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Post by Bron on Jul 10, 2008 20:53:49 GMT 1
It took 4 long years to receive a usage permit but finally, we could proceed with categorisation and accepted bookings for 2008. We subsequently find out that the authorities have decided to implement an old law which states that if a property was being rented out it had to have commercial use on the original building permit but yet previous houses remain categorised. To our horror, we find that the inspectors have been to our house last month, interrogated our guests and are closing the house for 30 days or more. No one will be granted access. We will also face heavy fines. In hindsight, yes we know we shouldn't have proceeded with the bookings but thought the categorisation would easily follow. We genuinely have done everything in our power to be legal, we want to pay taxes but yet Croatia seems to make everything difficult and is not making it easy for people to invest there. I want to warn people who are buying their house to let out about this restriction or thosr who are currently doing so without categorisation - it's not worth the risk. Is anyone else aware of this?
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Post by polako on Jul 10, 2008 21:15:36 GMT 1
Bron hate to be the smart **** but yes we did know. You have got to keep in contact with the relevant Istrian mob (e.g upthevilla, felicia) on this forum because they all know what is going on in Istria and have written off to MEPs etc to try and get the rental laws changed. Here is felicia's post on your thread no water usage. Hi Bron. I recently found myself in the same situation yourself in that I have been trying to get categorization for two flats which I have been doing up to rent out and was told last year that this was no longer a problem for private owners as the law had changed in late 2006. I was dealing with a rental agent who had all the relevant documentation in place and told me in Sept. 2007 that I could just as easily arrange inspection etc. early in the new year as the department closes down over Christmas. I went in February to arrange this - he had already taken photos for advertising on his website!! - when he told me that the law had changed again and that I needed the original building permit (my property is some 30 years old) to have commercial use. Setting up a company has nothing to do with it. To get change of use apparently can take up to 2 years and costs who knows. I have written to Minister of Interior, MEPs, European Commission (especially as there is a plenary meeting concerning accession of Croatia to EU on 9 April!!) in connection with this and the residency laws. In the latter we (or someone) appears to have been successful. Am awaiting full translation to see if anything can be deduced from that one as it pertains to non nationals and their activities. We are entitled to the peaceful use and enjoyment of our property and should not be restricted in this way. This seemingly new restriction is apparently a revival of an old byelaw set down in 1991 and mostly ignored by the local authorities. Then last October the people working in the categorization departments were called to an official meeting where they were told to implement this ruling. There is a very helpful agent in Porec who clarified this for me with whom I was in touch last month and who was going to pursue the matter with people in Zagreb. I shall see her again when I go in a couple of weeks. All the agents are up in arms as it is severely restricting their business and this is the second change in as many years. Shall keep you informed of any developments.
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Post by nikh on Jul 11, 2008 15:59:07 GMT 1
you will mostly find this law being implemented in residential areas. Their is a solution however, and you should check with your relebvant property manager or tourist office and they can explin your solution it is not as profitable as summer letting but it can be done and over the year can net as much with a lot less bother and reduced costs. These laws are good in the long term and their are solutions just not what you may initially think of or you agent will have told you when you bought. Watch out for residential zone purchases even if you are buying a block of apts or a villa conversions. Apply the logic of Eu law and you will see how it works.
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Post by polako on Jul 11, 2008 16:12:23 GMT 1
nikh, can you give us an example of what the solution might be?? I am probably being a bit thick..........
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Post by Bron on Jul 21, 2008 19:08:41 GMT 1
Hi Nikh - I would really appreciate knowing what the solution to this might be. We've been informed that we will have to wait until Croatia joins the EU and this law becomes obsolete.
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Post by polako on Jul 21, 2008 19:18:37 GMT 1
Bron- just happened to see your post. I am waiting for an answer from Nikh too. I spotted a potential way around this using the stabilisation and association agreement. But we are checking this out as noone knows about this. It seems under articles 48 and 49 of the Stabilisation and Association agreement that a UK company can own and rent out property. So is it possible for a UK company to rent out your property as the Cro authorities can not discriminate as to how a UK company operates in Cro (which includes that UK company owning and renting out property)? If you are a tax payer in the Uk in any event, it will be no big deal for your UK company to submit accounts to both the Cro authorities and the UK authorities as you would have to do that in any event if you were renting in Cro. And there is the double taxation treaty. So we need to know the answer to this question and fast, as until this law is changed no one can rent out their property without commercial categorisation.
