The Croatian Chamber of Economy (HGK) sees the introduction of a property tax as a positive step, as in its opinion it creates the conditions for a more balanced taxation of all forms of economic activity, said HGK chief economist Goran Saravanja in response to the latest round of tax reforms.

“We believe that this is only the first step towards a tax system in which real estate is taxed based on its value and not its size,” he said, adding that the system requires the consistent development of administrative capacity and procedures to fairly and accurately assess property values and define the tax base.

“It is important to finally start taxing real estate as it is an integral part of all tax systems in developed countries,” Saravanja emphasised.

Impact on the property market

Maja Bogovic, Head of the commercial sector at the HGK, which includes the Association of the Real Estate Business, believes that the introduction of a property tax could increase supply on the market as it puts pressure on owners of vacant flats to make them available for sale or rent.

Bogovic pointed out that the responsibility for introducing property tax lies primarily with the municipalities and cities, which have to take many factors into account in the assessment. Two neighbouring properties do not necessarily have the same value or pay the same tax, she said.

Therefore, there should be room for improvement of the model, she added.

Six laws submitted for public consultation

The proposal for the new round of tax reform, which was presented on Monday, includes higher taxes on property not used for permanent residence or long-term rental, additional tax relief on income and tax incentives for the return of expatriates.

The changes are due to come into force on 1 January next year. The amendments to six laws have been submitted for public consultation: the Municipal Tax Act, the Income Tax Act, the Contributions Act, the General Tax Act, the Tax Administration Act and the VAT Act.