Mazars Tax Newsletter, May 2021

Tax Authorities’ opinion

Distance learning i.e. electronically performed services

Tax Authority issued an opinion referring to the VAT treatment of the organisation of virtual/online conferences, seminars and various workshops.

Namely, Tax Authority states that online conferences, seminars and various workshops are considered as distance education i.e. services performed electronically within the meaning of Article 26. paragraph 7. Of the Croatian VAT Act.

Moreover, VAT treatment of such services depends on to whom the service is provided, i.e. whether the customer is a taxpayer or not.

Further, in case where the service is performed to individual (non-taxable person) it is generally taxable in the place where that individual has place of residence, domicile etc.

On the other hand, in case where the service is performed to a taxpayer it is taxable in the place where recipient has established his business (e.g. in the case of a foreign taxpayer reverse charge is applied in accordance with Article 17. paragraph 1. Of Croatian VAT Act)

In addition, Tax Authority recently issued addition to the opinion with notice that it is necessary to pay attention whether a particular distance education service constitute an electronically preformed service or not. For instance, when the lecturer delivers the content of a course via the Internet or electronic network, as well as teaching services covering only correspondence courses, such as e-mail courses this is not deemed as electronically supplied service.

In order to determine whether certain services are recognized as electronically performed services the provisions of Article 7 of Council Implementing Regulation (EU) No 282/2011 should be considered.

Special taxation procedure for B2C supply of services and distance sales of goods

Tax Authority opinion - distance sales of goods within the EU

Regarding last year's adoption of amendments to the VAT Act and Rulebook which introduced provisions relating to new rules for the B2C supplies of services and distance sales of goods in other member states (applicable from 1. July 2021), the Tax Authority issued an official opinion in which it briefly explained the new rules.

According to the issued opinion, a taxpayer who has decided to apply a special taxation procedure is not obliged to issue invoices for distance sale of goods within the EU. However, if a taxpayer decides to issue an invoice, invoice should be issued in accordance with the invoicing rules in the Member State where he applied for the special taxation procedure.

Also, supplies performed do not have to be shown in the book of outgoing invoices nor in the VAT return, but the taxpayer is obliged to keep separate records of such supplies which should be available electronically at the request of the Tax Authority and also for the Tax Authority of the Member State of consumption. It is important to emphasize that such records should be prepared in accordance with Article 63c paragraph 1. of Council Implementing Regulation (EU) No 282/2011.

Also, the Tax Authority discussed the date ¸when VAT obligation occurs, i.e.  whether the VAT obligation occurred when the order was paid or when the goods were delivered.

Tax Authority concludes that for distance sale of goods the taxable event and the obligation to calculate VAT arise when goods are delivered. In case where the cost of delivery from a third party is invoiced to the final customer that service would be taxed in the same way as the supply of goods.

Mazars comment

I In this opinion, Tax Authority once again pointed out that as of 1 July 2021, the application of the MOSS scheme will be extended to all B2C services and distance sales of goods, so called OSS (One Stop Shop).

The purpose of this electronic system is to enable taxpayers to fulfil their VAT obligations towards all EU Member States in one Member State by filing a VAT return through this system from which the data will be automatically transferred to those Member States where supplies are taxable.

Additionally, registration into OSS system is already available to the Croatian taxpayers on Tax Authorities’ website.