VAT on cash receipts: when it protects liquidity and when it does not

The rule in one sentence

Under the Croatian cash-accounting scheme, output VAT becomes due when consideration is collected, while input VAT is generally deductible only when the supplier invoice has been paid. Partial collection creates a proportional VAT amount. This is a timing regime, not a lower VAT rate.

Who may use it

A Croatian VAT taxpayer may opt for the scheme if the value of supplies in the preceding calendar year did not exceed 2,000,000 EUR, excluding VAT, and the other statutory conditions are met. The choice is declared by the end of the year for application from the following 1 January. Once selected, the method applies for three calendar years and cannot be changed during a calendar year.

Transactions the scheme does not cover

• intra-EU supplies and acquisitions;
• services to a foreign taxable person where the recipient accounts for VAT;
• domestic reverse-charge supplies, including qualifying construction transactions;
• imports, exports and transactions covered by special schemes.

The invoice must contain the statutory wording obračun prema naplaćenim naknadama (“accounting according to collected consideration”). Historic R-1/R-2 labels are not a substitute for that wording.

Three practical tests

Collection, cards and leaving the scheme

Collection is determined by the prescribed payment rules. For card payments, the relevant moment is collection into the account rather than card authorisation. On exit, previously uncollected sales and unpaid purchases must be brought into the following VAT return under the statutory transition rules, together with the required lists. Plan the exit before filing it.