Računovodstvo, revizija i financije 8/2019

The Ministry of Economy, Entrepreneurship and Crafts has posted on its website the questions and information regarding the obligation of issuing an e-invoice upon public procurement. The Ministry of Finance  (State Treasury) has published a notification on the use of an e-invoice upon public procurement by non-profit organisations in the Instructions on preparation and submission of financial statements for non-profit organisations for the period from 1 January to 30 June 2019.

The author of the article analyses the accounting for purchase of real estate held for sale according to the requirements of the accounting standards. The article includes the examples of recording of purchase and sales of the above stated real estate, depending on whether such real estate are to be classified as inventories according to the requirements of the CFRS 10 i.e. IAS 2, as fixed assets held for sale according to the requirements of the CFRS 8 i.e. IFRS 5 or as the investments into real estate according to the requirements of the CFRS 7 i.e. IAS 40.

The companies which possess a land can keep it as long-term tangible assets or as short-term assets to be used for construction of buildings or for further sale, in order to realise certain goals i.e. make a profit. The article presents some of the most frequent business events regarding the land and their recording in financial reports. The business events are explained on the examples in various business situations, including the tax relevant in case of sales of the land.

The expenses for fines and offenses, compensation for damages and contract penalties are not usual expenses and arise rarely in the business practice. However, when they do arise, there are often dilemmas regarding their tax position. The author of the article explains the way of presenting such expenses in business records and their tax position.

A special taxation procedure of investment gold has been introduced in order to equalize the use of gold as a financial instrument with other instruments which are tax free according to the VAT Act. The Vat Act determines the term investment gold, the special procedure of taxation and the possibility of applying the right to the choice of taxation. The investment gold trader should keep the records on purchase and sales of investment gold. On the invoice for the sold investment gold should be stated that it is VAT free.

This part provides the replies to the most common questions arising from the accounting and taxation practice. The questions refer to the balance sheet dilemma as to when to adjust the sued receivables, how and when to cover the loss generated from the writing-off of such receivables, how to record the apartment purchased for the purpose of renting it for living, the tax position of business operations of tourist agencies, how to calculate VAT on purchase of goods in the customs procedure 42, the tax position of the services regarding the creation of the idea for the real estate built outside the Republic of Croatia, how to calculate the salary in the case of unjustified absence from work, how to pay a non-taxable compensation for the use of car to volunteers and the work of pensioners who are in pre-term old-age retirement.

Upon depositing cash a foreign currency clause may be stated. Only the realised difference of the foreign currency clause is recorded as income or expenditure, whereas this is not allowed for the one which is not. Upon transfer of cash, the budget authorised for the regular operations may use the account from the class of accounts which corresponds to the type of expenditure for which the cash is paid or the group account from the sub-group of accounts titled: Transfers to budget users from the authorised budget for financing of regular activities.

Non-profit organisations may receive services from physical persons, as well. If a service is rendered to a non-profit organisation by the member of a certain association, it is regarded the same as if it had been provided by any other physical person. Upon cash transactions, the real business event is to be recorded regardless of the possible time span of circulation of documentations which prove its existence.

Employers may put on disposal to their employees company’s cars for private and business purposes, or may request from their employees (with their consent) a temporary use of their private cars for business purposes. The payment for the use of the employee’s private car for business purposes represents a compensation of the employee’s increased expenses which arise due to the use of his/her private property and comprises the costs of fuel, amortisation, maintenance, etc. According to the corresponding tax regulation, the employer has the right to the non-taxable compensation for the employee’s expenses. Upon use of the private car for business purposes other expenses may arise, too. The article presents the types of expenses and the tax position of the use of a private car for business purposes.

