Tax Changes Have Not Halted the Growth of Private Accommodation

Although some landlord associations announced that changes in the law and an increase in the tax on tourist rentals would lead to a reduction in the number of legal landlords and encourage unregistered work, the latest data on the number of beds in family accommodation do not confirm such forecasts.

According to data from the Croatian Tourist Board (HTZ), in April of this year, there were 112 thousand registered landlords, while in the same month last year there were about 108 thousand. Accordingly, the number of beds in private accommodation also increased – in April there were about 656.6 thousand, which is 15 thousand more than a year earlier.

However, an interesting trend is observed when analyzing monthly data: the number of beds and landlords varies seasonally – after summer, in the winter months, the number of registrations decreases, while the peak is reached in August. This pattern is also confirmed by HTZ.

– Regarding the registrations and deregistrations of properties, every year there is a noticeable identical trend that a certain number of landlords deregister their properties at the end of the summer tourist season and re-register them for the year. In this way, we see that the number of landlords and properties/beds is highest at the peak of summer, that is, in August. Of course, the fact that some remain continuously registered does not mean that they operate throughout the year, and it is important to point out the ongoing trend of a general increase in the supply of family accommodation.

However, when everything is put into a certain context, we can conclude that the share of landlords who register and deregister every year is not very large, so last year at the peak of the season, about eight percent more taxpayers were registered than at the very beginning of the year, while at the peak of the season compared to the very end of the year, there were about three percent more – say the Croatian Tourist Board.

It is Not Possible to Avoid Annual Tax

Given that the flat tax on tourist rentals is paid quarterly, there has been a presumption that landlords deregister their activity in winter and re-register it in spring to avoid part of their tax obligations. However, according to the interpretation of the Tax Administration, such a tactic cannot avoid the payment of the annual tax.

– If a taxpayer permanently deregisters their activity in the fourth quarter based on a decision from the competent office, they will be obliged to pay the tax obligation for the first three quarters of that calendar year. However, if a taxpayer re-registers the same activity for the same property after deregistering the activity, in the same or the next tax period, their tax obligation will be determined for the entire tax period (including the time when the activity was deregistered) since there was no permanent deregistration of the activity, and the determined income tax obligation from the activity of renting and organizing accommodation in tourism is considered annual. Therefore, in such a case, it is not possible to avoid paying the annual tax obligation – explained the Tax Administration.

The explanation of the mystery of winter deregistrations and spring registrations of landlords was provided by Barbara Marković, president of the Croatian Association of Family Accommodation, who explained that some landlords deregister their apartments at the end of the season to pay less for utility bills and other fees because they calculated that it is more profitable to pay the registration than those bills.

They re-register the apartments before the season. According to her estimate, the number of properties in family accommodation will continue to grow, but probably at a somewhat slower pace, primarily due to the new legal provision that prevents the renting of apartments in residential buildings without the consent of neighbors.