Sailing in Croatia: A Closer Look at Sojourn Tax 2018

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Credit: Enrico Cossutta

April 5th 2018; Sojourn tax in the nautical sector has been a hot topic lately and leading into the season will only increase, we have been in correspondence with Stuart Bradley, past president of the Cruising Association (CA) to learn more.

Stuart Bradley has worked with the CA over the past 30 years. He is nowadays retired and has kept several boats, including his current 16.5m motorboat, in Croatia for the better part of the past decade, usually spending more than 100 days sailing the Adriatic with his family and friends.

“The Sojourn Tax issue started last August 2017 when news about the increase in tax slowly leaked out from the government. Communications from the Minister of Tourism, Gari Cappelli attempted to suggest that the rates of tax paid by different types of tourists have been harmonised when the truth is the very opposite.

In all of the information published by the government to explain and justify the tax increases, the statistics have been chosen very selectively to suggest that the increase is minimal. They also assume that the number of people staying overnight is proportional to the length of the boat, which demonstrates a considerable ignorance of nautical tourism. The majority of privately owned boats are crewed by just two people, so dividing the total cost of the tax by ten people for a short length of stay is very misleading. In the case of my own 16.5 m boat, there are usually just three persons on board. Occasionally, some private owners do take on friends as extra crew for short-term holidays, but you will probably know the old saying about visitors and fish – and the visitors usually don’t stay for long.

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Credit: Romulic & Stojcic

The current very unsatisfactory position is that some boat owners have paid the tax for 2018 at the old rate while those who didn’t know they could do that are being told the new rates now apply. There are likely boat owners who haven’t even heard about the tax rise yet! So, not only has the tax increased hugely, but the amount varies by upwards of 400% according to when it is paid. That situation just increases the sense of unfairness that private boat owners feel when they compare, for example, the rate they are being asked to pay with the rate for owners of holiday homes.

Holiday home-owners pay a fixed rate of between 30 – 60 HRK per person, per year – giving a maximum total of 120 kuna for 12 months benefit from the property for 2 persons. This compares to anything from 130 kuna (for a 5 – 9 m boat for 8 days) all the way up to 14,500 kuna (for a 20 m boat paying for 1 year). It is demonstrably clear that private boat owners have been singled out for drastic and unfair levels of tax increases.

The government defines and justifies the tourist tax on the basis of a payment per person, per night’s stay in the country to subside tourist infrastructure. However, the tax for boat owners isn’t calculated on that basis. Regardless of how many people are on board, the tax is calculated according to the length of the boat and a series of legislated time periods (8, 15, 30, 90 days or 1 year). Since the Croatian government’s own definition of Sojourn Tax is a tax per person per overnight stay, the tax is not a tourist tax but a boat tax and could, therefore, be held to be illegal under the terms of EU regulations for member countries. In addition, there are considerable concerns that the tax will not be applied equally to Croatian citizens.

The EU Commission responded to the CA’s complaint as follows: “Direct taxation is a national matter, as it remains the sole responsibility of Member States. However, EU countries are required to provide “equal treatment” to all EU citizens in tax matters. In other words, EU countries’ taxing rights should not conflict with EU law by, for example, discriminating on the basis of nationality or introducing unjustified restrictions to the exercise of the EU Treaty freedoms.” This means that Croatian nationals should pay the tax at the same rate as visitors from elsewhere in the EU. However, I am told that port authority offices are not equipped with the necessary software to do that. In addition, it is clear that there are inadequate resources to police such a situation so evasion of the tax could well become widespread. The Commission added: “You may also wish to contact the National Ombudsman in Croatia to address this matter.”

The Director of the Croatian Tourist Board, Kristjan Staničić, met journalists at the Düsseldorf Boat Show on Monday, 22 January and said that, following considerable protests, boat owners would be able to pay the 2018 tax at the 2017 rate throughout the year. He also said that marinas would be able to stamp the tax receipt to show the period of time that owners spent on their boats. This would allow, for example, anyone who spent three weeks on their boat but paid the tax for 30 days to use the extra time at a later date. Contact with several marinas has revealed that they know nothing of this arrangement and the general response has been “why should we do the government’s work for no money?” Neither have the port authority offices received any new instructions and it has not been possible to confirm the announcement with any government department. Many organisations, have written to the Minister of Tourism, Gari Cappelli to seek clarification but no clarification has emerged so far.

The Croatian Marinas Association has been active through the Chamber of Commerce in opposing the new rates of tax because of their concerns about the unfairness of the new tax and the negative effects on levels of nautical tourism. Many boat owners are currently making plans to leave Croatia and others, who would have visited this coming season, will be staying away. Despite what the government says about Croatia being competitive in terms of price for boat owners, it remains cheaper, for various reasons, to keep a boat in Italy or Greece.

The only sensible way for the Croatian government to emerge from this mess with any dignity is to suspend implementation of the 4th August 2017 decision until the promised revision of Sojourn Tax rates is implemented on 1st January 2019.”

On Thursday 29th March 2018, there was a review of the effects of this Sojourn tax at Marina Punat by a session of the Croatian Chamber of Economy Marina Association. President of the Association Sean Lisjak, addressed the concerns of the negative effects and confirmed that these fears have already begun to be substantiated by the relocation of vessels to other Mediterranean destinations (read fully story here).

As nautical tourism is booming in Croatia, will it appear that Croatia has shot itself in the foot if they do not make amendments to the Sojourn tax? Time will soon tell.

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Credit: Biograd Boat Show Official

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