Croatian Real Estate Newsletter - NIVAS · Croatian Real Estate Newsletter Volume 86, October 2013...

Volume 86, October 2013Croatian Real Estate Newsletter

CREN Patrons:

TOPICS OF THIS ISSUE:

InterviewHelena Knifi ć SchapsAuthor of the book: VELEBIT ARHITEKTONSKI Pučka gradnja u dijelovima Sjevernog i Srednjeg Velebita (The Architecture of Velebit. Folk Architecturein Parts of Northern and Central Velebit)

“Let us bring people back to Velebit and make life possible there!”

InterviewDražen NimčevićDirector, Tax Advisory Division Deloitte Croatia

Comment on changes in the Croatian taxation system

Croatian Real Estate Newsletter, October 2013 2

1. TOPIC OF THIS ISSUE

Interview:

Helena Knifi ć Schaps,

Author of the book: VELEBIT ARHITEKTONSKI

Pučka gradnja u dijelovima Sjevernog i Srednjeg Velebita

(The Architecture of Velebit. Folk Architecture in Parts of Northern

and Central Velebit) 3


Interview:

Dražen Nimčević,

Director, Tax Advisory Division, Deloitte Croatia 10

3. STATISTICS

3.1. Average Asking Prices of Real Estate Offered for September 2013 14

3.2. Statistical Reports of the Central Bureau of Statistics

from the Area of Construction 14

3.2.1 Construction work indices, July 2013. 14

3.2.2 Completed construction works, orders and residential construction,

business entities employing 20 or more persons,

second quarter of 2013 15

3.2.3 Completed buildings and dwellings, 2012 15

TABLE OF CONTENTS


First of all, we congratulate you on your book on folk architecture in parts of Northern and Central Velebit, entitled “Velebit arhitektonski”. As an introduction to this interview, please introduce yourself to our readers.

I work in architectural design, research, scientifi c and professional publications and public work within the framework of the profession of architecture. Today as a member of the Working Group for monitoring the implementation of the aims of documents on the architectural policy of the Republic of Croatia, I am active in the area of implementation of national guidelines for quality and culture in construction, which the Government adopted in November 2012 (following the proposal of the working group which I was leading).

This is my fourth interview for CREN (as president of the Chamber of Architects, as a member of the Council for Spatial Planning of the Republic of Croatia, and now as an author), so I don’t need to repeat myself.

Where does your great love for Velebit stem from?

Velebit is my homeland in a broad sense, and to paraphrase the architect NIkola Bašić, I am bound to it by “elementary emotions, and not affections for my homeland like a tourist.”

In our opinion, this book is a jewel amongst books on architecture. As well as its professional and scientifi c value, you have built into it your emotional, refl ective and personal standpoints, which go far beyond a purely professional approach. You have opened your soul in this book, which is fascinating. How did you manage to do that?

I am glad you felt that and thank you for your praise! Baudelaire said that a man works if not from inclination, at least from despair. In the desperate situation of my profession, I decided to admit publicly and reveal my love for the people and the folk architecture of parts of Northern and Central Velebit! Strong

Helena Knifi ć SchapsAuthor of the book: VELEBIT ARHITEKTONSKI Pučka gradnja u dijelovima Sjevernog i Srednjeg Velebita (The Architecture of Velebit. Folk Architecture in Parts of Northern and Central Velebit)



emotions can only be returned with a strong incentive. You are fascinated here by my different approach, because you perceive me as an analytical person who coldly and concisely summarizes the questions of my profession. Fortunately there are subjects which allow us to talk in our name (and for our own money!) and this is one of them. No one asked anything of me in the phase of research, no one expected anything, no one imposed any conditions, no one directed me and no one invested anything in me. These are my own travel notes, my personal architectural ramblings through Velebit. Velebit before me, no one behind me. You have to admit, it is an extremely pure concept.

What inspired you to write this book? How long was the idea in the formation and how long did you need to actually write it?

