legality of not charging the tax in cases of exemptions or zero percent rate.
