On 11th December 2018, the Commission released Council Implementing Decision 2018/1994 authorising Croatia to introduce a special measure as of 1st January 2019, allowing for the right to deduct input tax on the purchase and leasing of passenger cars used partially for business purposes, at a flat 50% rate.
Currently, it isn’t possible for taxable persons in Croatia to deduct VAT on passenger cars used for mixed purposes. However, Croatia intends to change its legislation in this regard and therefore made a request to the Commission for the option to apply an input VAT deduction flat rate of 50%. This is because to show the proportion of car activity devoted to personal use can be both inaccurate and burdensome.
This simplification will apply to the purchase and lease of personal cars including any related supplies if goods and services. It will cover passenger cars considered to be motor vehicles intended for the transport of persons with a maximum of eight seats in addition to the driver’s seat.
The new rule is due to expire on 31st December 2021.