Taxation: Registry Issues, Administrative Difficulties, Local Elections Delay Property Tax

It appeared that the Government and the Finance Minister Slavko Linic (SDP) were determined to ratify new legislation imposing a new property tax by 1 January 2013. At this week’s Government Cabinet session, it was decided to impose the property tax on 1 April 2013 and the first tax invoices to be issued in Q4 2013. Therefore, the idea is that from April to the end of the year property owners would pay a property tax instead of the present utilities tax. Linic and others within the Government rationalise the delay as a need to widen the public debate on the issue, in order to minimise the public opinion damage caused by opponents of the tax, implying wealthy property owners. Economic experts support the concept of a property tax. However, they also caution that extensive economic and administrative preparations are required to successfully implement such a tax, especially in Croatia where property ownership records are complex and unclear. Therefore, a quick implementation of a property tax could result in a more chaotic situation. It is also speculated that the Government has decided to delay the implementation due to upcoming local elections in May 2013, fearing negative reactions from the electorate.

According to unofficial sources, the Ministry’s initial idea is to implement a yearly tax of 2% of the property value for property that is not in use, 0.2% for where owners are in residence and 0.4% for property that is being leased. This high tax for unused property will surely be a catalyst for owners (e.g. individual owners, investment funds, banks, etc.) to either sell or lease their property, initiating a new stimulus on the real estate market. Again, the fair implementation of a property tax is virtually impossible to implement without the prior reform and coordination of the land and ownership registries.

See more