HOK Considers Property Tax an Additional Burden

The Croatian Chamber of Trades and Crafts (HOK) welcomes tax relief and the increase of the VAT threshold, but believes that property taxation is an additional burden on citizens and that young craftsmen have been excluded from the new round of tax reform.

The proposal for a new round of tax reform, presented on Monday, includes, among other things, higher taxation of properties that are not used for permanent residence or long-term rental, the continuation of tax relief on incomes, as well as tax incentives for the return of emigrants.

The changes are expected to come into effect on January 1 of next year, with amendments and supplements to six laws being sent for public consultation – on local taxes, income tax, contributions, the General Tax Law, the Tax Administration Act, and the Value Added Tax Act.

The changes foresee an increase in the threshold for entering the VAT system from €40,000 to €50,000, an increase in personal deductions, an increase in non-taxable allowances, and a reduction in the upper limits of income tax rates, which, according to HOK, represents a certain degree of tax relief, which is always encouraging and welcome.

According to HOK, Croatia has not been able to raise the VAT threshold for the past five years due to a signed agreement at the EU level, which has negatively impacted the increase in prices of goods and services for Croatian citizens. Therefore, HOK’s proposal was to raise the threshold to €60,000 due to inflation, which they will continue to advocate for.

Property Tax an Additional Burden on Citizens

Regarding property tax, HOK states that currently those who rent for so-called short-term rental pay two taxes if it is a holiday home (one is the tax on holiday homes, and the other is on rental income).

– The tax reform does not plan to abolish anything in this area; everything remains as it is, with an increase in both taxes under a different name. Additionally, if a citizen has a property that they have not put into circulation, e.g., for rent, there is very likely a reason for that (e.g., a larger investment is needed that someone cannot afford, etc.), and in such situations, it is an additional tax burden on citizens – believes HOK.

HOK believes that tax should be paid on additional income, and that so-called “rentierism” is not a source of income in Croatia at this moment but rather additional income.

Additional Relief on Labor Costs

HOK is of the opinion that labor costs should be further relieved. The recent increase in salaries in the public sector, as they noted, strongly affects the average salaries in Croatia, which further creates a problem for craftsmen in dealing with the significant challenge of finding and retaining workers.

They note that the number of early retirements is increasing, and currently, 17.3 percent of retirees are in early retirement. On the other hand, craftsmen who have the right do not retire, and HOK continues to seek that craftsmen be allowed to receive a pension alongside their craft, without income restrictions.

HOK also emphasizes that within the framework of the new reform, young craftsmen remain in an unequal position without relief in paying income tax. They believe that this should be the subject of amendments to the Income Tax Act.