Unbelievably, Croatia’s Tax Administration has indirectly admitted it made a mistake.
Proceedings at the European Court of Justice, initiated by the Belgian company New Valmar and the Italian company Global Pharmacies Partner Health due to the language on the invoices, have finally resolved a dilemma that has long troubled Croatian companies which are doing business with foreign partners. The European Court has in fact ruled that invoices do not have to be issued exclusively in the language of the domicile country and that they can be written in the language of the country of the partner company’s origin. Insisting on the language of the country of domicile would represent a violation of the EU law, reports Večernji List on August 13, 2016.
Although Croatia’s Tax Administration argues that the Croatian tax legislation is in line with the EU regulations, in practice there have been many problems. The auditing company Kopun has recently sent an interpretation of the European Court’s decision to its clients precisely because the Tax Administration had been acting in accordance with the Ministry of Finance’s opinion from October 2013, which is still posted on their official website. The document states that there is an obligation for entrepreneurs to write all their invoices in Croatian.
According to the opinion, admissible bookkeeping documents are only those drafted in Croatian language and Latin alphabet, and invoices should not even be bilingual. It has also been indicated that there is no option to issue transcripts in a foreign language for invoices originally written in Croatian.
“Such provisions are making things difficult for some entrepreneurs who have recently focused on overseas business operations. There was always a question how will the tax audit act in situations when there are inspections being done, but the recently published decision of the European Court of Justice has resolved all our concerns”, said auditor Dubravka Kopun.
It is interesting that the court case was the result of the Italian company wanting to cancel some invoices in order not to make a payment based on them. They used the language as an excuse, although their Belgian partner simply wanted to accommodate them and facilitate their cooperation. However, Croatian companies have been plagued with bureaucratic hurdles related to the language issue, and the Tax Administration has now indirectly admitted that they have so far been wrong.
“It should be noted that tax regulations of the Republic of Croatia do not specifically prohibit the use on the invoices of any foreign language. If there were such cases in the past, this will be corrected”, they said. However, penalties prescribed by law amount to between 10,000 and 100,000 kuna.
