Vacation homes in Croatia - Do you need to pay Property Tax?

This article outlines the taxation regulations concerning vacation homes as per the Local Taxes Act, where revenue benefits the respective municipality or city. This discretionary tax, ranging from EUR 0.60 to EUR 5 per square meter annually, is separate from income tax on rental earnings. An amendment clarified that income tax payments do not exempt from vacation home tax. The Tax Administration reaffirms this stance, emphasizing the distinct nature of both taxes. Exceptions exist, and verification of residency is based on actual occupancy. Owners must submit property information by March 31, with tax payment due within fifteen days of assessment.

The taxation of vacation homes falls under the purview of property tax regulations as outlined in the Local Taxes Act, with the revenue directed to the respective municipality or city where the property is situated and utilized temporarily by its owner. Notably, this tax is discretionary, with local authorities having the option to implement it rather than it being obligatory. Should a city or municipality decide to tax occasionally used houses and apartments, they must adhere to prescribed minimum and maximum tax limits.

The tax on vacation homes is calculated based on the usable area of the property, ranging from a minimum of EUR 0.60 to a maximum of EUR 5 per square meter, payable annually as a lump sum. The usable area excludes spaces unsuitable for habitation, such as storage units or animal shelters.

A significant amendment to the Law on Local Taxes in 2023 clarified that income tax payments from renting out vacation properties do not affect their classification as vacation homes. This aligns with previous guidance from the Central Office of the Tax Administration, emphasizing that income tax payments do not absolve individuals from their obligation to pay vacation home taxes. These taxes are distinct, and paying one does not exempt from the other.

The Tax Administration has reiterated this stance to taxpayers, emphasizing that income tax on tourist rentals does not negate the obligation to pay vacation home taxes, particularly following the amendments to the Local Taxes Act. This information is publicly available on the Tax Administration's website.

In cases where owners demonstrate that their vacation homes are exclusively used for tourist rentals throughout the year, they may be exempt from the vacation home tax obligation. The Tax Administration can verify this through various means, including the eVisitor system or data obtained from domestic and international intermediaries, electricity and water consumption records, among others.

Merely registering temporary residency at a vacation property does not exempt the owner from vacation home tax unless they genuinely reside there. Residence status is determined by actual occupancy rather than formal registration under the Residence Act, facilitating relatively straightforward verification based on utility consumption and other evidence of permanent residency.

Certain exceptions are also outlined in the law, exempting vacation homes rendered unusable due to war damage, natural disasters, age, or dilapidation. Additionally, no tax is levied on properties housing refugees, children under fifteen in local government-owned resorts, or those rented for permanent residence with income tax paid accordingly.

Owners of temporarily used houses and apartments must furnish information about their vacation homes to the relevant tax authority by March 31 of the applicable tax year. This includes details regarding the property's location, usable area, and taxpayer information. The tax obligation and amount are determined by the authority, with payment due within fifteen days of receiving the tax assessment decision.