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Guidelines: Timing of Input VAT deduction under cash accounting scheme

Unofficial translation

Value added tax – Deduction of input tax

Class number: 410-19/22-02/87

Order number: 513-07-21-01-22-3

Zagreb, 30.11.2022

The right to deduct input tax

​The Republic of Croatia, as a member state of the European Union, is obliged to apply the jurisprudence of the Court of the European Union (hereinafter: the Court of the EU) competent for the interpretation of the provisions of Council Directive 2006/112/EC (hereinafter: the VAT Directive), which have been implemented in the Law on Value Added Tax (Official Gazette, No. 73/13, 148/13, 143/14, 115/16, 106/18, 121/19, 138/20, 39/22, 113/22, Ruling USRH 99/13, 153/13; hereinafter: Law on VAT). In this regard, we refer to the judgment of the Court of Justice of the EU of February 10, 2022 in case C-9/20 Grundstücksgemeinschaft Kollaustraße 136.

In the aforementioned judgment in case C-9/20, the EU Court interprets the application of Article 167 of the VAT Directive, which was taken over by Article 57, Paragraph 1 of the VAT Act. The decision of the EU Court in that judgment reads: “Article 167 of Council Directive 2006/112/EC of November 28, 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of July 13, 2010, should be interpreted in such a way that it is contradicted by a national regulation which stipulates that the right to deduct input tax arises already at the moment of execution of the transaction in the event that, in accordance with the national derogation based on Article 66, first paragraph, point (b) of Directive 2006/112, as was amended by Directive 2010/45, the obligation to calculate VAT in relation to the supplier arises only at the time of collection of the fee, and the fee has not yet been paid.”

From the aforementioned judgment of the Court of the EU in case C-9/20, it follows that a taxpayer, who applies the regular taxation procedure or the taxation procedure according to the collected fee, when he receives an invoice for a delivery or service performed by a taxpayer who applies the taxation procedure according to the collected fee, can deduct input tax only when he pays the invoice to that supplier, and that the decision of the EU Court is not limited to a specific case.

For the purpose of correct application of the judgment of the Court of the EU in case C-9/20 in the conduct of the Tax Administration in the Republic of Croatia and the interpretation of the existing provisions of the Croatian VAT Law, and considering that this judgment results in a significant change in the procedure related to the determination of the moment of the right to deduct input tax of taxpayers applying the regular taxation procedure, an official interpretation of the said judgment was requested at the level of the European Commission, the General Administration for Taxation and Customs, the VAT Committee.

According to the conclusion from the 121st meeting of the VAT Committee, related to the application of the EU Court’s judgment in case C-9/20, the European Commission’s position is that ” Article 167 of the VAT Directive connects the moment of the right to VAT deduction and the moment of obligations to calculate that VAT. It is not possible to deviate from this rule unless the VAT Directive provides for this possibility. Consequently, the VAT charged on the supply of goods and services performed by taxpayers who apply the taxation procedure according to the fees charged from Article 66 point (b) of the VAT Directive can only be deducted by their customers if they receive that VAT from them as part of the payment for completed deliveries. In this case, member states cannot provide a different rule for the deduction of VAT.”

With regard to the previous procedure, according to which the taxpayer who applies the regular taxation procedure could use the input tax deduction based on the invoice received from the taxpayer who applies the taxation procedure according to the fees charged, regardless of whether that invoice was paid, we note that from December 1, 2022. the answers of the Tax Administration, which gave such an interpretation of the provisions of Article 57, paragraph 1 of the VAT Act, do not apply. Acting in such a way that the taxpayer, when he receives an invoice for a delivery or service provided to him by a taxpayer who applies the procedure of taxation according to the fee charged, can deduct input tax only when he pays the invoice to that supplier, has been applied in practice since December 1, 2022.

Source Porezna-uprava

See also ECJ C-9/20 (Grundstücksgemeinschaft Kollaustraße 136) – Decision – No deduction of VAT if chargeable event is later

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