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In the middle of last year, one of the more prominent topics among private accommodation providers in Croatia was the introduction of a new tax that was widely covered by the media and discussed at length. All of this took place in the context of speculation about the content of the new Tourism Act, which entered into force on 1 January 2024.
However, when the draft of that Act was published for public consultation, it became clear that it did not, at least for now, introduce any new financial obligations for accommodation providers. Still, it seems that such obligations are coming after all, only through a different route.
Namely, in the last quarter of the year, amendments to the Local Taxes Act entered into force, and one part of those amendments also concerns private accommodation providers.
What has changed?
Article 20 of the Act prescribes that local self-government units, that is, municipalities and cities, may introduce the following taxes: consumption tax, holiday home tax, and public land use tax.
Expansion of the definition of a holiday home
This in itself is not new, since the holiday home tax already existed before. However, the difference lies in the expanded definition of the term holiday home, and therefore in the expansion of the group of taxpayers who will have to pay this tax.
Until now, in the context of this Act, holiday homes were considered to be weekend houses, that is, properties located at an address other than the owner’s place of residence and used for occasional stays.
With the amendments to the Act, a holiday home is now defined as any building, part of a building, or apartment that is used occasionally or seasonally, that is, not used for permanent residence.
What does this mean for accommodation providers?
Although there are different interpretations of what exactly this definition includes, it is clear that the new tax will not bypass accommodation providers, at least not those who have a tourist accommodation unit at an address other than the one where they live.
The Tax Administration interprets that, compared to the previous situation, there are למעשה no changes, meaning that this tax already existed for the same categories of taxpayers and that its introduction is still optional rather than mandatory. However, in practice it can already be seen that many local self-government units have quickly started collecting data on the square footage of holiday homes so that the tax can be charged, and private accommodation providers are also required to submit this data.
How will the new tax be calculated and how much can it amount to?
Who determines the tax amount?
The amount of holiday home tax is determined by decision of the representative body of the local self-government unit, that is, the city or municipal council.
If a city or municipality wishes to charge this tax, the decision on its amount must be adopted no later than 15 December of the current year, and it enters into force on 1 January of the following year.
How much can the tax be?
The minimum tax amount is EUR 0.60 per m² of usable net floor area, while the maximum may amount to EUR 5.00 per m². For comparison, the previous upper limit was EUR 1.99 per m².
Example of calculation
For example, if a city or municipal council adopts a decision that the tax will amount to EUR 4.00 per m², the owner of a holiday home with a net usable area of 150 m² will have to pay EUR 600.00 per year.
This is a significant expense compared to the previous obligations of private accommodation providers. If we assume that the average tourist tax is around EUR 50.00 per bed and the flat-rate income tax on rental activity is EUR 30.00 per bed, then for a holiday home with a capacity of 4 persons, total annual charges until now amounted to around EUR 345, including tourist tax, flat-rate income tax, and tourist board membership fee.
The new tax may therefore represent an amount almost twice as high as the total annual charges paid so far.
What if the accommodation provider does not submit data about the accommodation facilities?
According to Article 49 of the Local Taxes Act, taxpayers are required to submit data on holiday homes by 31 March of the current year, including the location of the properties, their usable floor area, and other necessary data.
Failure to submit the declaration is subject to fines. For legal entities, fines range from EUR 260.00 to EUR 3,310.00, and for natural persons from EUR 10.00 to EUR 660.00.
How are municipalities and cities proceeding?
Collecting data from taxpayers
At the very beginning of the year, most municipalities and cities had already started sending notices to taxpayers about the need to submit data in order to determine the tax amount.
What if the data is not submitted?
If they do not receive the requested data, some municipalities and cities will determine the square footage of accommodation facilities on their own.
In any case, payment of this tax will not be avoidable, so accommodation providers are advised to cooperate with the municipality or city and submit all data requested from them.
What documentation may be requested?
Some local self-government units ask accommodation providers to fill in special forms in which they state the square footage of the property themselves, while most of them also request additional documentation, such as a floor plan of the property, purchase agreement, land registry extract, categorization decision, and similar evidence.
What should you do now?
If you have not yet received a notice by post about data collection from the municipality or city in whose area your accommodation facility is located, we advise you to inform yourself independently.
You can do this by searching the official websites of the municipality or city, since some of them do not send notices to all taxpayers but only publish a public notice on their websites. You can also request information by phone or email.
The deadline for submitting data is approaching, so do not risk possible fines, but check in time what has been decided at the level of the municipality or city where your property is located.
