ZAGREB Nov 22 Croatia will introduce a property
tax next year to replace communal taxes, seeking to encourage
investment and reduce scope for tax avoidance, Finance Minister
Slavko Linic said on Thursday.
Croatia, due to join the EU next July, is in a fourth year
of recession and the government has been seeking to tackle
problems that foreign investors cite as deterrents, including
too much bureaucracy and complicated tax rules.
The new tax will provide income for local authorities and
will replace the current fee that citizens and firms have to pay
for maintaining and developing local infrastructure.
"We expect to apply the new taxation law on property from
April 1. The rate will be 1.5 percent on 70 percent of the
estimated value of a real estate asset," Linic told reporters.
He said the new tax should not increase the overall tax
burden, which investors complain is already very high, because
it will be offset by a gradual decline in taxation on salaries.
"This will reduce the tax bite for investors, who saw the
fee for local infrastructure as an additional burden. This
should also motivate people to legalise their property or pay
taxes when they rent it. The fines for trying to avoid rules
will be heavy," Linic said.
People will pay tax on a much lower percentage of the
property's value if they live in it or use as a second home. But
any further properties they own and do not use for business will
be fully taxed.
Similar principles will apply to property owned by
businesses or the state.
"Those objects that are not used for commercial purposes
will be fully taxed. We want to make full use of what citizens,
businesses and the authorities own," Linic said.
The measure is also expected to revive the property market
and to cut property prices and rents by encouraging owners to
use their properties.
(Reporting by Igor Ilic; editing by Zoran Radosavljevic/Ruth