New Bylaw on Binding Tax Authority Opinions and Tax Settlement

Bylaw on binding opinions, the correction of the tax return, statistical reports and tax settlement (in force from 28 July 2015) was introduced based on the amendments of the General Tax Law from March 2015. The Bylaw regulates the procedure of issuing binding opinions of the Tax Authorities relating to the tax treatment of the future transactions: VAT taxable supplies for the purposes of input VAT deduction, the application of the tax laws regarding investment projects, the tax base in status changes and implementation of the agreements on avoidance of double taxation.

Based on the taxpayers’ written request (with prescribed mandatory content), the Tax Authorities’ Advisory body will issue binding opinion within 60 days. The deadline may be extended to 90 days or exceptionally more with appropriate explanation. The costs of issuing binding opinions range from HRK 5,000 to HRK 30,000, depending on the revenue of the taxpayer.

The Bylaw stipulates that, within the statute of the limitation period, the Tax Authority may invite the taxpayer to make corrections of the tax return within 30 days from receiving the request. If the taxpayer does not respond to the request, the Tax Administration will initiate a procedure of tax audit.

Furthermore, Bylaw prescribes that persons obliged to file statistical reports on due but unsettled receivables are VAT payers with due and unsettled claims recorded in their business books as at the reporting date.

Bylaw regulates in details the procedure for concluding a tax settlement related to the decrease of the newly established tax liabilities (based on an assessment), decrease of the default interest and not initiating the offence proceedings. The proposal for concluding the tax settlement must be submitted by the taxpayer in writing at the final interview, or at the latest within 8 days from the date of concluding the final interview in the tax audit procedure. Exceptionally, the proposal may be filed after receipt of the tax minutes (if the liability established by the tax resolution was not executed), but within 6 months from the day the Law on Amendments to the General Tax Act was introduced (i.e. until 17 September 2015 at latest). The tax settlement has the power of the enforceable tax resolution issued in the tax inspection.