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.
PDV is calculated and charged according to a 25% rate. Some products and services are taxed at reduced PDV rates of 5% and 13% and other product categories are completely exempt from PDV.
PDV (VAT) rates in Croatia
Below are all the PDV categories and their payment rates, which are valid from 2022. 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
- Services of religious and philosophical institutions related to spiritual care
- Services that non-governmental organizations deliver to their members
- 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% is applied to:
- All types of bread and rolls
- All types of milk in a liquid state (cow’s, goat’s, sheep’s milk) and food that serve as a substitute for breast milk
- Baby food
- Edible oils and fats
- Butter and margarine
- Meat delivery
- Live fish delivery
- Fresh egg delivery
- Fresh fruits and vegetables
- Fertilizers, pesticides, and agrochemical products
- Seedlings and seeds
- Professional books
- Medical products that are surgically embedded in the human body
- Daily newspapers except for ones that publish advertisements, videos, and music
- Tickets for sports, cultural and other events
- 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% is applied to:
- Accommodation services and accommodation with breakfast
- Commercial magazines and newspapers
- Baby car seats
- Baby diapers
- Sanitary pads and tampons
- Water and electricity delivery
- Urns and coffins
- Communal services
- Animal food (but not pet food)
- Live animal delivery
- Sausages and meat product delivery
- Frozen fish and seafood delivery
- Frozen vegetable delivery
- Dried fruits and nuts
- Copyright services for writers and artists who are members of certain societies
- Food services outside restaurants
- Gas and thermal energy
The standard PDV rate of 25% is applied to all other products and services starting January 1, 2020.
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.
VAT is sometimes charged on the import of a vehicle and 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. You can view the process of importing a car and personal belongings here.
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.
Please note: All information provided by Expat in Croatia is only for the purposes of guidance. It does not constitute legal or financial advice in any form. It is important to understand that Croatian laws and bureaucratic rules often change and each personal case is individual and different rules may apply. For legal advice, you must consult with a licensed Croatian lawyer. For financial advice, you must consult with a licensed Croatian tax advisor or accountant. We can recommend one if you contact us.