ViDA: Croatia consults on legislative amendments to implement ”Single EU VAT Registration”

Croatia has proposed a draft bill to implement the EU’s VAT in the Digital Age (ViDA) rules.
The bill introduces updated OSS, IOSS, and digital VAT frameworks.
It aligns with Croatia’s Fiscalization 2.0 initiative.
VAT-registered businesses would need real-time digital reporting and e-invoicing to improve compliance and reduce the VAT gap.

Source:

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Main changes

Technical Improvements and Expansion of OSS/IOSS Systems:
- The core objective is to improve and expand the existing OSS/IOSS systems.
New Method for Reporting Movement of Own Goods:
- A new method for reporting the movement of own goods to other Member States via an adapted OSS system will be introduced from July 1, 2028.
- This will replace the previous reporting via the Summary Declaration.
- There will be a transitional period: existing arrangements for the transfer of goods made by June 30, 2028, will continue under old rules until June 30, 2029, after which Article 7a of the Act (governing these arrangements) will cease to apply.
Online Platforms as Deemed Suppliers:
- Online platforms (electronic interfaces) will be considered sellers when they facilitate the distance delivery of goods within the European Union by a taxable person from a third country, especially when those goods are sold to non-taxable persons or legal persons whose acquisitions are not subject to VAT.
- This extends the application of the OSS system to supplies of goods within the EU to all persons who do not pay VAT on acquisitions of goods within the EU.
Clarification of the EUR 10,000 Threshold for Distance Sales:
- The threshold of EUR 10,000.00 for distance sales within the European Union will be more precisely defined.
- It will clarify that this threshold specifically covers distance sales of goods within the EU carried out from the Member State of the taxpayer’s seat (e.g., Croatia in this context) and certain services (telecommunications, radio and television broadcasting, and electronically supplied services) to non-taxable persons in other Member States.
- Taxpayers will have the option not to apply this threshold and instead have supplies taxed in the Member State of consumption, which would bind them for two calendar years.
- Taxpayers who apply for the special taxation procedure (OSS) will be deemed to have exercised this option.
Extension of OSS to All B2C Services from Non-EU Providers:
- The OSS system will be extended to cover all Business-to-Consumer (B2C) services provided in the European Union by service providers located outside the European Union.
IOSS Ineligibility for Small Taxpayers:
- Taxpayers who apply the special taxation procedure for small taxpayers (exempted from VAT payment on their supplies) will not be able to use the IOSS system.
Distance Sales Definition for Energy Products (Temporary):
- The supply of electricity, heating, and cooling (through specific networks) to non-taxable persons will be considered a distance sale of goods within the European Union for the purposes of applying the OSS system until June 30, 2028. This applies when the supplier is not established in the Member State where the goods are subject to VAT.
Clarification on VAT Refund Procedures:
- The text clarifies that a taxpayer who has chosen Croatia as their Member State of registration in the OSS system can request a VAT refund in the Member State of consumption through the existing VAT refund procedures for taxpayers established in another Member State or for taxpayers not established in the EU.
Information Requirements for OSS/IOSS Applications:
- Applications for the OSS system (for non-EU established taxpayers) and the IOSS system (for taxpayers or intermediaries) will require information about the taxpayer’s website, “if any.”
Impact on Input Tax Deduction for Non-EU OSS Users:
- It’s clarified that taxpayers applying the special taxation procedure for services who are not established in the EU do not have the right to deduct input tax for services covered by that special procedure, but are entitled to a VAT refund under specific directives.

In essence, Council Directive 2025/516 drives a significant update to how VAT is handled for digital commerce and cross-border supplies, aiming for greater harmonization, simplification, and clarity within the EU.

Changes to VAT liability

Here’s how the VAT liability changes or is clarified for non-resident suppliers:

Online Platforms (Electronic Interfaces) as Deemed Suppliers (Article 7b amendment):
- Scenario: A taxable person from a third country (non-EU) makes distance deliveries of goods within the European Union.
- Change: When an electronic interface (like a trading venue, platform, or portal) facilitates this supply, the electronic interface itself will be deemed to be the supplier.
- Impact on Non-resident Supplier: This means the VAT liability for these supplies effectively shifts from the actual non-resident supplier (from the third country) to the platform facilitating the sale. This simplifies VAT collection for the EU by placing the responsibility on the usually larger, more visible platform.
Extension of OSS to All B2C Services from Non-EU Providers (Article 119a amendment):
- Scenario: A service provider from outside the European Union supplies Business-to-Consumer (B2C) services within the EU.
- Change: The One Stop Shop (OSS) system will be extended to cover all such B2C services.
- Impact on Non-resident Supplier: This facilitates VAT compliance for these non-EU service providers. Instead of having to register for VAT in every Member State where they provide services, they can register in one EU Member State (e.g., Croatia) and declare and pay all their EU VAT through the OSS system. This streamlines their VAT obligations, effectively centralizing their liability to a single Member State of identification.
Clarification on Input Tax Deduction for Non-EU OSS Users (Article 124 amendment):
- Scenario: A non-EU established taxpayer uses a special taxation procedure (OSS) for services within the EU.
- Clarification: Such a taxpayer is not entitled to deduct input tax directly under the normal domestic rules for services covered by that special procedure.
- Alternative: Instead, they are entitled to a VAT refund pursuant to specific EU directives (Article 67 of the Act, or Article 2, paragraph 1 of the Thirteenth Council Directive 86/560/EEC).
- Impact on Non-resident Supplier: This clarifies how non-EU suppliers operating via OSS handle their input VAT – they claim it back through a refund mechanism, rather than deducting it directly from output VAT declared via OSS.

In summary, for non-resident suppliers, the changes aim to:

Shift liability to platforms when they facilitate certain distance sales from third countries.
Simplify compliance through OSS for B2C services provided by non-EU entities.
Clarify input tax recovery for non-EU OSS users via refund mechanisms.