Rental Licence Issue

[philjames]

I am hoping someone can help with a creative solution. We bought a property a few years ago as a private individual which we wish to rent out during the summer months. After several years of waiting we received our permission from the Ministry and paid the purchase tax. The next stage was to get ourselves set up for the rental licence. However as we are not Croatian we have been advised the only way forward is to set up a Croatian company and sell the property from ourselves as 'individuals' to the Croatian company. We will then be in a position to declare our small amount of income each year and probably prove to the authorities that our amont of earnings is below a level at which we will be liable to tax (apparently!).

The issue is, by selling the property to the new company we will have to pay the purchase tax again as well as accountancy fees on an ongoing basis and other fees to carry out the selling procedure. Apparently once Croatia joins the EU, private ownership and renting will cease to be a problem. The problem seems to be the conflict between private ownership and the rental licence rules. Has anyone found a way round this yet? I have seen lots of advice about buying a property now - via a company if you wish to let it out, but unfortuntaley several years ago when we purchased, this kind of advice was either not available or at least I did not see it! Thanks

[jill]

I think the answer is that you let through a company with a letting licence, there are several people who offer this service, depends where you are who you choose to use.

[rijekafan]

Hi,
The big problem is they tax the bejesus out of you when you declare rental income. It may have been better to keep the house private and get a sobe licence. Croats do everything on the black so taxes are not usually a big issue for them. I am no expert and can only reflect my own experience.
Croatia entering the EU will not lessen the tax burden.

[Carol]

you can use your house as foundation capital for the company, thus overcoming the requirement to pay stamp duty for a second time.
However now that you have reached the point where you actually have permission to own and therefore you are now counting down your 3 years to zero capital gains, it doesn't make any sense to out the property into a company.

[sheldon]

I also own a house as a private individual. Considering the croation mentality, why not 'when in Rome' and not do everything by the book. Would it not work by receiving rental income in this country and paying UK tax. Why tell croatian authorities that you are retning it - you could be letting friends stay there for nothing. How would anyone know? Am I being too naive?

[hansel]

I might be able to help you depending on where your property is. Please feel free to call.

[Carol]

I think you are taking a risk sheldon, not only on your own behalf but also on behalf of the people who are your customers. If someone pays you to stay in your villa, how will they feel if the inspectors evict them half way through the holiday. In those sort of situations, reimbursement of the rent doesn't really cover it.
However its also true that you are just as likely to get away with it as not. One thing i have learned though is when it comes to Croatians it is very much do as i say, not as I do.

[philjames]

Thanks everyone for your efforts. Carol I agree with your sentiment about taking risks and we decided right from the start to declare everything. Its something I do in the UK and it enables me to sleep at night! You are right about the issue of it possibly affecting guests and this is the reason I am so keen to find a solution. Carol - I know what you mean about the CGT situation but if getting the property into our own 'company' is the only way to get the rental license, then the CGT position is something I can live with. I had not heard of the ability to use the house as 'foundation capital' for the company. If there is anything further you can add to this Carol, I would be very grateful.

[Carol]

you can use the house as foundation capital rather than the 20000kn usually required. Its really as simple as that. I don't know if you would plan to have someone setup the company for you or use the hitro service? If you use someone, they will atek care of this for you, but if hitro then I would seek the advice of a notary first before going into the fina office if i were you.

[Cam W]

Can someone answer this for me? If the property is sold from the individual owner to their company, does the company save the VAT? Is this a positive?

[Carol]

canw: I don't really understand your question. Do you think VAT (in croatia PDV) is paid everytime a property is sold? Or are you confusing it with RETT (Croatia's equivalent of Stamp duty)?
There are a couple of differnces: RETT= 5% and is paid by the buyer. PDV= 22% and is paid by the seller..
PDV is paid only the first time a property is sold (unless its been done up by a PDV registered developer). When a property sale attracts PDV, the only RETT applicable is on the sale of the ground plot.

Does that answer your question or did you already know that bit and were asking something else?

[mirabelle]

I am trying to find the thread which would tell me what a person needs to get a rental license.
A list would be helpful?

[darcy]

Have a look at:

visitcroatia.proboards21.com/index.cgi?board=property&action=display&thread=1182418264

for the details what do you need to do regarding property itself. If you intend to go seriously into the business, you should start learning Croatian as well, I think that is the only way to go, or at least have someone you can trust.

Get in touch with somebody to help you with the paperwork. What you are doing is called "kategorizacija", and if approved you will receive a "star rating" for your property. That will determine the price you can change.

If you manage to get your "kategorizacija" application accepted by the tourist board and you receive your start rating, you will find out what to do next. My 2c tip is, it is much easier if you have a Croatian 'friend' with a long term mutual interest.

I suggest you not to transfer your property to a company, as an individual and a foreigner you are much better protected.