The liability for calculation of contributions from and on salaries, income tax and sur-tax emerges in the moment of salary payment, regardless of whether the salary is paid to the total amount or partially. If the salary is not paid in the current amount for the previous month, the contributions, income tax and sur-tax should be calculated until the last day of the current month at the latest. The net salary may be paid subsequently under the condition that the previously calculated income tax is presented in the JOPPD Form and paid. In the case of  the subsequent payment of the net salary, the JOPPD Form should present the received amount, the income, the paid tax and sur-tax and the net salary. Due to the fact that the contributions, tax and sur-tax are due in the same periods, regardless of whether the net salary was paid or not, it means that after the calculated and paid income tax and sur-tax, several net salaries may be paid in one month without the cumulative calculation of the income tax.

The tax payers who do not have headquarters or a permanent business unit which makes deliveries, neither the place of residence nor the usual place of residence in the EU, have the right to VAT return, which was calculated by the tax payers on the territory of the Republic of Croatia according to the determined conditions. The authors of the paper presents the conditions and the ways of exercising the right to VAT return by the above stated tax payers, which was calculated to them by the tax payers with the headquarters in the Republic of Croatia. The application for VAT return is submitted in the ZP-PDV Form.

Upon the written request of the tax payer the Tax Administration is authorised to issue a binding opinion on the taxation treatment of business events and activities which are specific and on which the official and general explanations of tax regulations cannot be applied. The binding opinion has a binding impact on the Tax Administration and the costs of its issuing are paid by the applicant to the total amount, but according to the special call of the tax body. The binding opinion is to be issued by the counselling body appointed by the head of the Tax Administration, which consists of two authorised employees of the Tax Administration. As of 1 January 2019 binding opinions may be requested for any field of taxation.  

Companies, crafts businesses and other entrepreneurs are obliged to notify the Tax Administration on removal of the plant and permanent business unit, on acquisition of 50% or more stake or minority interests in other companies, on the company they control in a foreign country as well as other facts important for taxation. Such notifications should be submitted in the specific form and within the determined period. Notifying the Tax Administration on the facts important for taxation is determined by the General Taxation Act and has been applied since 2009. In the meantime, in 2016, the new General Taxation Act was passed, followed by a number of amendments, which were the basis for the new Rulebook on Application of the General Taxation Act, which came into force in May this year. The new form titled Notification of the Facts Important for Taxation is a constituent part of this Rulebook. The data should be submitted within 30 days after the fact important for taxation emerged.

The receipts from dividends and share in profit realised on the basis of the stake in capital by physical persons are regarded as income from capital and do not subject to  calculation of contributions. In some cases the payment of profit may be non-taxable. Upon payment of share in profit and dividends to the company members (physical persons) who are non-residents, the provisions of the Contract on Avoidance of Double Taxation should be taken into consideration. The article presents the issues important upon payment of dividends and share in profit to non-residents – physical persons who are members of the Croatian company.

A blue diesel fuel represents a tariff product, the use of which is strictly defined by the tariff regulations. According to the Tariff Act, the energy generating products include, among other things, diesel fuel stated in the Art. 103 of the Tariff Act (blue diesel) marked as KN 2710 19 41 do 2710 19 49. The tariff base is 1,000 litres upon the basic temperature conditions of the energy supply product of +15 degrees Celsius. The Tariff Act determines the system of consumption of the blue diesel for which the tariff amounts to 0.00 HRK and which can be purchased by end-users with possess a fuel card and who will use it exclusively for agricultural activities, fishing or aqua-culture, for which they have received state subsidies i.e. for which they are not obliged to pay tariffs.

The supervision of the use and sales of blue diesel fuel is carried out by the customs office, the ministry authorised for agriculture and fishing and the ministry authorised for maritime activities within the framework of the corresponding regulations as well as other bodies authorised for supervision activities in accordance with the specific regulations.

The delivery is provided with charges only in the case when there is a legal relationship between the provider of the delivery and the user of the delivery, whereby the compensation received by the provider of the delivery corresponds to the real value of the provided delivery to the user. In the case when it has been determined that the same transaction is differently treated in some other EU member state, there is a possibility or obligation to apply for the explanation of the EU Court.

