18.06.2019

How to categorize a property for a tourist rental?

Most people use their property for their own purposes, i.e. they represent their home and place of living. However, real estate can also be put into economic function and bring significant income to its owner. Real estate rental for tourist purposes is increasingly frequent and it is expected that this trend will continue to grow in line with the growing popularity of Croatia as a tourist destination.  

A few years ago, this trend prevailed only in the Adriatic, and now it is more and more present in the continental part of Croatia, especially in Zagreb. Many owners who possess more than one house or apartment have seen the opportunity in extra earnings and have decided to become real estate leasers. For you to become one of them, it is necessary to take certain steps that imposes Croatian legislation and follow the advices below. 

 

Obtain all necessary documentation for the categorization of the property 

The first step you need to take to become a real estate leaser is to get all the necessary documentation for categorizing the property for tourist rental. In the State Administration Office in your home county you need to submit a request for obtaining a Decision on approval for the provision of hospitality services in the household and with this request also enclose the accompanying documents most important of which are: a copy of the ID card or passport as evidence of Croatian citizenship and residence or EU nationality, a proof of property ownership (land registry book extract and the written consent of all the real estate owners if they exist), use permit (if the property is built before 1968, it is sufficient to confirm that the property was built on the building plot), plot of real estate and paid administrative fee. After about 30-60 days, the competent office will issue you a Decision on approval for the provision of hospitality services in the household and the Categorization decision.  

Another way to get the decision is to do so via the internet by sending the request and all necessary documents electronically to the official email address of your County Tourist Office. The decisions obtained have categorized your property as an object for tourist rental. Also, it is necessary to use the decisions to report your intentions to the relevant police and tax administration as well as to the tourist board. 

 

Buy a standardized rental panel 

Each rented object should also be labeled with a standard rental panel that contains information on the type of facility to be leased and the service being offered, and its categorization or star number. Panels can only be ordered from the manufacturers that have been authorized by the Ministry of Tourism for this activity. For their production it is also necessary to enclose the Categorization decision when ordering it from the manufacturer.  

Depending on the size, the panel prices range between 250 and 350 kuna. Otherwise, if you do not put this panel on your object, you violate the law and unlawfully rent your space. The penalties in this case range between 5000 and 30 000 kuna. In addition, it is necessary to indicate both the facility you provide and the type of accommodation (at the reception, in the rooms), but it is enough to write that information by yourself. 

 

Make official price list and determine house rules 

While there is no minimum or maximum price you can charge for providing your accommodation services, you must also bear in mind that this freedom cannot be easily understood. When determining the price, you have to be realistic and well explore the prices on the market for renting for tourist purposes.  

By setting a low price you may be jeopardized that you will not be able to cover the cost of your work and many prospective guests will doubt the quality of your service. On the other hand, the excessive, unrealistic price will drive your guests away, and as your rooms will be empty, your competition will have all capacities full. It's important to set a price that will be in the range currently available on the market. Within that range, you can manoeuvre and determine the price you would be satisfied with, but which also indicates the quality of your services.  

When setting the price do not forget to consider your rental costs, i.e. fixed costs, residence tax and real estate agency commission if you choose to rent your property using brokerage services. The rest of the price represents your earnings.  

Once you have determined the prices you need to enter them into the official price list. The official price list is strictly prescribed and must be in visible locations of the facility itself, i.e. at the reception desk and in all rooms. It is necessary to abide by the prices stated in the price list and you must sign it as the owner of the property.  

The official price list should contain the following information: basic information of the landlord (name of the property, name and surname of the owner, address and personal identification number), type of service (whether it is a one-night stay, a bed and breakfast, type of billing (per night, per week, per person, etc.), period (prices in pre-season, season and post-season), prices in kunas, additional services offered (e.g. pets allowed AC) and their prices, the amount of the sojourn tax (included in the price of the overnight stays or paid separately), the amount of the VAT, the date of the validity of the price list and the signature of the owner of the facility.  

In addition to the official, classical price list, there is an allotment price list that is compiled in case you rent your accommodation facilities using the agency services, i.e. the licensed rental agencies or the online rental platform. The prices contained in the allotment price list are lower than the price in official price list because they are reduced for commission or rebate which the landlord approves the intermediary. Creating this price list is not mandatory, but it is desirable that as a renter you leave the impression of professionalism to the mediators. The price lists have ready prices for brokers and you not need to calculate and negotiate them later and in this way, you can strengthen relations with your brokers and be more competitive on the market. 

Apart from the price list in a visible place in all rooms, it is also necessary to put the house rules. The house rules inform your guests with the most important information about their accommodation, such as check-in and check-out time, breakfast time, and a description of the responsibilities and acceptable behaviour of guests.  

It is desirable to create a price list and house rules in more than one foreign language, not just in Croatian, to be accessible and understandable to as many guests as possible. Given the nationality of guests for the Croatian market, the most important languages are Slovenian, English, German and Italian. 

 

Register guests to the tourist board 

All persons who stay in your accommodation you are obliged to register to the tourist board within 12 hours of arrival and no later than 24 hours after departure. Check-in / check-out can be done via the internet or you can fill out the form purchased in the Official Gazette and submit them to the regional tourist board personally.  

In the event that your guests are not EU nationals you are obliged to report them to the Ministry of the Interior or to do so by a regional tourist board. All your guests must be registered in one place as a guest list.  

You can use the guest list as a tied book using a form XII-46 that you can buy in the Official Gazette. You are legally obligated to keep this guest list for at least two years. Of course, you are obliged to issue a bill for all services and keep its copy. 

Pay the sojourn tax, tourist board membership fees and income tax 

As a landlord you are obliged to pay regular sojourn tax, membership fees to the tourist board and income tax. Sojourn tax can be paid on a flat-rate basis or per night. For lump-sum payment is used lump sum payment slip, which can be obtained at the competent tourist office.  

The amount of the sojourn tax varies depending on the class of the tourist resort and whether it is the main season, the pre-season or the off-season, and the Government of the Republic of Croatia determines it annually with the Decree on determining the amount of sojourn tax for the following year.  

For example, children under the age of 12, seasonal workers, people with disabilities of 70% or more and one companion are exempted from paying sojourn tax. Exemption from payment of taxes is proved by appropriate documents and certificates. Tourist board membership fees are also paid according to the tourist class. The fee is paid to the Tourist Board and surrendered to the Tax Administration for the control of the payment of the tourist membership fee.  

In addition to the sojourn tax and tourist board membership fee payment, each landlord is also required to pay income tax. The documents you obtained to become a landlord refer to the relevant tax office that issues a decision on the amount of annual flat-rate income tax. The annual flat-rate income tax is determined as a multiplication of the number of beds, the lump sum per bed and the appropriate coefficient of the area where the service is provided.  

The amount of annual flat-rate income tax has been increased to raise income tax and is paid quarterly. In most cases private renters are not obliged to pay VAT because their annual turnover does not exceed 230.000 Kuna, but they are obliged to issue a bill where VAT is not charged. 

 

The path of wanting to use your own real estate for tourist renting to the realization of the idea is not easy. Be sure to prepare your real estate for rent, arrange its space and prepare ownership and technical documentation before taking any administrative steps.  

Also, consider the additional services besides the accommodation you would like to offer to your guests. For your guests to be more satisfied and returning to you year after year, it is important that your services are of high quality, professional and value-added. In this way you will be best highlighted in your competition and achieve a comparative advantage. In order to be as successful as possible in your venture and facilitate administration and easier reach guests, it is advisable to hire a licensed agency whose experts will help you to categorize your rental property.
How to categorize a property for a tourist rental?How to categorize a property for a tourist rental?