(Bloomberg) -- Croatia plans to start taxing second homes, such as holiday rentals along the Adriatic, to boost budget revenue.
The move aims to dampen short-term holiday rentals, tackle a housing shortage and revive residential real estate sales in Croatia. Finance Minister Marko Primorac did not provide estimates of possible tax revenues, saying at a press conference in Zagreb on Monday that such sums “remain hard to foresee.”
The proposed tax bill, which needs to be approved by lawmakers and may enter force in 2025, would apply to more than 800,000 second and third homes.
The real estate tax could fall anywhere between 0.6 to 8 euros per square meter, Primorac told reporters. All properties that are empty or are rented out short-term at the cut-off date on March 31 next year will be taxed, he said.
A first property would be exempt from the tax along with properties under long-term rentals for least 10 months a year, as the government also seeks to limit the number of short-term rentals that has ballooned in recent years. So far only a modest tax has been levied at family vacation homes.
Almost every fourth family in Croatia owns a second home and some have a third. A census in 2021 reported 231,000 houses or apartments described as vacation homes and another 600,000 residential properties which were either vacant or short-term rentals.
Croatia has been under pressure from institutions such as the International Monetary Fund to expand its tax base.
Previous governments have tried to impose a property tax — a deeply unpopular move — in recent decades. None have succeeded.
To cushion the blow, the cabinet has also pledged to lower income taxes in the near future.
“The property tax has been known in Croatia as a road to political death, a suicidal move for any political party,” said Vedrana Pribicevic, lecturer at lecturer at the Zagreb School for Economics and Management. “This time too we can expect an extraordinary amount of resistance.”
©2024 Bloomberg L.P.