The author of the article presents the viewpoint of the EU Court referring to determination of whether it is the case of a single or one multiple-units delivery in the sense of existence of the previous transaction in the case when on the internet auction is required to buy credits which enable bidding for goods, as well as the case when the parent company puts on disposal to its subsidiaries credit cards to buy fuel.

The new Audit Act, which has been applied since 2018, includes the provisions regarding supervisory activities of audit companies conducted by the Ministry of Finance. The article presents the procedures of supervision and documentation to be prepared and submitted to the Ministry of Finance.

At the beginning of July, a new EU system of resolving tax disputes between member states was implemented. Companies listed on a stock exchange must prepare consolidated financial statements in accordance with IFRSs from the financial year beginning on 1 January 2020.

The Anti-Fraud Directive (2017/1371) entered into force on 6 July this year.

The article presents indicators of liquidity, level of gearing, turnover and days of collection of short-term receivables, including the total income per employed person in 2018 for all the enterprises in Croatia who are profit tax payers according to specific activities, excluding banks, insurance companies and other financial institutions

The comparison of relations between certain data stated in financial reports, business results are measured by the received indicators, whereas the indicator represents a rational relation of one economic measure to the other economic measure. In such a way it is possible to determine the position of the specific enterprise in relation to the average of the group and compare it with other enterprises engaged in the same business activities through various indicators. The analysis is based on the data from the annual financial reports of 131,117 enterprises for the year of 2018.

            In Croatia most companies were established by the founder who is a family member – a physical person. Although the term family company is not officially used, it represents the company in which one or more physical persons have a stake in the share capital.

            The problems with management of such companies usually arise in the case of the generational shift, when new persons enter the company – the persons who have inherited the company and are family members of the founder. In order to arrange the relations among new company members and to avoid disputes and prevent the company’s liquidation eventually, the corresponding Code may be established.

            Such an issue was introduced in the article published in the previous issue (no. 7/19, p.153). This article presents a round-up of this topic presenting the experience from the German business practice with the goal of taking over their solutions which may help the entrepreneurs in Croatia. 

The article provides a short review of default interest rates, highest allowed contract interests, interests between affiliates and interests on loans to physical persons who have not been obliged to pay income tax in the past few years.

The idea of creating a Banking Union emerges as a result of the impact of the recent financial crisis, on the basis of which the European Commission wants to secure the conditions for a stronger banking system within the EU as well as better supervision and control of the banking system. In order to finalize the banking union, the following 3 pillars are a prerequisite for the complete implementation: SSM - Single Supervisory Mechanism, Single Resolution Mechanism and a set of legal measures as a foundation of the bank union (EU Single Rulebook). As the Government of the Republic of Croatia and the CNB have taken a common viewpoint on the introduction of the euro as the official currency in Croatia, it is expected that the entry into the exchange rate mechanism (ERM II) is to be realised as soon as possible, including the entry into the close cooperation with the Eurozone and ultimately into the banking union.

The author of the article analyses the cases considering the current and significant issues regarding tariffs, public procurement, discussions within the administrative procedure, the right to access to the court, termination of the administrative procedure, renewal of the administrative procedure, a discression assessment within the administrative procedure, an appeal in the administrative procedure, all in view of the recent practice of the Supreme Administrative Court of the Republic of Croatia and the Constitutional Court of the Republic of Croatia.

Sole traders and free professions who are profit tax payers are in view of taxation and accounting treated in the same way as companies. Termination of such activities should be recorded taking into consideration the equal tax and accounting regulations as those which refer to companies.  

However, regardless of the fact that sole traders and free professions – profit makers are treated in the same way as companies in view of accounting and taxation regulations, they are still physical persons, which means that the assets which are used in performing their activities are their personal property. Thus, in the case of termination of the business activities, the sales of such assets is to be treated in the same way as with the assets of a company, taking into consideration the VAT payment. Similar to the sales, the long-term assets should be removed from the records on activities and record the receivables per market value, including income.

