Value Added Tax, known in Croatia as “PDV”, is a modern form of taxation. This is the tax that is charged to everyone, including businesses, on most transactions. The purpose of PDV is to tax consumption. It is essentially a sales tax.
2020 will bring taxation changes. PDV will be calculated and charged according to a 24% rate instead of the previous 25%. Some products and services will be taxed at reduced PDV rates of 5% and 13% and other product categories will be completely exempt from PDV.
PDV (VAT) rates in Croatia
Below are all the PDV categories and their payment rates, which will be valid from January 1, 2020. The complete law on PDV can be found here.
Some activities are exempt from paying the PDV and they are divided into ten categories.
- Certain activities of public interest
- Universal postal service
- Hospital and medical care
- Performing medical care
- Human organs, blood, and breast milk delivery
- Dental fees
- Services of associations and non-profit organizations
- Social care services
- Child and youth protection services
- Education of children and youth
- Private teaching
- Sports services
- Cultural services
- Transport of patients
- Public television and radio
- Certain financial activities
- Insurance and reinsurance transactions
- Granting loans
- Credit guarantees contracting
- Giro and current account transactions
- Currency, banknote, and coin transactions
- Stocks, bonds, and other loan stock transactions
- Investment fund management services
- Postage stamps delivery
- Lottery, casino, sports book, slot machines
- Buildings and land delivery
- Apartment rental
- Transactions within the European Union:
- Delivery of goods
- Acquisition of goods
- Certain transportation services
- Import of certain goods
- Export of certain goods
- Services executed on movable property
- Certain international transport services
- Certain exports equal to the import
- Certain mediation services
- Transactions related to international trade
The PDV rate of 5% will be applied to:
- All types of bread and rolls
- All types of milk and food that serve as a substitute for breast milk
- Professional books
- Medical products that are surgically embedded in the human body
- Cinema tickets
- Science magazines
It should be noted that many of these items in the 5% bracket used to be exempt from PDV.
The tax rate of 13% will be applied to:
- Accommodation services and accommodation with breakfast
- Commercial magazines and newspapers
- Edible oils and fats
- Baby car seats
- Baby diapers
- Processed baby food
- Water and electricity delivery
- Concert tickets
- Urns and coffins
- Communal services
- Seedlings and seeds
- Fertilizers, pesticides, and agrochemical products
- Animal food (but not pet food)
- Live animal delivery
- Meat delivery
- Sausages and meat product delivery
- Live fish delivery
- Fresh and frozen fish and seafood delivery
- Fresh and frozen vegetable delivery
- Dried fruits and nuts
- Fresh egg delivery
- Copyright services for writers and artists who are members of certain societies
The standard PDV rate of 24% will be applied to all other products and services starting January 1, 2020. Until 2020, the rate of 25% will continue to be charged.
How PDV is charged
On each receipt or invoice issued, the company must include the amount of tax. Be sure to pay attention to this detail when purchasing.
It is important to note that the PDV system is voluntary for businesses that have revenue under 300.000 kn per year. This means that if they do not want to pay PDV, they do not have to. That also means they cannot collect PDV and they cannot get reimbursed for the PDV that they pay on their goods.
If your business voluntarily enters into the PDV system, you’re obliged to stay in for at least 3 years. However, if your business entered the system because it’s revenue exceeded 300.000 kn in one year, you can request to leave whenever the yearly revenue drops below that threshold.
VAT for imports
Let’s say you’re moving from Austria to Croatia and are carrying a lot of things over the border. You don’t have to fear paying taxes. When relocating from abroad, you are entitled to tax exemption on personal items in accordance with customs regulations.
This does not apply to the import of any type of vehicle or any items that are not considered household items. Alcohol and alcoholic beverages, tobacco and tobacco products, commercial means of transportation, machines, tools and instruments for performing a particular professional activity are not considered household items.
If you only pass goods through Croatia, then you do not have to pay VAT as the rules of the final destination apply.
VAT in other countries
VAT is a system used by many of the world’s nations and has a different name in each country. In Albania it’s TVSH (Tatimi mbi Vleren e Shtuar), in Turkey it’s KDV (Katma deger vergisi), in Singapore it’s GST (Goods and Services Tax), and in neighboring BIH and Montenegro it’s also called VAT (Value Added Tax). In the United States, it is Sales Tax and varies by state and city.
The only country with a higher rate than Croatia is Iceland with a rate of 25.5%. Sweden, Hungary and Denmark also carry a VAT rate of 25% while Canada and Japan have only 5%. The European Union also prescribes VAT. The highest rate is set to 25%, which means that we are the most taxed country in the EU.
Short-term visitors in the European Union
If you are only visiting Croatia (or another EU country) as a tourist, you may be entitled to a refund of the VAT (PDV) you paid during your trip. Check out our guide regarding refunds of value-added tax.