Croatia is going to introduce significant changes in real estate taxation from next year 2025. We’ll wait and see how it all plays out but the government has already announced the introduction of a new property tax, which will mainly apply to apartments used for short-term rentals to tourists and empty habitable properties. This move is intended by the government, as elsewhere in the world, not only to raise additional revenue for the state budget but also to curb short-term rentals, which the Ministry of Finance says are undermining the stability of the local housing market. APA reported, citing Finance Minister Mark Primorac, that the measure is intended to improve the use of existing properties.
Who will be affected by the property tax?
The tax will not apply to permanently occupied buildings or long-term rental properties, providing some relief for local residents and long-term investors. On the other hand, residential units used for short-term rentals to tourists will be taxed. The tax burden will range from 60 cents to EUR 8 per square metre, with the specific amount of the tax to be determined by local municipalities. These municipalities will keep 80 % of the tax revenue, while the remaining 20 % will go to the state budget.
According to the Croatian authorities, there are roughly 600 000 properties in the country that are either empty or used only for short-term rentals. The government hopes that the new tax will help to improve the housing market situation, which is particularly difficult for young families, and will also strengthen local budgets.
Increase in flat rate tax for holiday home owners
Another change planned by the Government is an increase in the annual flat rate tax for holiday letters. The flat-rate tax will apply to each bed offered for tourist rental and the amount will depend on the attractiveness of the tourist site where the property is located. Landlords in less attractive locations will pay around €150 per bed, while in more popular destinations it can be up to €300. Currently this tax is considered very low at 199 euros per bed, due to the high profits that owners make from rentals.
Criticisms and concerns of small landlords
The planned reforms have been met with criticism, particularly from small landlords. They fear that the higher tax burden could jeopardise the operation of small family-run guesthouses, which are an important part of Croatia’s tourism sector. According to some media, the current level of taxation has been relatively low, especially compared to the income generated during the tourist season.
Interest in Croatian real estate
Apart from Croatians, Croatian real estate is mainly attractive to foreign investors. According to Eurostat data (07/2024), in 1Q 2024 property prices increased by up to 9% compared to the previous year. A consistent increase in property prices has been recorded regularly over the past years. Croatia is becoming a second home for many of us, thanks to its clean sea, accessibility by car and language that is close to our hearts. You may be surprised to know that the most frequent buyers of real estate in Croatia are Czechs, who, according to the Croatian Central Bank, bought almost 700 properties last year. Only Slovenians, Germans and Austrians are ahead of them in the ranking. The opening of the Schengen area, quality motorways and infrastructure without waiting at border crossings, and the euro currency are attracting many Europeans, who are increasing in Croatia every year. At the same time, more and more tourists are visiting Croatia not only during the peak summer season to take advantage of the healing power of sea inhalation known as Thalassotherapy.
Source: https://www.croatiaweek.com/croatia-introducing-property-tax/#google_vignette