In such a case the sole trader has a role of a buyer. Receivables may be settled from the retained profit after payment of the income tax from the capital based on the payment of the retained profit, the capital based on the investments of the sole trader – profit maker, recorded in the initial balance sheet upon the changed way of taxation unless it has been spent, as well as payment on the giro account of his/her own assets. In the case of lack of assets for settlement of the receivables, the sole trader is obliged to calculate the income tax from the capital based on deduction of the long-term assets without fee at 36% fee, increased by the sur-tax at the re-calculated rate.   

The vehicles which are used for public road transportation of passengers and cargo and the vehicles which are used for road transportation of passengers and cargo for one’s own needs should, besides the conditions determined by the regulations on traffic safety on roads and the registration (technical control), fulfil certain special conditions which refer to the looks, age, devices and equipment. The author of the article presents such special conditions.

The complete application of the Act on Agriculture and the Act on Family Farms required the new rulebooks. The Rulebook on Registry of Farmers determines the persons to be entered in it, the way of keeping the records on production and sales of one’s own agricultural products and the ways and deadlines the Payment Agency is to be notified. The Registry of Farmers should contain the following; the farmer who applies for the direct subsidies in view of the measures of agricultural policy, the farmer who applies for the market subsidies and the measures of rural development and the farmer – self-sufficient farm – who places on the market his/her own agricultural products produced on the farm. Accordingly, the physical persons who independently perform agricultural activities and are not obliged to be entered in the Registry of Family Farms due to the fact that the value of their farm is less than EUR 3,000.00 and are not income tax payers, should be registered in the Registry of Farmers.  

The family farms, whose economic value is higher than EUR 3,000.00 and/or are income or profit tax payers due to their performance of agricultural activities, are obliged to be registered in the Family Farms Registry.

Termination of the contract on employment during the trial period is regarded as a regular dismissal from work. Due to the frequency of trial periods in practice, the author of the article presents a review of such an institute, emphasizing the recent court practice referring to the dismissal from work due to dissatisfactory work during the trial period.

The employers who are not registered in the Republic of Croatia, but have the headquarters registered in other EU countries, may employ the Croatian citizens, whereas the employers from the Republic of Croatia may employ citizens from other EU member countries. Thus, one of the fundamental rights of the persons employed on the EU territory is exercised – freedom of movement of workers and the right to social security. The article describes the procedure of application into the system of pension insurance upon employment. 

In view of the court practice, the author of the article presents the cases when and under which circumstances the contractor is regarded responsible for the failures in the contracted services. Taking into consideration a wide definition of the temporary service contract, it should be pointed out that some other types of contracts represent a sub-type of a temporary service contract, such as the contract on construction services, according to which a contractor is obliged to construct a certain building on a certain land within the pre-determined period or to provide construction services on the existing building, and the client is obliged to pay the arranged price for such services.

An appeal cannot be made against the decision made by the State Commission for Supervision of Public Procurement Procedures. However, it is possible to start an administrative procedure at the High Administrative Court of the Republic of Croatia. The article presents a review of certain decisions made by the above stated court regarding the timeliness of the appeal, inadmissability of the appeal, cancellation of the administrative dispute due to withdrawal of the appeal and the opinion of the High Administrative Court that the plaintiff has withdrawn the appeal, the effect of the withdrawn appeal, the deadline for making a decision of the High Administrative Court and the legal consequences of termination of the solution made by the State Commission for Supervision of Public Procurement Procedures.  

The Croatian Parliament passed the Act on the Amendments to the Act on Civil Servants on its 12^th session held on 12 June 2019. The article presents the provisions of the above stated Act, including the explanation of certain important issues.

1. Opći pregled
2. Poljoprivredna proizvodnja
3. Industrijska proizvodnja RH i EU-a
4. Potrošačke cijene u RH i EU-u
5. Proizvođačke cijene industrije RH i EU-a
6. Cijene stambenih nekretnina u RH i EU-u
7. Građevinarstvo RH i EU-a
8. Vanjskotrgovinska razmjena
9. Trgovina na malo u RH i EU-u
10. Turizam
11. Plaće
12. Zaposlenost i nezaposlenost RH i EU-a