property rental - private v company route

[sueandjimdavies]

Has anyone else been told about a change in the in the interpretation of law [from April 2005], especially in the Dubrovnik region that means that private individuals can no longer obtain a license to let? Even the route suggested by Martin Westby of Croatia Holiday and Home is not an option to us.

We are still waiting for permission from MoFA but that now seems to be a side issue as we are being told that the only way that we can legally let is to set up a Croatian company. We are also being told that that company may need to employ a Croatian national.

[mark2]

Zadar is the same, to obtain a letting licence, you must first start a Croatian domestic company. with all due respect to Mr Westby's book, I feel that the laws and rules are changing so dramatically here that much of the information will need reviewed and updated in a very short while.

[mark2]

Sorry, forgot to mention that you can form a company with zero employees, only husband and wife as directors.

[fonz]

Does this mean that the house has to be resistered under the company on the land registry?

[mark2]

philfenton said:

Does this mean that the house has to be resistered under the company on the land registry?

If you have bought the house as a private Foreign buyer, you just register the house as the registered office. There is no need to try and transfer the property to the company, this will cause no end of headaches.

[mambo]

If only a company can rent the house then the house has to become the property of the company. Just to register your company on that address won't do you any good.
Our company is registered at the address of our landlord, but that does not mean I can start renting out the space.

Perhaps you could get around this by making a contract in which you (the owner) state that you don't object to subleasing, but that is a bit touchy.

One solution (although it needs to be checked by a lawyer) could be to rent the house for a low fee to a company who then rents it out to tourists. Since there is a difference in season (contract is for whole year and renting out is only possible in summer) you could justify the difference in price. After all, there is a risk for the 'rental company'.

But easiest way and safest way is to make the company owner of the house, will take quite a lot of paperwork, but could be worth it.

I do wonder however what European regulations state on foreign ownership and renting out property. One can assume that within the European Union it should not be limited who is the owner and who can rent.

[mark2]

If you own the house as a private individual, you must register a Croatian company to be allowed to rent it, the status of the house remains unchanged.

[mambo]

That is all fine, but if you want to register the company you have to advise them of the activities you want to perform.

Later, when you get into the tax part the owner will have to answer the question to whom he has been renting it. It is not the owner who rents the house, but he does get the money, so where does that money come from ?
If a company starts renting a house they can only do so if they can show a contract of lease of a house or the papers of ownership. If they show a contract of rent the ball is immediately in the court of the owner again, because how can he rent the house if he is not allowed to do so in the first place ?

This may not seem important at this moment, but wait until you get the inspectors on your premises, that is when you have to do some explaining and most of the time inspectors don't have a nice sense of humor.
Everybody can do what they want, hope it goes well, but be extremely careful. This year some friends of mine in Pazin got a fine for not having registered guests. And how did the inspector find out ?
There was a small accident with one of our workers, he had to go to the hospital for two stitches, the hospital warned the police, the police warned the inspector and the inspector wanted to know where they were staying. Next day my friends got a visit from that inspector and all hell broke loose.

Whatever you do, make sure you abide the law with renting your house, because renting houses is in the spot lights at this moment.

[Madgolfer]

You say we so I assume there are two of you.

Just be careful how you register the division of shares if you do form a company. The company can only be issued with ONE business permit and they will not give one to a company with shares split 50-50.

One of you must have more than the other eg 51-49

[Graham - Bosmere]

mambo said:

This may not seem important at this moment, but wait until you get the inspectors on your premises, that is when you have to do some explaining and most of the time inspectors don't have a nice sense of humor.

Whatever you do, make sure you abide the law with renting your house, because renting houses is in the spot lights at this moment.

There is a massive revenue implication for the HR government and they intend to make the most of it given the precarious state of the economy. Tourism will be taxed to the max as it is the only resource that can provide a reasonable return on enforcement. As Mambo says do it by the letter of the law because someone somwhere will 'shop' you to the authorities as soon as you step out of line or try to use some form of avoidance.

[fonz]

Thanks guys,
Mambo - you make a good point about the rental agreement and that private Foreigners cannot obtain a liscence to let to tourists , but can a private Foreign home owner let a premises to a croatian company? i.e the contract of lease would be with the private Foreigner and croatian company

[mambo]

That will be the tricky part and you should check that with a lawyer. Reason is of course that the Croatian company is (in the case example written above) again that same foreigner. So the question becomes 'what jurisprudence is there on something like this ?'

If that company would have no ties to the foreigner I am sure it would be easier, but when you own that company yourself it could be seen as tax avoidance, so better check that and get it in writing, with a signature and a stamp. Don't take someone's word for it, because that will bite you in the ass when you stand in court.