Whether you already own a property in Croatia or you are just about to buy one, the idea of leasing your property to tourists may have crossed your mind. Tourism is prevalent and developed in Croatia, so offering real estate lease to guests can be a very payable business. Please keep reading to find out more about the business’s basic rules for foreigners, written by our tax advisor Ivica Baban.
Real estate lease in Croatia
Foreign natural persons who are owners of real estate in the Republic of Croatia may provide tourist accommodation services.
What steps and tax obligations are required to provide a tourist accommodation service depends primarily on whether foreign natural persons who own real estate in the Republic of Croatia come from:
1. Member States of the European Union, the European Economic Area (Norway, Iceland, and Liechtenstein) or the Swiss Confederation
2. Other countries.
In this blog, we will address the situation where tourist accommodation is provided by foreigners coming from Member States of the European Union, the European Economic Area (Norway, Iceland, and Liechtenstein) or the Swiss Confederation.
Leasing properties in Croatia – Step by step guide
They may provide tourist accommodation services in the Republic of Croatia as natural persons without registering a craft or a company. The initial step is to obtain a work permit from the competent rental authority. In this way, foreigners are considered to be renters providing tourist accommodation service and natural persons resident in the Republic of Croatia. It is also necessary to be entered into the register of taxpayers in the Republic of Croatia on the prescribed form.
Tax obligations arising from the provision of tourist accommodation service can be divided into two groups:
a) As natural persons, renters are subject to income tax on the provision of tourist accommodation services, which they can pay:
1. In a lump sum by their own decision, if the receipts from the provision of tourist accommodation services do not exceed the amount of HRK 300,000.00 annually
2. If their receipts from the provision of tourist accommodation services exceed the amount of HRK 300,000.00 annually, they are obliged to keep business books and pay income tax based on the prescribed rates (currently, the income tax rates are 24% and 36%).
b) Renters are subject to VAT if they provide tourist accommodation directly to the guest and as renters are obliged to issue an invoice in which they will calculate VAT of 13%, which they are obliged to report as VAT payers in the Republic of Croatia on the prescribed form (20th day of the current month for the previous month) and pay within the legal deadline (the last day of the current month for the previous month).
If, as renters, they provide tourist accommodation service through a tourist agency, they are not obliged to become VAT payers in the Republic of Croatia, nor do they calculate VAT on the invoices they issue to the tourist agency. It is important to point out that in this case, the tourist agency issues an invoice to the guest on its own behalf, while the foreign owner of the property in which the tourist accommodation service is provided issues an invoice to the tourist agency without VAT.
If the agency would only work as an intermediary and issue an invoice for the intermediary to the foreigner, then the renter would be obliged to register as a VAT payer in the Republic of Croatia and to the invoices, it issues to the guest directly (and for which the tourist agency mediated ) to calculate VAT of 13%.
The registration itself as a VAT payer in the Republic of Croatia is done on the prescribed forms before providing real estate lease services.