Do you know what a temporary tax solution is? It is a preliminary determination of tax liability based on data from your tax declaration, such as price and type of property. However, it is not final; Tax Administration may later review these data and, if it finds differences, issue a new solution with corrected liability.

If you have purchased, inherited or otherwise acquired real estate (building or land) when no value-added tax (VAT) is paid on the added value, you are subject to tax on property transactions. The tax rate is 3% of the market value of the property at the time of acquisition.

Tax on property transactions is an important financial item that young buyers often forget. Many are not even aware that the exemption from paying tax on the first property was abolished in 2017.

Tax filing on property transactions

Property transactions that occurred after January 1, 2017, are reported by public notaries, courts or public bodies within their jurisdiction. If someone still prepares a document that has not been legalized by a public notary, they are still required to report the property transaction to the relevant tax administration department where the property is located, within 30 days of preparing the document.

Recommendation “It is recommended that you review all the costs associated with buying and selling property, including tax on property transactions, agency fees, total cost of credit (effective interest rate), costs of a public notary, moving, potential adaptation and adjustment costs, and other possible costs, before buying a property.”

- Opereta credit intermediation -

What is this temporary tax solution?

This is a solution that determines tax liability, based on data from the tax declaration of the taxpayer (purchase price, type of property, area), without the Tax Administration having previously carried out a procedure to verify the facts relevant to the adoption of that solution. The Tax Administration may subsequently verify the credibility of the data stated in the tax declaration and, if it is found that there is a basis for amending the tax liability, as determined by the temporary tax solution, it adopts a new solution to determine the difference found.

What if a new solution comes your way?

Pursuant to Article 24 of the Law on Tax on Property Transactions, determining tax differences is considered a separate tax solution that each taxpayer has the right to appeal, but the appeal will not postpone the performance of the new obligation. If the Tax Administration does not adopt a decision that replaces the temporary tax solution with a tax liability determined by the temporary solution, the tax liability as determined by the temporary solution is the final one.

Deadline for paying tax on property transactions

The taxpayer must pay the determined amount of tax within 15 days of the date of delivery of the decision. Although you may lodge an appeal, it does not postpone the obligation to pay the tax. Further information on tax on property transactions can be found on the Tax Administration's website. Author: Martina Mataić Škugor, dipl. iur. Director, Opereta credit intermediation

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