Tax Clarifications on Age Coefficient, Calculation of the New Property Tax

The Minister of Construction and Spatial Planning, Lovro Kuščević, stated on Tuesday that the new laws on communal economy and local taxes do not bring an increase in burdens for citizens compared to the current ones.

The Law on Communal Economy does not foresee “any new burdens at all,” Kuščević said at a press conference, adding that a series of incorrect information has been presented in the public space in recent days.

He reminded that based on the Law on Local Taxes, as of January 1, 2018, the communal fee will be abolished, and instead, a property tax will be introduced.

Nothing changes in the amounts; only the communal fee becomes a property tax, which will be much fairer than the communal fee due to the introduction of age and condition criteria for the property, Kuščević said.

Incorrect Petition

He referred to the petition of the Taxpayers Association Lipa, which claims, among other things, that the construction rent is a replacement for the communal fee and a new burden for citizens, asserting that this is not true.

Namely, as he explained, instead of the current communal contribution, a rent and a contribution for the construction of communal infrastructure are being introduced, which are paid when obtaining building permits. The sum of these two fees cannot be greater than the current communal contribution.

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The minister emphasizes that the contribution for the construction of communal infrastructure will not be paid if construction occurs in an infrastructurally organized area.

He claims that the vast majority of investors in property construction will save money, as construction usually occurs where communal infrastructure is established and functional, that is, in organized settlements.

“Therefore, there is no talk of a new burden, and the rent is not a replacement for the communal fee but for the communal contribution and is paid only once, when obtaining the building permit,” Kuščević said.

Age Coefficient

The Deputy Director of the Tax Administration, Marijana Vuraić Kudeljan, explained that the property tax will be calculated by multiplying the current communal fee by the age coefficient and the condition coefficient of the property. This means that the basis for determining the tax will not be the assessed value of the property.

Regarding the age coefficient, five classes are being introduced, whereby properties built from 1971 to 1986, which account for about 60 percent of the total housing stock, will have a coefficient of 1. For younger properties, this coefficient can be up to 1.2, while for older ones, it can drop to 0.8.

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Properties suitable for use will have a condition coefficient of 1, which will increase depending on additional amenities, such as swimming pools or tennis courts. The condition coefficient cannot be increased due to investment expenditures such as roof renovations, facades, and similar, so there is no talk of “punishing” citizens who invest in their properties, emphasizes Marijana Vuraić Kudeljan.

The property tax will be calculated by local self-government units, which will also receive the revenue, and depending on their decision, it will be charged annually, quarterly, or semi-annually.

Kuščević expects that by the end of the year, everything will be ready for the introduction of the property tax, of which the state is also a taxpayer, which, according to the minister, will pay local units a total of about 300 million kuna annually.