Croatia is set to impose a tax on second homes, including holiday rentals along the Adriatic coast, as part of an effort to increase budget revenues and address the housing shortage. Finance Minister Marko Primorac announced the proposed tax, which aims to curb short-term holiday rentals and stimulate the residential real estate market.
The new tax, which could range from 0.6 to 8 euros per square meter, will apply to more than 800,000 second and third homes. Properties that are unoccupied or rented out for short-term periods as of March 31, 2024, will be subject to the tax. However, first homes and properties leased for long-term rentals, defined as 10 months or more annually, will be exempt.
The legislation still requires approval from lawmakers and could be implemented in 2025. While Primorac declined to provide revenue estimates, he acknowledged the challenge of predicting the financial impact.
The move comes amid growing pressure from institutions like the International Monetary Fund (IMF) for Croatia to broaden its tax base. The country has struggled with attempts to introduce a property tax in the past, as previous efforts have faced strong public opposition. In an effort to offset the impact of the new tax, the government has pledged to lower income taxes in the near future, though significant resistance to the property tax is anticipated.
Short-term rentals are coming under increasing pressure at vacation hubs around Europe as over-tourism leads to growing unrest. Budapest’s VIth district recently banned Airbnbn and other platforms following a referendum on the issue. In August, the Ministry of Regional Development (MMR) introduced a new plan to regulate the conditions for providing short-term rentals. The drive is being chalked up to the millions in lost tax revenues. But a subtext of the move is the impact the platforms have on the local housing market.
