Important tax changes in 2025

As of January 1, 2025, new regulations have come into effect in Croatia, which significantly affect the tax burden in the real estate sector. In recent years, the country has been trying to attract foreign investors while responding to socio-economic challenges, such as the growing deficit of affordable housing for the local population. Below, we present the key changes, their consequences for owners and investors, and practical tips for adapting to the new reality.

Introduction of the euro

Taxation of income from rental property

The new regulations introduce the following rules:

• Long-term residential rental (at least six months of the year) is subject to a reduced income tax rate, which has been reduced from 10% to 8%.
• Short-term rental (mainly tourist) has been covered by a higher rate - instead of the previous 8%, it is now 10%.

The change is intended to reduce the excessive number of apartments designated for short-term rental, especially in popular seaside resorts, and encourage owners to offer apartments for longer periods. According to the Croatian Chamber of Commerce, the new regulations should increase the availability of apartments for residents and partially slow down the increase in rental prices.

New – annual property ownership tax

Previously, in relation to residential properties, it was paid in the form of a so-called "municipal fee" to the municipalities. Currently, we are dealing with a centralized tax, which will be divided between the state and individual local governments. The rate varies depending on the type of property and its use:

• Residential units intended for permanent residence: Basic rate of 0.2% of the assessed value of the property per year.
• Apartments and holiday homes: Basic rate 0.3%, which, depending on the location, can be increased to 0.5% in attractive tourist areas (e.g. Dalmatia, Istria, Dubrovnik).
• Commercial properties: Basic rate 0.4% – adjustable depending on the type of business activity.

The key factor is the estimated value of the property, which is determined by the local tax office based on price maps and real estate market statistics. Owners have the opportunity to request a reassessment of this value within 30 days of receiving the decision if they believe it is overstated.

Conclusions

Croatia has been attracting foreign investors looking for holiday properties for years, especially from Poland, the Czech Republic, Germany and Austria. The crystal clear sea, charming seaside towns and a stable real estate market mean that many buyers see this country as an ideal place for a second home or investment for rent. 

The introduction of a higher tax rate on the acquisition of holiday properties (4%) and an annual tax on their possession may, however, cool down the enthusiasm of investors looking for quick profits. 

Despite this, the country remains a competitive option compared to other popular Mediterranean destinations such as Spain or Italy, where tax costs can be even higher. For investors looking for long-term rentals and stable returns, Croatia still offers excellent conditions – both in terms of tourist demand and rising property values. 

What's more, the reduced 8% rate for long-term rentals may be an incentive to change the rental strategy - we have been seeing interest in long-term rental of properties by people working remotely for a long time now. 

Whether you are a foreign investor planning to buy a seaside holiday apartment or a local owner considering a long-term rental, it is crucial to monitor your tax obligations on an ongoing basis to avoid potential penalties. It is also worth regularly checking official information published by Croatian institutions and consulting with experts to optimize your investment as much as possible.