CROATIA Law and Practice Contributed by: Marko Paulinović and Dino Vukoša, Buterin & Partneri
rent to the rate of inflation or to the consumer price index. It is also possible to agree on a gradual increase in rent during the term of the lease or on a variable rent linked to the lessee’s turnover. If the lease agreement does not contain a provision governing the modification of rent, it generally cannot be unilaterally altered. Exceptionally, in the event of fundamentally changed circumstances, amendment or termination of the contract may be sought through court proceedings in accordance with the general The method of modifying or increasing rent primarily depends on the contractual provisions or on a pre - viously agreed adjustment mechanism. Most com - monly, indexation is applied based on the official con - sumer price index published by the Croatian Bureau of Statistics, whereby the rent is automatically adjusted once per year. principles of the law of obligations. 6.6 Determination of New Rent If no adjustment mechanism has been agreed, the rent cannot be unilaterally increased. In such circumstanc - es, modification is possible only by mutual agreement of the parties or, exceptionally, by court decision due to fundamentally changed circumstances. 6.7 Payment of VAT Under the Value Added Tax Act, the renting of real estate for residential purposes is exempt from VAT. Conversely, the lease of commercial premises or real estate used for business activities, as well as rental for tourism purposes, is considered a taxable supply subject to VAT. In such cases, if the service provider is a VAT-regis - tered taxpayer, VAT is charged at the standard rate of 25%, or at the reduced rate of 13% for tourist accom - modation services. 6.8 Costs Payable by a Tenant at the Start of a Lease With regard to lessee-related costs, the statutory framework does not prescribe specific fees other than the payment of the agreed rent and the costs of
regular maintenance. However, in practice it is typi - cally agreed that the lessee bears the costs of utilities and communal services (electricity, water, gas, waste disposal, etc), insurance costs as well as a security deposit, the amount of which is contractually deter - mined and serves to cover potential damages or out - standing claims upon termination of the lease. The lease agreement may also stipulate the obligation to pay brokerage fees or the costs of notarisation of signatures. 6.9 Payment of Maintenance and Repair The Commercial Premises Lease and Sale Act pro - vides that the lessee is obliged to pay compensation for the costs associated with the use of common installations and the provision of shared services in the building in which the business premises are locat - ed. In practice, lease agreements typically reflect this statutory principle, whereby the lessor transfers such costs to the lessees. 6.10 Payment of Utilities and Telecommunications In practice, the obligation to pay utilities and telecom - munications services is most often transferred to the lessee, who pays the service provider directly. Where this is not technically feasible, such costs are paid by the lessor and subsequently allocated proportionally among the lessees. 6.11 Payment of Property Taxes Property tax, as a new annual local tax, was intro - duced on 1 January 2025. The subject matter of taxa - tion comprises real estate intended for residential use. Real estate that is leased for permanent residential purposes (for a minimum period of ten months) is exempt from this tax, whereas real estate used for short-term rentals is not exempt. The taxpayers are domestic and foreign legal entities and natural persons who are the owners of such real estate. Nevertheless, the parties may contractually agree that the economic burden of this tax will be transferred to the tenant. In addition to the aforementioned tax, most real estate is also subject to a communal utility fee, which is
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