recent tax developments 12/2022

Deduction of input VAT based on invoices issued by VAT payers applying the cash-accounting scheme (so called “R-2” invoices) only possible when the invoice is paid

At the beginning of 2022, the European Court of Justice ruled in the judgment in case C‑9/20, Grundstücksgemeinschaft Kollaustraße 136 that the right to deduct input tax on invoices issued by VAT payers applying the cash-accounting scheme arises in the VAT period, in which the supplier is obliged to assess VAT liability, i.e., in the VAT period in which such an invoice is paid.

As EU Member State, the Republic of Croatia is obliged to apply the case law of the European Court of Justice. The Croatian Tax Administration has issued its opinion on the mandatory application of the Court decision. The Opinion confirms that as of 1 December 2022, when a taxpayer receives an invoice for supply of goods or services performed by a taxpayer applying the cash-accounting scheme, the right to deduct input VAT arises in the VAT period, in which such invoice has been paid. The previous interpretations of the Tax Administration, which contradict the judgment of the European Court of Justice, are no longer applicable.