VAT was invented in 1954 by Maurice Laure, a French economist, joint director of the French Tax Authority

France originally introduced VAT in 1954 for large businesses, and then extended it to all business sectors

VAT is an indirect tax – it is a tax collected from someone other than the person who bears the cost of the tax

Added value is the value of what the producer has added to the inputs before they are sold as new products and services

The VAT came into effect on 1 January 1998, replacing the retail sales tax

The Croatian Parliament has, on its session held on Friday 17 February 2012, enacted amendments to the tax legislation, amongst which were amendments to the Value Added Tax (VAT) Law.

Old rates: zero rate, 10% and 23% (originally 22%, increased in 2009)

Current rates: 5%, 13% and 25% New standard rate: Amendments to the VAT

Law increase the standard VAT rate from 23% to 25% as of 1 March 2012.

Exemptions at the zero rate used to apply only to medical, cultural and educational goods and services

Daily necessities: Bread and milk, books, scientific journals,

medical supplies

In determining which VAT rate to apply, tax payers should take special care of the following:

when providing services through more than one VAT period the issue arises as to which VAT rate to apply: the rate that applies at the time of issuance of the invoice or the rates during the period the services were provided;

VAT is levied at each stage of the production and distribution process

The input tax on purchases is deductible from the output tax

1. Any person who, independently, carries out any economic activity, whatever the purpose or results of that activity.

2. Any person who, on an occasional basis, supplies a new means of transport.

3. Taxable person which is not established and has no fixed establishment rendering supplies, or permanent address or habitual residence in the Republic of Croatia and who supplies goods and perform services in the Country, for which the place of taxation is in the Republic of Croatia

4. State government bodies, state administrative bodies, bodies and units of local and regional self-government, chambers and other legal persons with public authority if they carry out economic of other activity and non-taxation of that activities would lead to significant distortions of competition.

Translate the above!

1. Svaka osoba koja samostalno obavlja bilo koju gospodarsku djelatnost bez obzira na svrhu i rezultat obavljanja te djelatnosti.

2. Svaka osoba koja povremeno isporučuje nova prijevozna sredstva.

3.  Porezni obveznik koji na području Republike Hrvatske nema sjedište, poslovnu jedinicu, prebivalište ili uobičajeno boravište, a u tuzemstvu obavlja isporuke dobara ili usluga čije je mjesto oporezivanja u Republici Hrvatskoj

4. Tijela državne vlasti, tijela državne uprave, tijela i jedinice lokalne i područne (regionalne) samouprave, komore te druga tijela s javnim ovlastima ako obavljaju gospodarsku ili drugu djelatnost, a neoporezivanje tih djelatnosti bi dovelo do znatnog narušavanja načela tržišnog natjecanja.

1. Supply of goods and services for consideration within Croatia

2. Acquisition of goods within the EU for consideration in the country

3. Supply of new means of transport4. Supply of services for consideration5. Imports of goods

The sales price of goods and services supplied, including the costs of transportation, insurance and packaging

Services of banks, savings and loan institutions, insurance companies, the renting of housing premises and medical care

unions, services, authorities, entities, supplies, goods, activities

Taxable persons are individuals and legal __________ engaged in taxable activities. Any importer or exporter of goods is also a taxable person, as well as an entrepreneur receiving _________ performed by a non-resident. Government bodies, central and local _____________ and self-governing bodies, political parties, trade ___________ and chambers of commerce are considered to be taxable persons if they perform business __________ and if the non-taxation of such activities would lead to unfair competition. Taxpayers whose ___________ did not exceed HRK 85,000 in the preceding calendar year are exempt from VAT.

Taxable persons are individuals and legal entities engaged in taxable activities. Any importer or exporter of goods is also a taxable person, as well as an entrepreneur receiving services performed by a non-resident. Government bodies, central and local authorities and self-governing bodies, political parties, trade unions and chambers of commerce are considered to be taxable persons if they perform business activities and if the non-taxation of such activities would lead to unfair competition. Taxpayers whose supplies did not exceed HRK 85,000 in the preceding calendar year are exempt from VAT.

Read the text Croatian Government Severely Tightens Budget Belt (handout) and answer the following questions:

Which countries have a higher VAT? Which prices have increased? What did the goverment predict with regard

to a GDP growth rate? What did the government announce?

Austerity measures – mjere štednje Discontent - nezadovoljstvo Layoff – otpuštanje radnika Public enterprise – javno poduzeće To halt funding – obustaviti financiranje Freelance workers – radnici u slobodnim

profesijama Surplus - višak