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Croatia eyes property tax to cut labour costs ahead of EU entry

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 3:13am

Croatia will introduce from April a 1.5 per cent property tax as the government adjusts its policies to attract investment ahead of European Union entry.

"The aim of the property tax is to gradually ease taxes on labour, so we can become more competitive and more attractive to investors," Finance Minister Slavko Linic said.

Croatia, set to become the EU's 28th member in July, needs to improve competition and boost investment to emerge from a renewed recession. The government expects the economy to contract 1.1 per cent this year before returning to growth in 2013.

The tax, lower than Linic's earlier proposal for a 2 per cent levy, would be applied on 70 per cent of a property's estimated value, the minister said. Owners would be able to waive up to 95 per cent of the tax on their primary residences, while properties such as a summer home could receive a waiver of as much as 85 per cent. Investment properties would receive a waiver of between 20 and 80 per cent.

Other aims of the tax include pushing homeowners to report rental income, and forcing people to update ownership documents and to legalise buildings that were constructed without permits, Linic said.

The proposal is still to be approved by parliament.