Croatian Tourist Authority

[Ed]

Hi
I bought a house one year ago which I am renting out this summer. The land register authority have not registered it yet.
I am told that I must collect tourist tax and pay it to the Tourist authority. They also say that I must be registered with the Tourist authority. The problem is that the Tourist Authority will not register the house until it is registered in my name on the Land registry. I am told that there are big problems if you rent out property without being registered. Is there any solution to this seemingly "catch 22" problem.
Thanks
Ed

[Peter Ellis]

Not really. The position is that in order to rent out you have to be categorised by the tourist people, who will give you a star rating. You can only apply to them when you have the property in your name. They will also tell you what you can charge. The latter is not as bad as it seems as what they suggest is quite reasonable, considering the length of the season.

Whilst I would not advocate always buying property through the medium of a Croatian company, as distinct from buying in your private names, as it is not otherwise essential, this is one instance where there is a good case for it. Property bought by a Croatian company (which can be 100% foreign owned) can be registered immediately, as it is not subject to Ministry approval, so you don't have to wait a long time before you can rent out.

Any property being rented out should be through a local company, although this matters little whether it is yours or a professional rental company. If you are renting out now, without this, you are almost certainly operating illegally and risk penalties.

Whilst the Croatian authorities may be slow to follow up on some of these matters, the real danger will come from other foreigners who are doing it by the book, paying their taxes and netting less than the illegals. One major investment group, who will have a lot of stone houses with pools for rent next year, have already indicated that they will not allow their considerable investment to be jeopardised by non registered owners letting out at rates which effectively under cut them, and intend identifying unregistered landlords and reporting them.

The only practical solution, although by the time it goes through you will have missed most of this season, is to form a company here. Do a new contract from your vendor selling to the company and scrap the old one, selling it to you, personally. You can then scrap the ministry application, too.
The upside is that if it was a new property sold by a company, who paid the PDV (VAT), you can recover the PDV. The downside is that when you come to sell it, you will have to charge (and effectively absorb) PDV, which on a property that has increased in value, will obviously be greater that the amount that you initially recover. It's a cash flow issue.

Otherwise, with your property now owned by a Croatian company, you can apply for the categorisation, rent it out legally and collect and pay the tourist tax. Your guests will also then be legally registered in Croatia, should they have need to call upon any official resources in case of mishap. Hotels do this automatically, when they borrow your passport on the first night.
It is worth pointing out that all foreigners, including you as the property owner, should also register on arrival and departure, unless you have a residence visa.

Hope this helps.

[Graham Amiss - Bosmere Travel]

Well said Peter. Too many people are buying properties to rent out without checking what their resposibilities are. We frequently get approached by owners asking us to market their properties in the UK only for them to admit that they do not know about registration and tourist taxes etc because they did not ask the questions to the right people.

[Ed]

Thanks Peter that has clarified the position.