My eyes were opened to this subject by my great mentor and certainly the greatest authority in the population of this area, the long-term head of the Senj Town Museum, and initiator of the scientifi c annual, the Senjski zbornik, the late Professor Ante Glavičić. Academic Andre Mohorovičić welcomed my fi rst paper on this subject and wrote a review back in 2000, but did not live to see it published. Academic Velimir Neidhardt directly suggested I should write a book, after he saw some of the material. He was also just about the fi rst person to show an interest in this

subject, perhaps because the buildings are not spectacular and are quite incomparable. Not even Aleksandar Freudenreich came to this area, a person who dealt most systematically with folk architecture in the books Kako narod gradi (How the People Build) and Narod gradi na ogoljenom krasu (The People Builds on the Naked Karst). Velebit is not mentioned anywhere. It is diffi cult and demanding terrain, a huge area, with scattered settlements with less and less people, especially nowadays.

My basic project was solely research and gradual publication of the material, which I began thirteen years ago. The book came into being over two years,

as the result of about thirty years spent on Velebit, not as a mountaineer, but as an architect. The editor of the book, Vladimir Mattioni, was a huge encouragement to me, as he has dealt with Velebit professionally as a spatial planner. This material also opened a new dimension to him too, as a subject we all know quite a lot about, but no one knows everything. He also passed on his enthusiasm to the publisher UPI2M plus and the designer Damir Gamulin, so that the creative climate was more than encouraging and enjoyable. The value of the material was also recognized by some institutions and they made the publication of the book possible by donating funds: The Foundation of the Croatian Academy of Science and Art, The Croatian Chamber of Commerce - the Otočac County Chamber, the Ministry of Science, Education and Sport, the Croatian Chamber of Architects, the Lika-Senj County and the Town of Senj. I would like to take this opportunity to thank them most sincerely.

How is the book structured?

The foreword to the book was written by Prof Dr. Ivan Rogić, a prominent sociologist and poet. In the introduction I write about the mountain in terms of fi gures, its settlement through history, and the general characteristics of its architecture. The other chapters present the sites I visited on the


merely chose a place that had the largest number of elements necessary for survival. These were: shelter (from natural forces, robbers), accessibility of water and food for man and his livestock, arable soil and heat (the sun, wood). There is no philosophy here about a view of the sea, a river, a waterfall, a mountain etc. Shelter is the law! It is only recently, with the help of “advanced technology and contemporary materials” that we have been building on the tops of hills, with shelter from the wind created by diggers, beside main roads, in the shade of pine trees, on water bearing, arable, fertile soil... God forbid!

We imagine that as part of your research work you spent a long time talking with the people of the area of Velebit. How did they react to this project and what were their most frequent comments?

As I have already said, the book itself was not the project; it came about as the result of many years of research and papers which were systematically published in the scientifi c annual publication I have already mentioned, the Senjski zbornik. None of this would have happened without the cooperation of the local people (I mention 26 people who were my sources of information), to whom I express my gratitude always and on every occasion. It is very important to

me that through my work, like scientists in other disciplines, I awaken in them a feeling that what they are telling me is valuable, that every word they say is a contribution to creating a whole, which must not be lost. People contacted me over the years and sent me their photographs. So I included those by Hrvoje Skorup in the book, although they are already of ruins, but in a beautiful location, in Skorupov dolac.

I remember a boy who, at the exhibition of my photographs at S.S. Kranjčević Elementary School in Senj, noticed the doors of his grandfather’s house. I will never forget the pride in his eyes! I believe there is a chance that precisely he will save it from destruction and perhaps a few others too. Identifi cation with a space is an important element of our identity.

How would you briefl y describe the typical architecture of Velebit? What type of construction is dominant?

In the traditional sense these are dwellings for permanent or occasional, seasonal living. Those for permanent accommodation are stone houses with one or two fl oors (if they are on a slope) and there are dwellings for occasional accommodation. There is also a new

slopes facing the sea and inland, with a separate chapter on water as one of the requirements of settlement. In conclusion I examine the question of the existence of heirs to all this and this form of architecture. There is also a glossary of local words and phrases, and a list of sources of information and literature. The book contains testimonies from local people, several hundred photographs (of complete landscapes to details of construction, roofs etc.) cartographic diagrams, architectural sketches of villages, houses and groups of houses of family communities, shepherds’ dwellings, wind breaks, wells, ponds etc.

Let’s start with urbanism. How did the people of Velebit used to choose the location of their houses?

