Tax Reforms for Property Owners in Croatia: What You Need to Know in 2025

Tax Reforms for Property Owners in Croatia: What You Need to Know

The beginning of 2025 brings significant changes to Croatia’s tax system, especially for property owners. Property tax becomes mandatory for all property owners, and the reform introduces certain exemptions and specific conditions you need to be aware of. Here, we will clarify who is required to pay property tax, who is exempt, when the reform comes into effect, and who determines the tax rate.

1. Who is Required to Pay Property Tax? Property tax must be paid by all property owners in Croatia, regardless of the type of property. This includes owners of residential and commercial properties, whether they are rented out or used for personal or business purposes.

The reform imposes an obligation on owners to pay tax based on the size and value of the property, with the tax amount depending on the location and specific characteristics of the property.

One of the key changes is the introduction of property tax, which replaces the previous tax on holiday homes. The tax rate ranges from 0.6 to 8 euros per square meter of usable property area, depending on the decision of the local authority. For an average residential property of 80 square meters, the tax will range between 48 and 640 euros annually.

2. Who is Exempt from Property Tax? According to the current laws of the Republic of Croatia, there are several specific situations in which property owners may be exempt from paying property tax:

• People using the property for service activities within a residential space, such as renting out a part of their house, may be exempt from the tax. This exemption applies when owners rent only one or a few apartments within their house, while using the rest of the property for personal or family needs.

• Agricultural properties – If the property is used exclusively for agricultural production, it may be exempt from tax. This applies to land and buildings used for that purpose and not associated with commercial renting.

• Business properties – People using business premises for non-specific rental purposes (e.g., not for tourism or rental activities) may also be exempt from tax, depending on the specifics of their business.

• Protected tenants who acquire residential properties in which they live under rental agreements may also be exempt from paying property tax.

3. When Does the Reform Come into Effect and Who Determines the Tax Rate? The reform comes into effect on January 1, 2025. From then on, all property owners will be required to submit a property tax return and begin paying tax based on the new rules.

Local authorities play a key role, as they are responsible for determining the property tax rate based on specific local conditions such as local development indices, tourism traffic, and other variables. Local governments must make their decision on the tax rate by February 28, 2025, so it can be applied in 2025. After that, they will be required to inform property owners of the tax amount.

Notifications will be sent either by post or electronically, and all owners will be required to report their properties within the deadlines set by the local authorities.

4. Conclusion

Every reform, especially tax reform, can be challenging at first, but it is important to note that these changes are being made to stabilize and make the real estate market fairer. Croatia is still among the countries with the least rigid tax systems compared to many Western European countries, and these changes align our system with international standards. Although initial changes may seem challenging, over time they will lead to more sustainable growth in the real estate market and positive effects on both rental and property sales markets.