Property tax reform 2025: What renters need to know

Property tax has become a central issue for small-scale landlords. As of January 1, 2025, major reforms affect how property, rental income, and overall earnings are taxed. The former “holiday home tax” is now replaced by mandatory property tax, imposed by all local governments and particularly targeting short-term rentals.

Why the change?

The reform aims to reduce the imbalance between long-term and short-term rentals. Many landlords favor short-term letting, which has worsened the housing shortage for long-term tenants.

Property tax does not apply to homes used as permanent residences or those rented out on a long-term basis. However, owners must be able to prove actual residence when requested by authorities, but be aware – simply being registered at the address is not sufficient.

Homes that are uninhabitable due to natural disasters (e.g., floods or earthquakes) are also exempt, provided there is valid proof that the property cannot be used.

In contrast, landlords engaged in tourism-related rentals are always subject to property tax. Importantly, paying income tax on rental activity does not eliminate the obligation to pay property tax, as the two are separate tax categories.

The tax is determined based on the property’s status as of March 31. Properties rented long-term (at least10 months per year) are exempt. However, if the property is used for short-term rentals or left vacant, the tax applies.

For newly constructed real estate, the obligation to pay property tax arises on the date the occupancy permit becomes effective for the year for which the tax is determined, or on the date the property begins to be used without an occupancy permit.

How is property tax calculated?

Tax rates depend on location. More attractive areas face higher rates, with local governments zoning areas by their economic and tourist value.

• Rates: Between €0.60 and €8 per m², set by local authorities. If no decision is made, a default rate of €0.60 per m² applies.
• Local governments may grant exemptions for socially vulnerable groups.
• Taxpayers include all property owners—individuals, companies, and non-residents with property in Croatia.

Impact on landlords

Alongside property tax, a new flat-rate income tax is proposed, tied to the tourism development index:

• Index 1: €100–€300
• Index 2: €70–€200
• Index 3: €30–€150
• Index 4: €20–€100

Another important change: the VAT registration threshold rises from €40,000 to €60,000, giving small landlords more flexibility and reducing administrative burdens.

Penalties

Failure to report property data or changes affecting taxation can result in fines of€1,000–€6,630, depending on severity. Penalties apply to:

• Unreported changes in property area, use, or status.
• Incomplete or inaccurate information provided to tax authorities.

Finally, is private renters’ business at risk?

The reforms introduce both new costs (property tax, flat-rate income tax) and relief measures (higher VAT threshold). While compliance will require more diligence, small landlords may benefit from simplified VAT obligations and clearer taxation rules.

All set for the season, but don’t have a professional to handle your rentals yet?

Don’t worry, contact us via mail info@litto.agency or call +385911770310 and schedule a meeting with one of our experts. 💌