E-Invoicing in Croatia – A Briefing document

Executive Summary:

The Croatian Ministry of Finance has proposed a new Law on Fiscalization, which was undergoing public consultation, which will significantly expand the scope of fiscalisation beyond cash transactions to include mandatory electronic invoicing (e-invoicing) and electronic reporting (e-reporting) for most business-to-business (B2B) transactions within the VAT system. This initiative, known as “Fiscalization 2.0,” builds upon the existing fiscalisation framework for cash transactions (B2C) and the mandatory e-invoicing already in place for business-to-government (B2G) transactions. The proposed law aims to digitalise the tax system, enhance tax compliance, and provide real-time invoice data to the Tax Administration. The mandate is slated to come into effect in stages, with key obligations commencing on 1 January 2026 for VAT-registered entities and further expansion in 2027. Croatia has requested an EU derogation to implement this country-wide B2B e-invoicing mandate.

Main Themes and Important Ideas/Facts:

1. Expansion of Fiscalisation Scope:

The proposed law significantly broadens the current Act on Fiscalization in Cash Transactions to encompass “fiscalization of invoices in final consumption” (B2C, regardless of payment method) and the “issuance and fiscalization of electronic invoices (eInvoices) in the operations of taxpayers” (B2B and B2G).
This represents a move towards a comprehensive digital reporting system. As stated in the VATupdate source, “the implementation of fiscalization in most of the B2C segment and the already well-known business with eInvoices in the B2G segment provides the prerequisites for a new digital reporting system in Croatia.”
The definition of “turnover in final consumption” is broadened to include “the issuance of invoices by the taxpayer of fiscalization of invoices to citizens… regardless of the method of payment.”

2. Mandatory B2B E-Invoicing and Fiscalisation:

A key aspect of the proposed law is the introduction of mandatory e-invoicing for domestic B2B transactions between entities within the VAT system, planned for 1 January 2026.
Both issuers and recipients of e-invoices will be obligated to “report, in real-time, invoice data… to the tax administration’s system (fiscalization system).” This process is termed “fiscalization of eInvoices.”
The fiscalization system will verify that “all mandatory elements of the reporting have been submitted and whether they have been signed with a valid digital certificate.”

3. Legal and Technical Framework for E-Invoicing:

The proposal leverages existing legal frameworks, including the Act on Electronic Invoicing in Public Procurement, which is harmonised with EU Directive 2014/55/EU.
E-invoices must comply with the EU standard (EN 16931-1:2017). The law defines an “eInvoice” as “an invoice that has been issued, sent and received in a structured electronic form, which enables its automatic and electronic processing.”
The exchange of e-invoices will primarily occur through “access points,” ensuring “standardized formats, protocols and interoperability between different systems.” However, alternative technologies are permitted provided authenticity, integrity, and legibility are maintained.

4. Fiscalisation 2.0 Project and Objectives:

The mandatory e-invoicing is part of the “Fiscalization 2.0 Project,” financed by the National Recovery and Resilience Plan.
Key goals of this project include:
Extending fiscalisation to non-cash B2B and B2G invoices.
Implementing a cashless payment system via e-invoice in the B2B segment.
Establishing a free e-invoicing application (“MIKROeRAČUN”) for small, non-VAT registered taxpayers. This aims to reduce costs “where the costs of introducing a business based on eInvoices would be disproportionate to the benefits they would receive.”

5. Key Dates and Phased Implementation:

1 September 2025: The Act (excluding specific e-invoicing related articles) enters into force. Testing of e-invoice exchange and fiscalisation systems will be available for payers and intermediaries.
1 January 2026: The obligation to issue and receive e-invoices for VAT-registered taxpayers commences. This also includes the obligation for non-VAT registered companies, craftsmen, liberal professions, and public sector entities to receive e-invoices.
1 January 2026: Fiscalisation procedures apply to all taxpayers in final consumption, regardless of payment method.
1 January 2027: The obligation to issue e-invoices extends to non-VAT registered companies, craftsmen, liberal professions, and public sector entities. This signifies the near full transition from paper invoices.

6. Technical Infrastructure and Data Management:

The Tax Administration will manage a “Metadata Services Directory (AMS),” an “address book” containing identifiers and metadata of e-invoice recipients, facilitating the discovery of e-invoicing addresses.
A “List of Taxpayer Identifiers” will be publicly available, containing data on e-invoice recipients to enable exchange. Taxpayers voluntarily decide to have their data published.
The Tax Administration will provide a “FiskApplication,” allowing taxpayers to “view fiscalized data, manage authorizations for the exchange of eInvoices and fiscalization, view the status of invoices…”
The law emphasises data security, with the Tax Administration committing to “continuously improve, standardize and certify systems and system management in accordance with the highest standards in the field of data protection.”

7. Obligations of Taxpayers:

E-invoice Issuers: Obligated to issue e-invoices for domestic B2B transactions (from 1 January 2026/2027), fiscalise issued e-invoices, and ensure compliance with the EU standard.
E-invoice Recipients: Obligated to receive e-invoices (from 1 January 2026), fiscalise received e-invoices, and submit information on their identifier to the AMS. They must also report rejected e-invoices.
All fiscalisation payers (B2C) will be required to fiscalise all invoices regardless of the payment method from 1 January 2026.
Taxpayers using the free “MIKROeRAČUN” application must adhere to its terms and conditions.

8. Enforcement and Penalties:

Supervision of fiscalisation will be carried out by the Ministry of Finance, Tax Administration, and Customs Administration.
The law outlines various misdemeanours and associated fines for non-compliance, ranging from failure to fiscalise invoices to not retaining them. Fines vary depending on the type of entity (legal person, craftsman, etc.) and whether the offence is repeated.
In cases of non-fiscalisation, temporary prohibition of activity by sealing business premises is possible.

9. EU Derogation:

Croatia has “requested the EU derogation to introduce countrywide mandatory B2B e-invoicing from 1 January 2026.” This indicates that the implementation is contingent upon approval from the European Commission, as it deviates from standard VAT Directive articles.

Quotes from Sources:

“Since its inception, the law has been amended several times… Over the years of its application, it has been evident that fiscalization data have become a source of data on macroeconomic developments.”
“The legal and tax system in Croatia already has the basic prerequisites necessary for the transition to a new reporting system in the digital age based on the issuance of eInvoices.”
“According to the draft law, issuers and recipients of e-invoices will be required to report, in real-time, invoice data (Croatia’s fiscalization procedure) to the tax administration’s system (fiscalization system).”
“The Fiscalization 2.0 package aims to digitalize the tax system by, among others, introducing mandatory electronic invoicing and implementing certain financial reporting tools.”

Conclusion:

The proposed Law on Fiscalization represents a significant step towards the digitalisation of Croatia’s tax system. The mandatory B2B e-invoicing and enhanced fiscalisation procedures aim to improve tax compliance, reduce tax evasion, and provide the Tax Administration with more timely and comprehensive data. Businesses operating in Croatia, particularly those within the VAT system, need to prepare for the new requirements, including adopting compliant e-invoicing solutions and understanding the fiscalisation obligations. The successful implementation hinges on the EU granting the requested derogation and the readiness of businesses to adapt to the new digital framework. The provision of a free application for small taxpayers demonstrates an effort to mitigate the burden on smaller entities.

Sources