Anton, believe me, we are more than happy to pay tax on rental income.
We've tried our absolute best to get all the paperwork in place and have also put in considerable effort, stress and hassle for 4 years in order to do so. We finally got the usage permit but it's suddenly not recognised and now we're unable to get categorised ...this means we can't pay tax on rental income. Do you think this is fair? We did not anticipate this nor did anyone else. I would also like to inform you that we've paid our property transfer taxes.
Unfortunately, the usage permit came through too late for us, it seems we were unlucky, if it had come through earlier, we'd be categorised and able to pay tax on the rental income. We offered earlier before all this to declare the rental income and pay the tax but without the categorisation, they didn't want to know!
I'm also confident that you have the same usage permit as us but the difference is in your case it came through before they changed the law. Good for you. You're clearly one of the lucky ones; it seems to be about timing or luck in Croatia. Bearing this in mind, you can't compare Croatia to other countries.
I agree with you all countries expect you to pay taxes and there is a penalty if you don't - normally a fine and back payment of taxes. Other countries snap your hand off to pay taxes. Croatia is the only country I know off which makes it impossible to do the right thing. They prefer to forbid us access to our property until we swear in court that we won't rent out our house without categorisation!! I think the penalty outweighs the "crime" in this case.
Just in case you are still unclear the "crime" is the Croatian authorities decided to change the law, not accept the current usage permits which would enable categorisation and this has prohibited us (and many others caught in this loop hole) to rent out their properties legally. No one knew this was coming. If I'd known that the usage permit would suddenly be invalid, I'd never have rented out the property.
I don't think it's right of you to make judgements on us as if we are deliberate tax evaders, quite the opposite in fact. I've openly admitted that our "crime" is we haven't paid tax on the rental income because we weren't allowed to do so - they would NOT accept it without categorisation!
I too wish we could have coughed up our taxes as it would be a very small percentage of what we've just shelled out now! You seem to have missed the point here. This is NOT a classic case of tax evasion and getting caught and making the lucky ones who got their permissions look stupid!
There are many other unfortunate people caught in the same situation through no fault of their own....you honestly have no idea how lucky you are...the point of my post was to warn others of the consequences, we had no idea this could happen... and also to inform those who are thinking of buying buy to let in Croatia as under the current law, it doesn't seem to be possible. I'm trying to do the right thing here. Thank you.
Hey Bron . . .the Croatian government should of thought about all of this before they changed the law. . . as in grandfather clause! I am wondering. . . is there no provision for this?
I know that it would cost you more money. . . and I don't know if it is even possible to sue the Croatian government over this. . . I know you just want to get it taken care of and do the right thing.
My heart goes out to you and all the other folks here in the same position.
Met up with a British friend in Istria this week who has temporary residency in Istria. The tourist police had gone around to their family home and had questioned them about who was in the house etc. They then questioned them about their neighbours and whether their homes were being rented out etc. They were not uniformed and in an unmarked vehicle and had been to the area twice. Bearing in mind that my friend had had all sorts of residency issues, they feel incredibly victimised now by the authorities in Istria as this residence is their only home. But it shows that the authorities are taking enforcement seriously this year.
An official member of the Choink fan club. Rant away my friend, rant away.......
They have been taking enforcement serious for the last few years, but no one would listen. You may have a loophole that can be used to help you. Did you do this on your own or did you have help ? pm me and I will give you the name of a guy who deals with these issues, he has had some very good results, he may be able to help. one more thing I mentioned that the law will change in February giving foreignerrs the same rights as Croatians, but beware this doesnt mean yur problems will be solved as you willhave issues regarding tax payment obert or doo and Croatian companies acting asa representatives etc. It really appears that it will solve the problem that has been around for the last few years and going back to the situation before, allowing foreigners to rent but the question is how does this affect the other Government departments. These regulations are very good in the long term but you need professional help to deal wth the issues that are popping up now .Your lawyer may not be the right person, unless they are speing in this area and considering all parts not just the question asked
Has anyone considered/ tried the following as a solution:-
private foreign owner legally lets his property on a long term contract to a Croat (firm or private person) who then legally sublets it to tourists for one or two weeks at a time. The long term can be anything from six months to one year. The owner receives a long term rent and the middle man receives the tourists' money.
Having just returned from our holiday apartment in PULA and witnessing the police remove a family and board it up .. leaving a notice on the door is not very nice.
It has put a question mark on our ownership and we wonder if we have done the correct thing by buying in this county which appears to be changing the laws daily.
