Croatia’s VAT Registration Threshold Increases to €60,000 in 2025

December 23, 2024

The Croatian VAT system will undergo some novelties at the beginning of 2025, as the VAT registration threshold will be increased. The decision to increase the VAT threshold was announced in September when the Croatian government published a Draft Bill for the Value Added Law.

The increase in the VAT registration threshold is part of a broader tax reform that includes changes in other taxes. These include the introduction of a real estate tax per square meter, exemption from taxes according to social criteria, raising the flat rate for beds depending on the tourism development index, reducing the maximum levels of lower and higher income tax rates, and exempting returnees from paying income tax for five years.

Impact on the Croatian VAT Regime

On January 1, 2025, the VAT registration threshold will increase from EUR 40,000 to EUR 60,000. The number of VAT-registered taxable persons is estimated to reduce to approximately 7,500. However, it is essential to note that those who voluntarily register for VAT must remain in the system for at least three years.

Interestingly, the first proposal was to increase the VAT threshold to EUR 50,000. However, in November, the Minister of Finance confirmed that the new threshold will be EUR 60,000.

Those VAT registered because they exceeded the EUR 40,000 threshold but are under the new threshold will not be automatically deregistered from the VAT system. If taxable persons want to deregister, thus reducing their administrative obligations and costs, they must submit a Request for Deregistration to the Tax Authorities by January 15, 2025.

In contrast, those whose annual turnover exceeds this threshold must submit a VAT registration form by the same date.

Conclusion

Taxable persons should examine their annual turnovers to determine if they exceed the threshold. If so, they should prepare for registration or possible deregistration from the VAT system. One key step in that process is to respect the due date, January 15, for submitting registration or deregistration forms.

Source: KPMG, Taxand, Večernji List

What is the new VAT registration threshold in Croatia for 2025?

The VAT registration threshold in Croatia will increase from €40,000 to €60,000 on January 1, 2025.

Who needs to register for VAT under the new threshold?

Businesses with an annual turnover exceeding €60,000 must register for VAT and submit the required form by January 15, 2025.

Can businesses deregister from VAT under the new rules?

Yes, businesses under the new €60,000 threshold can request deregistration from VAT by submitting a form to the Tax Authorities by January 15, 2025.

What happens if I voluntarily register for VAT?

Businesses that voluntarily register for VAT must remain in the VAT system for at least three years, regardless of turnover changes.

Are there other tax reforms included with the VAT threshold change?

Yes, additional reforms include a real estate tax, changes to income tax rates, and exemptions based on social criteria.

How many businesses are expected to benefit from the VAT threshold increase?

The increase is expected to reduce the number of VAT-registered taxable persons to approximately 7,500, easing administrative burdens for smaller businesses.

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