From 2015 VAT payments after collecting receivables

Croatian Government at its session held on October 30th 2014, adopted the amendments to the VAT Act. According to those, as of January 1st 2015, all small businesses with annual turnover of up to three million HRK in previous fiscal year will have the opportunity to pay their VAT obligations after collecting their receivables. Until now they were obliged to pay VAT based on issued invoices, regardless the fact have they collected receivables or not.

This measure will affect about 120.000 craftsmen and small entrepreneurs, VAT payers. That will facilitate their operations by enabling better liquidity and thus the regular payment of workers, settlement of accounts payable and payment of VAT from their own funds, rather than loans.

“Changing this law will certainly help tens of thousands of companies to avoid problems with the liquidity, alleviate their business operations and help them run business instead of closing it. Since this practice is present in other EU countries, it will certainly positively impact the competitiveness of our businesses,” commented these changes Minister of Entrepreneurship and Crafts Mr Gordan Maras, who is the initiator of these changes.

Although deferred fiscal revenue from VAT collection could be expected, Maras said that this should not create major problems for the State budget. According to the simulations “deferred income” from VAT for a period of three years would run from 529 million to 1.1 billion, and the amount of deferred revenue will depend on the value of the average period of collection of receivables and payment of payables, seeking tax refunds and assessing the viability of entering the system.

Source: Banka.hr, 30.10.2014.