VAT threshold of KN 85,000

[pink]

Hello – I have just started to rent out my property in Croatia and I do not know how much income I will generate.

I believe it is law if income is more than KN 85,000 that I should register into the VAT system. What are the implications/ disadvantages/advantages (if any) of doing this and what will it cost in the long run?

Wondering if it is easier if I don’t go over this threshold and/or not rent out once I hit the KN 85,000 threshold? Any advantages to doing this? Disadvantage would of course be lower income but just wondering if the extra paperwork, VAT etc would eat into any additional income anyway.

Croatia doesn't make it easy so any advice/recommendations would be greatly appreciated.

Thanks in advance.

[Madgolfer]

Obviously you should speak with your accountant.

[pink]

Have done - can't really get a direct answer as it all seems very complicated - they just said it's up to us so was hoping for some straight forward advice from other owners.

[Madgolfer]

I believe it is law if income is more than KN 85,000 that I should register into the VAT system. What are the implications/ disadvantages/advantages (if any) of doing this and what will it cost in the long run?

Assuming that you have your property set up as a company asset then it is probably worth doing.

If you have any work to do on your property, renovation or building work etc, you can claim back the pdv element.

All activities involved in maintaining and running your property, letting charges, maintenance, accountant, marketing etc, can also then be claimed as business expenses and the pdv re claimed.

Others on the forum may be able to give you advice about the likely number of weeks you can achieve each year in rental terms, depending on your properties location, your marketing plan and so on.

[riki]

If you have a company, which I assume you have as you have an accountant, entering into the PDV system means that you must submit reports every 3 months. As MG said, you can submit any business related expense which gives you a credit against PDV. You don't get money back but you can offset what you have paid against what you have to pay. If you don't have many expenses in Croatia then it doesn't make sense to enter the PDV system as you have to pay 23% of your rental income to the government.

I wouldn't have entered the system unless I had to, which is another point. If you ever want to get a business visa through your company, by the second year of operating you must be in the PDV system. No option. If this is not something you need to do, then rather don't enter. It is more paperwork (mostly for your accountant) and you must pay PDV on anything you earn.

[zvekov]

i thought pdv on rental income is 10%

regulations.porezna-uprava.hr/

(2) The value added tax shall be paid at the 10% rate on:

a) Room only, bed and breakfast, half board or full board accommodation services in all types of the listed commercial catering facilities and agency commission services for all the abovementioned services,

b) Daily and periodic newspapers and magazines printed on paper with the exception of those that, in their entirety or mainly, contain advertisements or serve for advertising purposes.

[cropal]

I would go back to your accountant and ask them what they will charge you in additional fees annually if you enter the PDV system. I know a couple of accountants who charge a flat annual fee for non-PDV companies (approx 1500kn) but once the company enters the PDV system the reporting becomes quite onerous for them (therefore you), the fee becomes monthly and it increases to approx 700 kn per month. You might also ask if there are any other related charges, e.g. chamber of commerce, local city corporate tax, etc etc. In Croatia it seems that if you raise your head above the parapet there'll be somebody there waiting to issue you with an invoice !!!

PDV on tourist related rental income is 10%.

Riki says you don't get the PDV back but that's not the case in my experience - perhaps people in other tax offices have different experiences. Nothing would surprise me!!