The implementation of the new property taxation model has, already in its first months, raised a number of practical questions and uncertainties for taxpayers. In this context, it is particularly important to recall one of the key obligations: taxpayers subject to property tax are required, no later than 31st March of the year for which the tax is assessed, to report to the tax authority any changes to data relevant for the calculation of the tax. This includes, among other things, changes in the taxable surface area, changes in the purpose of use of the property, as well as the submission of evidence required to qualify for exemptions from real estate tax for 2026. At the same time, taxpayers who have received property tax assessments for 2025 and consider them to be incorrect or calculated in an inaccurate amount should not overlook the possibility of filing an appeal.
It is precisely through this obligation to act, as well as the need to protect one’s rights, that the challenges in the practical implementation of the new system become most apparent.
The implementation of amendments to the Local Taxes Act, which introduced a new model of property taxation in Croatia as of 2025, is currently taking place under circumstances that raise more questions than answers. It should be emphasized from the outset that this commentary will not address the justification for property taxation itself. That is a legitimate topic for broader and ongoing public and professional discussion, but it falls outside the scope of this analysis.
Furthermore, this analysis does not consider the objectives behind introducing this taxation model, whether general goals or those highlighted at the time of adopting the legislation, nor does it assess the model’s impact relative to those objectives. The focus is solely on the implementation of the current legal framework.
In practice, it is evident that the system is being rolled out gradually and without clear uniformity. Tax assessments for 2025 were initially issued for houses and later (during February 2026) for apartments. Such a phased approach would not be problematic in itself if accompanied by a high level of accuracy and transparency. However, even now, numerous taxpayers report inconsistencies in assessments, ranging from disputed floor areas to unrecognized exemption rights.
An additional layer of uncertainty arises from the fact that obtaining an exemption required submitting a separate application, while feedback on the status of submitted applications is often lacking. Even when applications are registered in the ePorezna system, the displayed statuses create confusion, and various interpretations of their meaning arise in practice. At the same time, the law stipulates that a property tax assessment is not to be issued when the taxpayer is exempt from paying the tax. Consequently, taxpayers often remain in uncertainty: they do not know whether their application has been accepted, rejected, or is still under review, until they eventually receive an assessment determining the tax liability.
Meanwhile, the Tax Administration has published a number of informational notices and opinions related to property taxation, aiming to clarify the application of the legislation. Nevertheless, the frequency of such publications, including those highlighting errors in assessments, raises questions about the system’s stability and consistency. Particularly concerning is the fact that taxpayers are advised to submit requests to annul assessments for errors they themselves did not cause.
Further uncertainties arise regarding the application of exemptions, for example in cases where a property is not suitable for habitation. In such cases, practice often emphasizes the existence of infrastructure or connections, regardless of whether that infrastructure actually enables the use of the property. This approach can lead to formalistic conclusions that do not reflect the property’s real condition.
One of the most noticeable problems occurs when the Tax Administration, despite having all relevant data, calculates property tax for objects legally exempted. For instance, a taxpayer who rents out a property is already registered for personal income tax on rental income, giving the Tax Administration all necessary information to apply the exemption, since property tax is not due for properties rented for permanent residence. Despite this, according to certain information, the system generates and issues tax decisions for such properties.
Such situations further increase confusion and legal uncertainty and highlight issues in organization and coordination within the system.
Moreover, the Local Taxes Act stipulates that property tax is not payable when, based on all circumstances, the residential use of a property is impossible. At the same time, the law provides that the intended use is determined based on the existence of infrastructure, equipment, or devices replacing a connection to infrastructure. This criterion is precisely what the Tax Administration has emphasized in its opinions, raising several practical questions.
For example, in the case of properties whose construction is not yet completed, it is questionable whether the mere existence of a device replacing a connection can be considered sufficient evidence that residential use is possible. In a Tax Administration opinion (Class: 410-24/25-01/15, Registry No.: 513-07-21-01-25-2, dated 24th September 2025), it was stated that the fact that a property is undergoing adaptation does not affect the determination of tax liability if the existence of infrastructure or appropriate equipment replacing a connection is established. In such cases, the actual condition of the property is disregarded.
A similar issue arises for properties under construction that have completed foundations and structural works but are neither finished nor possess a use permit. Even if they have certain connections or equipment replacing connections, such properties are often not functionally fit for habitation. An additional problem is that the legislation does not clarify what is meant by “existence of infrastructure”: there is a significant difference between a mere connection (e.g., a water shaft with a meter and a single tap outside the property) and fully installed, functional systems that enable a property to be used for residential purposes.
In this context, it is reasonable to question whether it is contradictory that the law, on the one hand, sets as a criterion for certain exemptions the consideration of all circumstances indicating that residential use is impossible, while in practice the decisive factor is considered to be the formal existence of infrastructure, equipment, or devices replacing a connection.
Additionally, the amended Local Taxes Act defines a property as “a residential building, its part, or another independent functional space intended for habitation.” If an object is not functionally suitable for residential use at a given time, it is reasonable to question whether it even meets the statutory definition of a property.
Problems are also evident at the operational level. When submitting an exemption request through the ePorezna system, even though the property must be selected from a drop-down list and local self-government units are expected to provide the Tax Administration with data as of 31st March from the municipal fee records (including information on residential space, area, type, address, year of construction, and on fee payers), the system fails to recognize that no municipal fee is payable for certain unfinished properties or that the property is not constructed or completed. It is still required to enter the OIB of the municipal fee payer, the year of construction, and the area, even though these details have no practical application in these cases.
All of the above represents only part of the open questions that remain unresolved in practice.
At the same time, numerous notices and press releases from the Tax Administration regarding incorrectly issued 2025 property tax assessments, including for properties already legally exempt, have been observed. It is stated that after additional checks, procedures to annul such assessments were initiated and that situations requiring further data reconciliation were identified.
A particularly noteworthy issue concerns legal remedies: in a notice dated 23rd March 2026, it is stated that, in case of an appeal, no payment or further action is required while the verification process is ongoing, even though the law stipulates that an appeal does not suspend the execution of the assessment. It is also emphasized that no interest or enforcement will be applied to taxpayers who submitted appeals, raising questions about the legal basis for such guidance.
Although it is explicitly stated that there is no “chaos in the system” (“We emphasize that there is no “chaos in the system”, but only the need for additional data reconciliation from multiple official registers at the level of cities, municipalities, and the Tax Administration,” from a notice published on the Tax Administration website on 2nd March 2026), and that these are regular data reconciliations, such explanations do not eliminate the impression of uncertainty. On the contrary, it raises the question of how the system would function under truly exceptional circumstances if even this situation is considered normal.
All of this points to a deeper problem: the readiness of the system to implement such a complex tax regime. Key questions arise: was the organizational framework adequately prepared, are the data used to issue decisions reliable, and perhaps most importantly, who bears the consequences when the system generates incorrect assessments?
In circumstances where the tax administration itself points out errors through its own publications, it is legitimate to question whether this implementation model ensures an adequate level of legal certainty and trust. Instead of a predictable and clear system, taxpayers are faced with the need for constant verification, interpretation, and, often, contesting of issued decisions, while still paying the tax and, occasionally, wondering in passing where that money goes and how it is spent.
Do you have questions or concerns regarding property tax? Contact us – we will be happy to help.