Regulatory updates - Croatia

As previously reported by Pagero, the Croatian Tax Administration launched the project “Fiscalization 2.0”, which aims to introduce a new system for e-invoicing, e-archiving, and advanced online bookkeeping.

The Ministry of Finance of Croatia has formally reached out to the European Commission to obtain a derogation from Articles 218 and 232 of the 2006 VAT Directive. This would give Croatia the right to introduce countrywide mandatory B2B e-invoicing (“eAccount”) and digital reporting for domestic transactions.

The introduction of the mandatory B2B e-invoicing is planned from 1 January 2026.

Pagero follows the developments closely and will inform our customers once the decision on derogation from the EU Council is announced.

As previously reported by Pagero, the Croatian Tax Administration launched the project “Fiscalization 2.0”, which aims to introduce a new system for e-invoicing, e-archiving, and advanced online bookkeeping.

The Tax Authority is planning to introduce a countrywide CTC obligation, possibly, in two steps:

• Phase 1, a country-wide e-invoicing mandate,and
• Phase 2, a country-wide DRR mandate.

While much of the details still remain unknown, the businesses are expected to be reporting data on both sales and purchase invoices to a central infrastructure within 48 hours after issuance, respectively reception of the document. Which is largely in line with the ViDA proposal.

The current platform for B2G e-invoicing is likely to be merged or associated in conjunction with the anticipated mandate.

Peppol Network, which is already enabled for B2G e-invoicing, is expected to be a likely acceptable alternative distribution channel as well for B2B e-invoices, when the mentioned mandate comes into force.

It has already been raised, that the current EN 16931 specifications do not fulfil the local VAT requirements in Croatia sufficiently, and thus either a revised EN should come into place or an Extension provided for taxpayers doing business in Croatia.

On 27 January 2023, the Tax Administration under the Ministry of Finance of Croatia launched the project “Fiscalization 2.0”.

The project, financed by grants from the National Recovery and Resilience Plan programme, aims at imposing a mandatory exchange of electronic invoices between entrepreneurs. Its final product will be an implemented e-invoicing platform with an integrated e-archive and advanced online bookkeeping in the VAT system to increase efficiency and drive digitalization among small entrepreneurs.

Project objectives and potential benefits

The goals of the “Fiscalization 2.0” project are:

• To introduce a mandatory exchange of e-invoices between entrepreneurs;
• To establish a system for the fiscalization of digital accounts; and
• To implement a new reporting system integrated into the operations of taxpayers

The following benefits are expected from this project:

• Reduction of the number of forms;
• Prerequisite creation for the pre-fulfilment of data, which will enable taxpayers to verify the accuracy of the fulfilment of tax obligations;
• Making a positive environmental impact using electronic invoices and archiving them digitally, reducing paper consumption;
• Tracking and connecting accounts, preventing tax fraud related to VAT refunds;
• Support of the assessment and monitoring of macroeconomic indicators, enabling better adoption of public policies;
• Application for free e-invoice exchange for small entrepreneurs.

What are the timelines?

The project started with the Tax Administration’s survey to collect information from taxpayers covering the period from 18 January to 17 February 2023.

The implementation phase of “Fiscalization 2.0” project is planned to end in December 2024.

Earlier in 2018, the Croatian government sent a bill on electronic invoices in public procurement to the parliament and the decision 94/2018 was published on 17th October 2018.

The timelines of the mandate will be as follows:

• From 1st December 2018: all contracting authorities are obliged to be able to receive e-invoices
• From 1st July 2019: all suppliers to contracting authorities are obliged to issue only e-invoices

The Financial Agency (FINA) is a central information intermediary that performs the service of receiving and sending e-invoices and accompanying documents between suppliers and public contracting authorities, in accordance with the European standard (EN). FINA is a Peppol access point and will be accepting e-invoices that comply with EN 16931-1, i.e. UBL 2.1 or CII.

The central platform is now ready to accept e-invoices, however not all authorities are connected to FINA, which means that the process of connecting public authorities to the platform will continue into 2019. This shall apply to public and sectoral contracting entities as public purchasers, issuers of electronic accounts in public procurement procedures and to information intermediaries providing e-invoice exchange and accompanying documents in public procurement procedures.

FINA is also capable of sending and receiving B2B e-invoices, as FINA owns two platforms – one for businesses and one for public authorities. In the B2B segment they can only accept UBL 2.1 format according to PEPPOL BIS 3.0. There is no current proposal from the Ministry of Economy, Entrepreneurship and Crafts of making B2B e-invoicing mandatory.

“We see a growing trend of countries adopting Peppol, in order to meet the requirements of the eProcurement Directive deadline in April 2019. Croatia is one of the few countries that have an infrastructure in place and ready prior to the deadline”, says Trent Targa, Compliance Manager at Pagero. “Pagero is following the development closely, ready to help businesses meet the requirements and to help send e-invoices to Croatian authorities. Early adopters will not only add value to their operations, but also remain ahead of competitors.“