Apartment Rental Tax
This text is intended for, and most useful to, landlords, so that they are fully informed about additional expenses, which in this case include the special property tax. In this article, find out how rent is determined under the Residential Lease Act and how much tax on apartment rental income is payable under the Income Tax Act.
Obligation to Conclude a Lease Agreement
Under the Apartment Lease Act, an apartment is a set of rooms intended for residential use, together with the essential ancillary rooms, forming a single enclosed building unit with a separate entrance. The law stipulates that an apartment lease agreement must be concluded in writing, whereby the landlord undertakes to hand over the apartment to the tenant for residential use in return for an agreed rent. The agreement governs the rights and obligations of the landlord and tenant and contains provisions on the amount of rent and the method of payment. As the amount of rent is decisive for calculating the apartment rental tax, it is necessary to explain how rent is regulated under the Apartment Lease Act.
How the Rent Amount Is Determined
Under the Apartment Lease Act, the rent paid by a tenant for the use of an apartment may be either protected or freely agreed. Protected rent is determined on the basis of conditions and criteria set by the Government of the Republic of Croatia; for example, it is paid by occupants who use an apartment under regulations on the rights of Croatian war veterans. Freely agreed rent, on the other hand, is paid by occupants for whom the law does not prescribe protected rent. Freely agreed rent under an apartment lease agreement concluded for an indefinite period cannot be changed before one year has elapsed. After that period, the landlord and tenant may propose in writing a change to the amount of rent.
Apartment Rental Tax
The Act on Apartment Rental (Zakon o najmu stana) only stipulates that the parties must conclude a lease agreement, which does not have to be notarised, but it does not regulate the amount of tax on apartment rental. The amount of rental tax is determined by the provisions of the Income Tax Act (Zakon o porezu na dohodak). Under that Act, a landlord who earns income from property by renting out their real estate is obliged, within eight days, to report the rental to the Tax Administration responsible for their place of residence or habitual abode, so that they can be entered in the register of income tax payers and the Tax Administration can determine the tax on the apartment rental. Rental tax is paid in accordance with the Tax Administration's decision, no later than the last day of the month for the current month.
Apartment Rental Tax and Determining the Tax Amount
Nadležna Porezna uprava visinu poreza na najam stana kao poreza na dohodak od imovine izračunava na temelju iznosa najamnine koji je naveden u ugovoru o najmu stana. Na ugovorenu iznos visine najamnine Porezna uprava najprije primjenjuje pravilo iz Zakona o porezu na dohodak da se kod dohotka od imovine na temelju najma nekretnine priznaju izdaci u visini 30% od ostvarene najamnine te se primjenjuje stopa oporezivanja od 12%. Drugim riječima, porez na najam stana plaća se na svotu najamnine umanjene za 30% izdataka po stopi od 12%. Na taj iznos poreza obračunava se prirez po stopi grada ili općine na čijem području najmodavac ima prijavljeno prebivalište.
In practice, it would look like this:
Apartment Rental Tax: An Example
In the lease agreement, the landlord and tenant agreed a rent of 1.000,00 kuna. The Tax Administration then reduces this amount by 30% in tax-recognised expenses, i.e. by 300,00 kn. Subtracting 300,00 kn from 1.000,00 kuna gives 700,00 kn, which is the tax base. A tax rate of 12% is applied to this 700,00 kn, so the total apartment rental tax amounts to 84,00 kn. Surtax is then applied to this amount. For example, if the landlord is resident in Zagreb, they pay surtax at 18%, even if they rent out an apartment in another place where there is no surtax. The surtax amounts to 15,12 kuna (18% of 84,00 kuna).