All the owners in our block feel the same and it makes you wonder what is NEXT.. it does not make any sense removing tourists who are spending hard earned money in an area which needs it .
We did hear duirng our visit of more poeple been removed and finding nice property at this time of the years is expensive and time consuming.
The problem is getting categorisation!!! Anyone can rent out as long as one has categorisation. Now under resurrected law the building must have commercial permit and since most houses are residential this is the problem.
Yes i thought of it Carol and i did indeed look into .
Technically it can be done, but there are several problems. Which do not make mathamatical sense for either party.
My accountant explained it all to me once and totally lost me with tax implications etc. The bottom line was that it just is not worth it for either party.
Two weeks ago we were preparing the catergorisation papers for a client and they did indeed have paper work stating that is was in a commercial zone. Hooray at last i thought.
We went to the main office and then they said no . It is now not in a touristical zone. So we rang the relevant department in The village and we asked a very easy question "where is the touristical zone for this village " Answer. " we havent done it yet "
So another catergorisation claim starts the appeal process !!
There might be a point under the bilateral investment agreement for UK nationals, but we need more info about the categorisation process itself:- who needs it (ie foreigners and Croatians or just foreigners), any differences of approach?? define tourist zone/commercial zone/residential zone, Who makes the decision on the zones? Can you appeal the decision that your property is in a residential zone and not a commercial zone?? (your last post seems to answer that question) How long does the appeal process take? How much money does the initial categorisation application or appeal itself cost?
This information would be very helpful for us to try and see what to do next.
I think it might be the case now of all hands on deck.
All properties for short term rents and rentals to tourists have to be catergorised regardless of nationality.
The procedure and approach is fairly easy but time consuming. As with every Croatian institution there is numerous amounts of paper work to be submitted, stamped, submitted and then re stamped etc..
1. Lots of Paper work is checked and submitted for the property 2. A company is called out to provide the property with a safety certificate. They issue fire exstinguishers, fire blankets, first aid kit, stickers and an evacuation plan. 3. Once paid they issue the above and also a stamped piece of paper that is then submitted to the catergorisation people. 4. During this time we check the property and make sure that is has all the required items of furniture for the catergorisation. Depending on what type of property the list of requirements is DIFFERNT. house / villa/ room / apartment / agro tourism / etc 5. After aprox 1 month . An employee of the catergorisation department comes out to inspect the property. 6. After aprox 1 week they make their report and then the certificate is issued providing it reaches all the criteria. 7. With the certificate you then contact the blue plaque company and they make you the plaque. 8. The blue plaque is then place on the property. * something else to note * The blue plaque company told us last week that they are NOT issuing any plaques this year as they havent decided on a design for this year yet. " ring back in a month " !!!
Up until this year most properties were eligable for catergorisation ,providing the paper work was in order. Now the commercial zoning has come into place and after that tourist zoning. It is interesting to note that it is up to the builder now to register the project as commercial and not residential. The tax implication for the builder are huge so they submit as residential and thus save a fortune.
Re tourist zones. Each Opcina decides on the zoning. There are some dediacted touristic zones in place but in many places it has not been decided on yet. So it is not done and the clients are once again left with only Questions and appeals and no answers Yes you can appeal. Time frame can be up to 2 years
" How much money does the initial categorisation application or appeal itself cost? " Varies. The Company for safety test charge per m2 and allocate the safety equipment accordingly. For example a 2 bedroom apartment with a balcony will cost aprox 3,000 - 4,000Kuna. The catergorisation people charge aprox 270 kuna when they visit the property.
O.K if they have not decided the tourist zones, then the whole process becomes a joke as it becomes impossible for anyone to get tourist categorisation. So there might be a point there. But who to complain to is the next question, is it a bilateral property investment agreement point in which case FCO??
Secondly, if it is mandatory for you to have the blue plaque on the door and the company is not issuing the blue plaque, again it makes the whole process a joke as you can not complete stage 8. upthevilla, is the plaque a mandatory step before you can rent out?
Some areas do have tourist zones, its just a bit hit and miss at the moment. but yes it has become a joke.
Who to complain to - Try the wall as nobody seems to know or care, just send an appeal is all we are advised to do.
yes it is mandatory to have the blue plaque on the wall. As for renting without, Although nothing is gurenteed, I would think it highly unlikely to be prosecuted especially when they are not making them. The fact that you have the piece of paper stating it is catergorised should be enough, and I have never known anyone to be prosecuted for not displaying it. Technically once you apply for the blue plaque you are in the system .