Physical Planning, Construction and State Assets Branko Bacic said on Tuesday that property tax was being introduced primarily to make housing affordable and to stop the growth of house and rental prices, pointing out that all short-term rental apartments and housing units would be subject to this tax.

Our goal is to reduce the need for short-term rentals and to gradually encourage the use of apartments for long-term rent, he told the press after a meeting of the parliamentary majority.

He added that they received full support from the coalition partners for a new tax reform, which also includes the property tax.

He announced that this week, and by next Wednesday at the latest, that is, before the start of the session of the Croatian parliament, the entire tax reform would be presented, including the property tax.

“Our goal is to reduce the growth of real estate prices in Croatia,” said Bacic.

In response to a question by the press, he said that the tax would also apply to properties used for short-term rental in tourism.

He pointed out that with this tax, the government wants to stop the growth of short-term rental, because in Croatia 231,000 housing units are used for this type of rental.

This year, according to data from the Ministry of Tourism, 50,000 new housing units were recategorised for short-term rent. Our goal is to stop that trend, he said.

Making housing affordable

He pointed out that property tax was primarily being introduced in order to provide affordable housing in the country, stop the growth of construction prices, and the growth of real estate and rental prices.

He said that the property tax was not a new tax, but rather a redefined existing local tax on vacation homes. In addition, 94 local government units have not introduced this tax so far because it was not mandatory.

In response to a journalist’s question, Bacic said that the base for property tax calculation would be a square meter regardless of the value. The local government unit will be able to determine the amount of tax from one to 10 euros and it is up to its representative body to determine the tax amount.

He said that currently in Croatia, the local government units that have introduced a tax on vacation homes cover around 60,000 housing units.

Property tax will not apply to all real estate

Bacic also said that the tax would not apply to all property.

The property tax will not apply to real estate used as a place of residence, real estate used for long-term rental, damaged houses and those that are not habitable.

He pointed out that with the property tax the government wanted to change the paradigm of the tax burden. “We think that today Croatian society has matured to slowly shift the tax burden based on labour taxation to the tax burden on property,” he said.