Croatia: Croatian local taxes: what’s new in 2017?

October 26, 2017

The Local Taxes Act (Act), part of the 2017 Croatian tax reform, entered into force on January 1 2017. The main change includes the introduction of the new real estate tax (not to be confused with the real estate transfer tax) and the abolishing of the company name tax. Aside from the real estate tax, no further taxes are introduced. Instead, the taxes regulated by the Law Concerning the Financing of Units of Local Government and Regional Self-Government are being transferred and incorporated into this new Act in order to align them into a more efficient and structural manner within the goals of the Croatian tax system reform.

Provisions related to the real estate tax should enter into force on January 1 2018 with contemporary abolishment of the holiday homes tax, with the purpose of avoiding double taxation of a same property with two types of property taxes. The introduction of a real estate tax also abolishes the public utility charges and the monument annuity in line with the purpose of unifying all charges related to a property (currently being charged through several different administrative procedures). However, the introduction of the real estate tax has provoked severe criticism and negative reactions and numerous controversies in the media. Therefore, the Croatian prime minister announced the postponement in the application of the tax, but without a concrete and official postponement.

Separately, the inheritance and gifts tax rate has been reduced from 5% to 4%. The tax was previously paid based on the application of a taxpayer. In 2017, the obligation of reporting the inheritance and gifts tax by the taxpayer was abolished but only in cases when such a document has been verified by a notary or issued by a competent official body.

As of January 1 2017, the company name tax is no longer due, with the purpose of releasing entrepreneurs from excessive tax burdens. All proceedings in the matter initiated before this date shall be completed according to the provisions of the Law Concerning the Financing of Units of Local Government and Regional Self-Government.