In a bid to tackle the country’s escalating housing crisis, Croatia will shift its tax burden from individuals to property, Finance Minister Marko Primorac announced on Monday. The move aims to curb rising real estate prices and rents that have made it increasingly difficult for younger generations to find affordable housing, particularly in coastal tourist towns along the Adriatic.
The real estate market in Croatia, a country of 3.85 million people, has seen significant imbalances. Currently, there are about 600,000 properties either empty or available only for short-term rentals. These market conditions, fueled by both domestic and foreign investment, have contributed to the housing shortage. "Housing has become unavailable for many because people have bought real estate as the safest way of investment, while foreign buyers also rushed to invest due to low taxes," Primorac explained, highlighting the need for policy reform.
Under the proposed legislation, apartments will be subject to new taxes, while properties used for agriculture, production, and services will be exempt. The goal is to encourage long-term leasing and stabilize the real estate market. "We hope to create conditions for the development of a stable, predictable policy for managing real estate and encourage a long-term lease," Primorac said during a meeting with Croatia's Economic and Social Council.
To further promote long-term rentals, properties rented out for at least 10 months of the year will also be exempt from the new tax. The tax administration has proposed rates ranging from €0.60 to €8.00 per square meter, depending on the property’s size and location.
The legislation, which still requires parliamentary approval, is set to take effect on January 1, 2025. In addition to addressing the housing crisis, Primorac noted that the reforms are part of a broader effort to digitize Croatia’s tax system, strengthen tax discipline, and encourage the return of Croats living abroad.
