Mazars Tax Newsletter, February 2021

Tax News From Republic Of Croatia

Multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Organisation for Economic Co-operation and Development (“OECD”) published that Croatia have deposited their instrument of ratification for the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting (“MLI”) on 18^th February 2021.

Croatia’s list of reservations and notifications to the MLI (i.e., its MLI position) upon the deposit of its ratification instrument identifies 65 tax treaties that it wishes to be covered by the convention (from all related double tax treaties only tax treaty with Japan is not on Croatian list of limitations)

MLI will enter into force on 1 June 2021 three months after the deposit of the instrument of ratification.

The multilateral convention is the result of efforts by governments all around the world that have noticed that they are losing significant CIT revenues due to aggressive international tax planning that has the effect of artificially shifting profits to locations where companies are not taxed or subject to reduced taxation. This convention aims to ensure that profits are taxed where economic activity is carried out and where a certain value is created.

Furthermore, it will enable the implementation of certain minimum standards necessary for the effective prevention of abuse of double taxation treaties and more efficient mutual agreement procedures. Specifically, the results of the BEPS Action Plan will be implemented in 65 double tax treaties concluded between the Republic of Croatia and other countries, which are in force and applicable, if the respective countries list Croatia as the country whose agreement will be covered. Namely, this will lead to harmonisation of international tax rules and reduction of opportunities for tax evasion by multinational companies.

More details on Croatian list of reservations and notifications to the MLI can be found on OECD official web site

Tax Authorities’ opinion – fiscalisation of self-service machines

Regarding last year's adoption of amendments to Fiscalisation Act and Rulebook which introduced provision relating to the implementation of fiscalisation procedure for sales via self-service machines (applicable from 1. June 2021), the Tax Authority issued an official opinion in which explained the fiscalisation obligation for a self-service machines.

Self-service machine is an automated machine through which the direct sale of goods or services is made by inserting in the intended opening on the machine a means that represent cash in accordance with the Fiscalisation Act (e.g. banknotes, coins, credit cards, etc.) wherein the charge of goods or services is not mediated by a person.

Also, it is considered that a separate self-service machine is used when goods or services are sold without the participation of a person and when payment is made via SMS message to the particular number.

Exceptionally, a self-service machine will not be subject to the fiscalisation procedure when goods or services are purchased by tokens or with other similar means for which the procedure of fiscalisation has been previously carried out.

In situation where there is a mixed method of payment (banknotes, tokens, etc.) on the same self-service machine and where the fiscal procedure has already been carried out for tokens, then the sales fiscal procedure on the self-service machine will apply only for payments made with banknotes and other means that represent cash in accordance with Fiscalisation Act.

If self-service machines are used in business operations, taxpayers are obliged to report them as business premises to the Tax Authorities’ fiscalisation system. After successfully submitting data on the self-service machine to the fiscalisation system of the Ministry of Finance, the Tax Authorities allocates the self-service machine identifier using the reported data on the self-service machine, Personal identification number of the taxpayer and the business premises code relating to the machine.

Mazars comment:

In this opinion, the Tax Authority pointed out the mandatory application of fiscalisation procedure for sales through self-service machine for all taxpayers which are satisfying the aforementioned requirements. In this respect, it is also important to emphasize that the taxpayers are obliged to apply such a procedure if they use funds that are considered cash for payments on a self-service machine.

Therefore, it is recommended to review whether there are any self-service machines used in own business (which meet the previously mentioned conditions) and to report them in order to avoid receiving fines from Tax Authorities.

Other news

• Forest contribution fee (“OKFŠ”)

The Ministry of Agriculture has issued a notification that the deadline for submission of the OKFŠ form for the period from 1 January to 31 December 2020 is the end of April (i.e. until 30 April 2021). The form can be submitted to the address of P.P. 900, Ministry of Agriculture, FES, 10001 Zagreb or by e-mail to okfs@mps.hr

We would like to remind you that the forest contribution payers are all entities and individuals (self-employed) which are subject to the Corporate Income Tax and individuals which are subject to the Personal Income Tax, and as such engaged in a registered activity in the Republic of Croatia and whose total annual revenue or receipts exceed HRK 3,000,000.00. The fee shall be paid in the amount of 0,0265% of the total revenues or total receipts.

In addition, it is important to note that amendments to the Forest Act, which have entered into force at the end of the last year, stipulate that from 2021 the liability for forest contribution fee will refer to all entities and individuals (self-employed) which are subject to the Corporate Income Tax and individuals which are subject to the Personal Income Tax, and as such engaged in a registered activity in the Republic of Croatia and whose total annual revenues or receipts will exceed HRK 7,500,000.00. The fee will be paid in the amount of 0,024% of the total revenues or total receipts.