Toursim License Or Not

[zvekov]

We have a property designated for living owned via a company;
but have been informed that a change of use (to business) to get a tourist license will have some adverse consequences in the event we decide just to sell the property. Can anyone tell me the negative implications of having a property legally designated for tourism, to the foreign market looking to buy a second holiday home. And also the legal implications when it comes to acquiring a mortgage fpr purchase of tourist as opposed to residential properties.

[gramand]

You pose the start of a very interesting series of questions.

1) If you bought a property "designated for living, owned via a company"

How was it intended that the company would make profit?

By definition in Croatia dormant companies have never been "allowed" per se and it is now the government's intention to crack down on "dormant companies owned by foreigners as a means of holding property."

I keep hearing on these boards talk of a tax on dormant comanies some say equivalent to 5% of the value of the property they own. Although the IRS denied this to my accountant and I 3 weeks ago.

This would be in other words RETT not just on property transfer but annually??

Has anyone else heard this myth ?

2) Next Question

"but have been informed that a change of use (to business) to get a tourist license will have some adverse consequences in the event we decide just to sell the property."

Very true, you must get a business permit in order to trade your company, but also in order to get a Categorisation you must produce a "building permit" and a "usage permit". Unless your property was both built and gained its building permit before 1990 (start of the War) In my case for example the property was built before 1990 but the previous owner did not bother to apply for a permit until 2001 after the War was safely over. This apparentlly was a very common occurence.

3) Then we come to the 3rd question

When selling the property the company must pay PDV at 23% on the whole sale price?

Of course you could buy the property out of the company personally, that will only cost you another 5% RETT.

But beware in order to then liquidate the company it must be debt free and if like most people who bought as a company you were sensible enough to register the debt with the National bank in the amount your property cost you (it was a legal requirment so you did do it). (Interest free with notional repayment date, probably long past)

You must now give the company the money again to satisy the loans before you can liquidate it!!!!!!!!!

4), 5) And finally

"Can anyone tell me the negative implications of having a property legally designated for tourism, to the foreign market looking to buy a second holiday home. And also the legal implications when it comes to acquiring a mortgage fpr purchase of tourist as opposed to residential properties."

does not even bear thinking about

MY ADVICE SIT TIGHT AND DO NOTHING

Hope the EU membership will sort it all out.

I think that is what real Croatians are doing, unfortunately that includes the Government.

[crojoe]

With all the EU bosses visiting Croatia of late, have any of the you property owners, company owners ever written any of them about the problems you face? Is it worth the time and effort, or is it pretty certain that Croatia will start to join no matter what in June this year or by October the latest? That MP that did a piece on Croatia seemed to understand the situation on Croatia, but then again he is only fed info, but does not actually live here. Do we think the EU office in Croatia understand the problems on the ground? I talked to some of these guys once and they seemed to understand, but then kind of said that there's more to the picture then just their findings, in other words other international agenda's, politics and so forth. It's not just a "pass these grades" and you enter. One point that was interesting is even if they "fulfil" requirements by June; we're still looking at another 2 to 3 years while all current EU countries vote on the issue. So, it's not like they will join the EU this year. It's then a few more years before they can take on the Euro (if there is such a currency by then). I'm not sure if Croatians are told this info. Most think it all happens in June. A bit of a misconception, a slight of hand or what is termed as “double speak”.

[zvekov]

hi gramand,

My understanding of the issues of gov't taxation of dormant companies. Is not a 5% levy on the value of the properties. It is an assumption of a revenue of 5% of the property value, 7% in the case of boats. Therefore there may be a case of an income tax (20%) on this assumption. That may be around 1%. I think your acountant was given the right info, (highly unlikely) but will be interesting to see.

2) The building designated for business issue, is something i don't understand as there is currently a building and usage permit for the building for living. stambene. I hear one needs to change its purpose from for living to for business; then one can obtain ctegorisation. This process is a black box for me - no idea.

3) is more subtle. it may be the case you elected to be/or not be in the pdv system, so pdv may or may not have been paid on the wholesale price. My point here was, can a foreigner as a natural person, buy a business object and use as a second holiday home. Or do they have to follow its designated use(business)? which will be an issue for a foreigner.

4,5 i think you struck a cruel, but effective blow....cheers

[upthevilla]

( one needs to change its purpose from for living to for business; then one can obtain ctegorisation. )

Technically yes. BUT dont waste your time , effort and money it is virtually impossible to do and takes years. I have a few clients who has waited over 2 years,spent a fortune and is NO closer.