Do not know yet the answer to the UK company question. But I think that may be the only way forward. My friend with the same problems as you is also checking it out.
Good luck.....
last edit. Just to make it clear why this may be a potential way out is that there is no mention in the SAA about the need for commercial categorisation before a UK company can rent out property.
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Post by upthevilla on Jul 22, 2008 9:32:28 GMT 1
You can rent the property without categorisation if you sign a contract with the tennants at the public notary this is only for long term rent and does NOT cover tourism. Both parties can be individulas or companies . But i repeat this does NOT apply to short term tourism rentals.
The 3 page contract is a standard form. ie name ,address, purpose of use, defining who is tennant and who is landord, rights of both parties, who pays services etc The form is *Ugovor o najmu (sa slobodno ugovorenom najamninom ) and is based on the law for renting, article 91/ 96 ( Narodne Novine )
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Post by upthevilla on Jul 22, 2008 14:15:55 GMT 1
Property Rental- without categorisation is proving very costly and discomforting for many . So be very careful and dont do it !!!
In Liznjan over the last week the tourism police have been visiting and checking on apartments daily . They have closed a total of 21 apartments / houses. The property is sealed and is closed for 30 days. The owner is then issued with a 5,000 Kn fine.
This in itself is alarming enough for the owner of the property but spare a thought for the unfortunate guest. The latest one to be caught was Danish family. They had driven down from Denmark and arrived sunday morning . As they were putting the key in the door the tourist police pounced and subsequently closed and sealed the property. The Danish family managed to find another apartment for the night but were so distraught that they cancelled the vacation and drove home devistated.
The apartment in question is owned by a foreign citizen who had gone down the company route for purchasing. He has tried to do everything above board and within the law, But again due to * the new laws * his property is classed as residential and not commercial. When he bought the property 2 years ago this was not an issue.
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Post by upthevilla on Jul 22, 2008 14:53:48 GMT 1
What is the effect that this is having .
Not good. If you image 21 families returning home from hollidays with a horror story of being evicted by the police and having to endure a dawn raid . ( The following numbers are not proven ,they are just my guess , and you are welcome to do your own sums ), but the answer is always the same and that is
A lot of people will not be coming back.
If you average 2 adults per family thats 40 adults and They each tell 10 people thats 400 people. They each tell 5 people thats 2,000 people, Who tell 3 people = 6,000 who tel 2 people 12,000 It wouldnt take long before 20,000 people know of this and would certainly think twice about coming here.
Even by writing on this notice board i have alerted what will be at least a 1,000 people who subsequently will tell somone else
Why are the Croatian goverment doing this ?
Always look for the obvious.
At present the Goverment is making 0.00 from a property that is rented out illegally
Again I am generalising and using my own unique mathematics
20 famiies staying 1 week. average 3 people. Each family spends a maximum of 100 euro per day. 7 x 100 = 700 euro spent in the Croatia Economy 20 x 700 = 14,000 euro per week
Now if there are 20 apartments closed and sealed and the fine is 5,000 euro per apartment thats 20 x 5,000 = 100,000 euro direct to the goverment
And there are plenty more apartments to choose from in the next village , next county next week.
In general most of the buyers who look to rent the property as an income are prepared to do the required paper work, companies, accountants etc and get the catergorisation and do things correctly. But at the moment they cannot do this and are being punished for it as is the tourist who came here for a nice relaxing holliday and yet return with a very sour taste of croatia.
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Post by nikh on Jul 22, 2008 20:36:04 GMT 1
sorry i ve been travelling. You can organise long term rentals , The way we have been doing this is we have alot of workers from Bosnia and needed acomodation we needed to put them up for the winter months only during the building period dand cleaners in teh summer. so to solve the problem for owners in deep doo doo re residential and building permit issue, sowe rent on long term residential. Then we discovered it was also possible to take a management company and sublease after hat they put in the workers for us , collect payments etc. All too complex to explain here.Average rentals on the islands were coming out at between 2 and 3 percent returns and sometimes more as their were little or no expenses and maintenance was taken care of by the workers . If you think about rental return at the moment this is pretty good , especially if you are not getting any money and paying out all the time.In some cases we were supplying apt buildings that needed renovation with ready made renovators for almost no rent a and the workers fixed up the building as part of their rent. meaning costs were very low. It leaves the property free then for the list to be implemented if your inspector will allow it and therefore you can have your summer holiday friends and family can stay legally and everyone is feeling better about themselves. From February of course Eu citizens will have same rental rights as Croatian citizens, but beware this will take about 18months to settle down so dont expect mirracles as their are still other obstacels. Also Polacko I made a submission to the Eu on a number of issues and have meeting regarding the work permit issue next week but in relation to the company in Uk purchasing i tried this myself as I have a company in Poland and Uk it ws so complex it wasnt worth the income truthfully.
