VAT exemptions for companies providing health care – applied from 2020 with no legal basis in the Croatian VAT Act

2.2020.

The Croatian Tax Authorities issued their opinion (Class number: 410-19/19-02/341, Ref. number: 513-07-21-01/19-1, dated 13 Dec 2019) which relates to the changes of Article 39 of the Croatian VAT Act applicable as of 1 January 2020 concerning VAT exemptions. The opinion states that starting with 1 January 2020 companies providing health care services (if provided under conditions comparable with those applicable to bodies governed by public law) are VAT exempt.

However, the conclusion stated in this opinion and such tax practice introduced as of 1 January 2020 is not in line with the Croatian VAT Act. We have analysed and elaborated this issue in more details (more detailed elaboration is available in Croatian language - PDF 0.3MB) and it is obvious that this VAT exemption is not in line with the Croatian VAT Act (Article 39 paragraph 1 item b)). However, on the other hand it is in line with the EU Directive 2006/112 (Article 132 paragraph 1 item b). If different language versions of the relevant provisions of the EU Directive are compared with the relevant provision of the Croatian VAT Act, it can be concluded that the Croatian legislator was lost in translation. The change of the Croatian law is needed.