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Tax Authority Opinion: Tourist accommodation services performed by foreign citizens

2015-09

On 6 July 2015, the Tax Authorities issued the Opinion “Obligations of the renters - nationals of the other EU Member States or third countries performing in Croatia accommodation services to tourists in their own real estate”. We highlight below the obligations of renters – EU citizens who are taxpayers in their residence country and who are not taxpayers in their respective countries, as well as the obligations of the renters from third the countries.

Accommodation services in the own real estate of the foreigners in Croatia may be performed as:

  1. Renting services to the Croatian travel/touristic agency,
  2. Renting services to the travel/touristic agency from abroad (EU or third state)
  3. Accommodation services directly to the guest
  4. Accommodation services through agency contract with Croatian agency which performs activities in its own name and on the renter’s account
  5. Accommodation services through agency contract with foreign agency which performs activities in its own name and on the renter’s account
  6. Accommodation services through agency contract with Croatian agency which performs activities in renter’s name and on the renter’s account
  7. Accommodation services through agency contract with foreign agency which performs activities in renter’s name and on the renter’s account

In order to perform accommodation services in Croatia, EU citizens are not obliged to register a craft (“Obrt”) or a company in Croatia, but they can perform services as non-resident taxpayers. However, non-residents providing accommodation services in Croatia will not be able to apply the VAT rule on small taxpayers, i.e. irrespective of the annual value of their taxable supplies, they will need to register for VAT purposes in Croatia. Following the mandatory registration to the VAT system, EU Citizens will not be able to apply lump sum personal income tax from property.

Exceptionally, renters who are taxpayers in their resident country and who perform services described above in points a. and d. are not obliged to register for VAT purposes, since a reverse-charge mechanism will apply (thus, they can apply lump sum personal income tax from property option).

Based on the above, the following persons are obliged to register in the VAT system after obtaining all the necessary permits for performing touristic activities:

  • renters who are VAT payers in their residence country, except those ad a. and d. and #
  • renters who are not VAT payers in their residence country.

Unlike renters citizens of EU member states, renters citizens of third countries are obliged to establish a craft or a company for the provision of accommodation services in Croatia, according to their place of business. Established craft or a company is subject to personal income tax / corporate profit tax in Croatia. The VAT rule on small taxpayers (value of supplies up to HRK 230,000 per year) applies and it is also possible to pay lump sum personal income tax from property.

Authors

Picture of Tamara Jelic-Kazic
Tamara Jelić-Kazić
Partner
Zagreb