More Changes for Croatian Property Owners to Contend With
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- 01 Nov 2024
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Croatian property owners are facing a wave of new regulations following the recent approval of property tax legislation, particularly affecting those who rent out their properties. The Ministry of Tourism and Sport has proposed amendments to the Act on Hospitality Activities, which are currently open for public consultation. These changes aim to clarify the legal framework surrounding property rentals and introduce new classifications for property owners. Here’s what you need to know about the upcoming changes.
Introduction of the Term “Host”
One of the most significant changes is the introduction of the term “host” into Croatian law. Previously, all property owners renting out their spaces were treated uniformly, regardless of their circumstances. This lack of differentiation applied to both local and foreign renters, leading to calls for reform from associations representing small landlords.
Under the proposed amendments, a “host” will be defined as an individual who rents out accommodation in the same location where they are registered as a resident. This means that even if a person owns rental properties in different areas, they will be classified as a host if their primary residence is registered in the same locality. Hosts will also have the option to provide breakfast along with accommodation, enhancing the appeal of their offerings.
However, there is a notable caveat: individuals renting out apartments in multi-apartment buildings will not qualify as hosts, even if they reside in the same building. This regulation aims to prevent the conversion of residential housing stock into rental units, a concern that has been raised in the context of Croatia’s housing market.
Differentiating Between Landlords and Hosts
The Ministry of Tourism and Sport has indicated that defining the term “host” will create a legal basis for more favorable tax treatment for this group of renters. In essence, hosts may benefit from lower tax rates compared to traditional landlords. This change comes at a time when the government is working on implementing property tax and increasing the flat rate for renters, making it crucial for property owners to understand their new classifications and potential tax implications.
Consent Requirement for Multi-Apartment Buildings
Another significant change involves the requirement for property owners in multi-apartment buildings to obtain consent from 80% of their neighbors before renting out their apartments. This regulation aims to foster community harmony and ensure that rental activities do not disrupt the living environment for other residents.
Moreover, existing property owners who have been renting out their apartments will have a five-year window to secure this consent. If they fail to do so, their ability to continue renting will be revoked. This provision has prompted many property owners to rush to register their apartments for rent before the law takes effect, but it appears that such efforts may be in vain if they do not secure the necessary approvals.
Extended Deadlines for Legalization
The third major update for Croatian property owners is the extension of deadlines for those engaged in catering activities within properties that are currently undergoing legalization. Approximately 15,000 facilities are affected by this change. The deadline for temporary solutions allowing these establishments to operate has been extended from the end of 2024 to the end of 2026. This extension acknowledges the state’s ongoing challenges in completing the legalization process and aims to protect the summer tourist season from disruptions.
The proposed changes to the Act on Hospitality Activities represent a significant shift for Croatian property owners, particularly those involved in renting out their properties. The introduction of the term “host,” the requirement for neighbor consent in multi-apartment buildings, and the extended deadlines for legalization are all critical developments that property owners must navigate. As these changes move through the consultation process, it is essential for property owners to stay informed and prepared to adapt to the evolving regulatory landscape in Croatia’s rental market.