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Post by Bron on Jul 24, 2008 17:16:31 GMT 1
I have to agree with upthevilla - please DON"T rent out your property without categorisation. Our major stress during the closure of our property was finding our guests alternative accomodation and we were very, very lucky at this late stage to find a similar property available. We would hate to ruin somone's holiday that they've looked forward to all year. All of this creates such a negative impression of Croatia. We've had non stop trouble and hassle with the house from start to finish and the inspectors closing our house is just the last straw for us. They even turned up with police officers to interrogate the guests!!! We want out now...we can't take any more of this. We've hung on and hung on thinking we would get there in the end with the paperwork etc and honestly have tried to do things properly but it's useless. I've contacted a Real Estate Agent to sell the house but yes, we all know, it's a bad time, properties are not moving at the moment. We can't even sell the house now! To make a bad situation worse, they won't allow the house to be reopened until we go in person to sign a sworn statement in court that we won't rent out the house again without categorisation. We live in Asia; it's just not that simple to get there to do this. Can you believe that we, the owners, are not even allowed to stay in the house until we sign in court! Okay - we are guilty of not paying taxes..it's not for the want of trying to do things legally. With the fine, the financial loss to us of having to rent out alternative accomodation for guests (which we are more than happy to do so to protect our own repuation) combined with the permanent restriction on ever renting again without categorisation, I think the penality (emotionally & financially) is more than sufficient and would certainly suffice in other countries! Oh no...not in Croatia..we must go in person and swear in court as if we are some sort of big time criminals! We are totally disillusioned with Croatia. I just hope that when/if Croatia gets into the EU, we are not caught in some sort of legal loophole (yet again) having signed a sworn statement in court that we won't rent the property without categorisation. This purchase all started out as an exciting project in 2004; in 2008, it's left us worn down, disillusioned and paranoid!
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Post by crogirl on Jul 24, 2008 19:40:05 GMT 1
I completely agree with your sentiment Bron - there are many of us trying to pay transfer tax, sign legal documents to rent and, as you say, generally do right by Croatian law. They make it impossible and seem to make up (and change) the rules on a mere whim. It is almost Third World and the extortionate fines being imposed does make you wonder whose pockets are being lined. What amazes me the most is that you can be blocked from entering your own property??? How dare they? Although in a different league, I am encouraged that Bulgaria is being threatened with sanctions due to some of the corrupt practices demonstrated by its bureaucrats - take heed Croatia....
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Post by balkanbabe on Jul 24, 2008 19:44:01 GMT 1
Bron, I totally sympathise with your situation as having to deal with anyone and anything in the Balkans is enough to make a normal person go bonkers.
However, try to be positive and I'm sure the value of your property has risen considerably since you bought it in 2004. Also, don't be put off by thinking the property market has stalled. It may be the case in the UK, US and Spain but you'd be surprised how much cash there is swishing around here.
I would suggest targetting agents that don't just sell to foreigners. There are a lot of Croatians who buy holiday homes so you might try listing with agents in Zagreb.
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Post by anton on Jul 25, 2008 23:49:21 GMT 1
Sorry but do people really expect not to be hauled over the coals if they don't pay their taxes. Can't think of many countries where they'd just say that's O.K. and let you get on with it. If they did it would make us people who have put in the (considerable) effort to get the right permissions and cough up the taxes look pretty stupid.
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Post by crogirl on Jul 26, 2008 9:46:42 GMT 1
You obviously haven't read the the thread closely Anton. None of us wants to deliberately avoid tax payment. We have waited 4 years to pay transfer tax to the Cro office (still no permission through - despite 'considerable effort') and have signed docs with rental agents which have been torn up twice due to the ever changing rules. Plse don't infer we are trying to avoid payment - our hands are held out to pay but restricted due to the ridiculous bureaucracy. Lucky for you that your case was resolved...
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