Croatia's Road to E-Invoicing and E-Reporting: A Comprehensive Overview of the 5-Corner Peppol Model
Croatia is set to implement a robust framework in January 2026, transitioning to a mandatory e-invoicing and real-time e-reporting model for domestic transactions under a Peppol-based 5-corner system.
With the European Union encouraging standardization and efficiency in invoicing practices, this article delves into the intricacies of the Croatian e-invoicing landscape, effective compliance strategies, and the broader implications for businesses.
The Framework: A Phased Implementation
The foundation for Croatia’s e-invoicing initiative is the **Fiscalization Act (Official Gazette 89/2025)**, adopted in June 2025 and enacted on September 1, 2025. This reform is progressive, with a phased rollout based on taxpayer categories:
- Mandatory e-Invoicing—January 1, 2026: All VAT-registered businesses, as well as non-VAT-registered businesses and public entities, must transition to issuing structured e-invoices and simultaneously report to the Tax Administration.
- Full Scope Implementation—January 1, 2027: Small taxpayers and entities outside the VAT system must issue e-invoices.
- Intra-Community E-Invoicing—July 1, 2030: Business-to-business transactions with other EU member states will also fall under e-invoicing and e-reporting obligations.
Compliance Requirements
Starting January 1, 2026, VAT-registered Croatian entities must issue invoices in a structured electronic format, primarily through the Peppol network. The new framework mandates simultaneous reporting of invoice data to the Tax Administration, enhancing transparency and predictability in tax collection.
Key Elements of Compliance:
- Structured E-Invoices: Invoices must conform to the European standard **EN 16931** and be issued in **XML format**. The invoices need to include comprehensive information such as seller and buyer details, invoice identification, transaction descriptions, VAT details, and a qualified electronic signature.
- Decentralized Exchange with Simultaneous Reporting: The 5-corner Peppol model allows for the buyer and supplier to interact while also tracking transaction data in real-time through tax administration channels. The five "corners" involve the buyer, supplier, tax administration, the Peppol network, and possible intermediaries, ensuring transaction integrity and accountability.
- Monthly Reporting: Businesses must submit monthly reports detailing received payments and issued invoices, ensuring consistency and aiding in potential audits.
E-Invoicing in Practice
Domestic Transactions
- B2B Transactions: From January 1, 2026, all domestic B2B invoices must utilize structured e-invoices without the option of paper invoices, barring limited fallback situations. The simultaneous data reporting to the Tax Administration is essential for cross-verification.
- B2G Transactions: Since 2019, B2G e-invoicing has been mandatory under a different legal structure. From the start of 2026, these e-invoices are further subject to real-time reporting under the Fiscalization 2.0 framework.
- B2C Applications: Although issuing e-invoices to consumers remains voluntary, businesses must adhere to real-time fiscal reporting for all transactions, extending beyond cash payments.
Non-Domestic Transactions
Currently, cross-border transactions, including exports and intra-EU supplies, are exempt from the e-invoicing mandates, focusing primarily on domestic operations.
Preparing for Implementation
As businesses gear up for compliance, the Tax Administration has rolled out helpful resources such as the "Mikro e-Račun" application for smaller entities. This application allows for seamless issuance, transmission, and archiving of compliant e-invoices.
Consequences of Non-Compliance
Non-compliance with the new e-invoicing framework can lead to significant penalties. These may include fines for failing to issue mandatory e-invoices, incorrect data transmission, and not adhering to reporting deadlines. Given the zero tolerance for violations, businesses must prepare thoroughly to avoid unnecessary fines.
Conclusion
Croatia's forthcoming e-invoicing and e-reporting regime presents both challenges and opportunities for businesses. The transition to a PEPPOL-based framework promises increased efficiency and transparency in business transactions while also aligning with EU-wide regulatory objectives.
As January 2026 approaches, firms must invest in technology and processes to ensure compliance, while also educating their teams on the new frameworks. This preparation will be crucial not only for meeting regulatory requirements but also for leveraging the benefits of a digital-first invoicing landscape.
Stay vigilant and proactive as more developments unfold, including the upcoming inclusion of small taxpayers in 2027 and the future integration of intra-community e-invoicing. The future is digital, and Croatia is poised to lead the charge.
How Can KGT Support You?
KGT has created an SAP-integrated SAF-T add-on solution for Croatia, featuring outbound and inbound functionalities to meet tax reporting requirements. This add-on includes a data extractor and a cockpit for generating periodic e-invoicing files in the legal format and controls before submission. When SAP DRC launched the Croatian e-invoicing solution as part of its e-document offerings, KGT emerged as a leading consultancy firm for SAP DRC and tax services. Recognized as an SAP DRC partner for Croatian services, KGT is one of SAP's recommended implementation partners for this solution. We provide comprehensive support, including installation, configuration, customization, and training, to help you maximize the long-term value of your SAP DRC investment.
KGT is an SAP partner for PE services and an SAP Build partner, and to become an SAP partner, strict due diligence requirements must be met, including having certified SAP consultants. You can find us at: https://partnerfinder.sap.com/profile/0001925409
