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Charter Services – When must VAT be paid in Croatia?

Preparations for the 2014 nautical season have begun. This nautical season is special because for the first time, vessels under the flag of EU member States will be able to perform charter activities in the Republic of Croatia.

The charter business involves renting boats or providing rental services in international waters and the territorial seas of the Republic of Croatia. Until recently, the charter business could only be carried out by vessels registered in Croatia. However, with the country’s accession to the EU, vessels under the flag of a member state as well as vessels under the flag of a non-EU member country for which approval has been obtained for cabotage, can do so too, under the same conditions as the vessels registered to legal entities or physical persons performing charter activities in Croatia.

Foreign vessel owners who plan to carry out charter activities in Croatia, must be aware of the tax regulations governing their obligation to pay VAT on charter services. To be able to perform the charter business in Croatia, in addition to meeting the conditions required by the maritime regulations and the rules guiding the provision of services in nautical tourism, the suppliers of said services are obliged to pay VAT under the conditions defined by the VAT Law. The law states that VAT must be paid on the charter services in the cases outlined below:

  • When the boat is rented for up to 90 days, and is made available to service users in the territory of the Republic of Croatia
  • When the boat is rented for over 90 days, and the customer is a person with domicile or habitual residence in the Republic of Croatia
  • When the boat is rented for a period longer than 90 days, and the vessel is placed at the disposal of a customer within the territory of the Republic of Croatia by a service supplier with a seat or permanent establishment in the Republic of Croatia.

Thus, a foreign vessel owner who performs charter business in the cases outlined above, must register in the Croatian VAT system to settle the tax liabilities that would arise from said activities.

Boat owners with headquarters in one of the EU member states may voluntarily engage a tax agent for assistance and support in carrying out tax formalities in Croatia, while those without a seat in any of the EU member states are obliged to do so.

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Maja Blažević
+385 1 48 82 555

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