You see how we think in stereotypes! First of all, urbanism should primarily deal with towns – planning and studying their structure and development. In contrast to villages, a town is separated from the centre of production of food. Another question, however, is that we do not deal in planning rural areas as we should, in view of today’s way of life, work, production and housing. Villages on Velebit were founded without any plan, with an almost autocratic way of life. The conditions here have always been dictated by nature, and people


form, which are holiday houses for the descendants of immigrants, still mostly based on the original form of the village groups.

Anything that is truly new differs completely from the traditional form of building, although the way of life has remained the same, conditioned by the climate. So today there are houses with two and more storeys (on fl at land), with balconies and glass walls, which are then gradually bricked over, divided up, extended, altered. Who would ever sit on a balcony in Krasno? It is possible to withstand nature, but the question is how wise, comfortable and sustainable that is, I mean: is it economically viable?

How does contemporary life affect this area?

The local people who moved away complain about the fact that they had no electricity thirty years ago, because if they had had they wouldn’t have left it all behind. Now some of them have come back, repaired their houses and use them as a holiday or weekend house. Very few live here, but there are

some. I don’t know why it was odd for me too to talk about the latest episodes of the current soap operas, whilst heating something in the microwave, with a computer screen on the table. You don’t have to walk a long way anymore to get information, sometimes mobile shops come round with things to buy and newspapers.

In an architectural sense new concepts are being used (houses with upstairs fl oors, garages and architectural elements such as open staircases, balconies, façade boilers for hot water etc.) sometimes even inappropriate materials that are offered on the market (poly urethane foam which is eaten by dormice, silicone bricks, brightly coloured façades etc.).

It is possible for people to return to Velebit, if we examine models of sustainable development in the protected area.

The book has excellent photographs. Tell us more about them.

All the photographs are mine, except some by my friend and fellow-traveller through Velebit, from the early 1980’s, Dr. Srećko Božičević, and Hrvoje Skorup. Perhaps the photographs from the sea and those with the islands are a little surprising, however for me they show the indivisible whole, just as

the life of the people here throughout history is inseparable from it.

I must point out here the skill of the designer Damir Gamulin, who managed to make analogue photographs more than 30 years old to look like digital pictures taken recently. They are all documents of their time and as such are irreplaceable.

I am sorry I did not have the opportunity, as part of my in fi eld research, to fi lm video material as well, but it was all too much for me in any case - travelling, walking, measuring, sketching, taking photographs, talking, making notes... It is a lot for one person.

This is a praiseworthy book that enriches the collection of Croatian books on architecture. How much systematic research is done in Croatia into folk architecture and what does that research mean for contemporary architecture?

The most important works in this area are those I have already mentioned by Aleksandar Freudenreich, Andre Mohorovičić, Zdravko Živković and the Ministry of Culture, Davorin Salopek, Tomislav Premerl, Aleksandra Faber, associations like Dragodid etc. The Ministry of Tourism has issued two valuable handbooks for the restoration of traditional wooden houses and houses


in Baranya, which give instructions on how to restore these buildings and prepare them for use in tourism.

There are always infl uences on architecture and valuable examples which are recognized by professional criticism.

As for everything else, our clients and some professional examples, at least regarding accommodation, is very much under the infl uence of supply and the media. Some examples are propagated in the popular press, the work of professionals is mixed with the work of decorators or with DIY, all represented equally and completely uncritically. There is not much room here for concern about authenticity or identity.

What traditional materials and techniques could be used today in contemporary architecture?

Everything! But interpreted in a contemporary way. Defi nitely not by copying, but certainly by interpretation.

In the textual part of the spatial plans of this and other areas it states that façades must be covered with stone, with a gabled roof or whatever sloping roof. It says all this as though people built by themselves, without any plan, which is not permitted in our laws. Everything else is frequently too complicated for incompetent offi cials

with inappropriate and insuffi cient training, because it is not comparable with the template they use. How can you evaluate creativity, if you are not able to tick off a list of creative elements? Have a look at what they are doing today in the Alps, the Dolomites, the Pyrenees, in the Nordic countries! These are contemporary buildings with absolutely recognisable local elements, which, as Adolf Loos wrote, do not compete with the beauty of the landscape. From choice of location and measurements onwards. We today draw in roads, and to the left and right of them houses on their plots, regardless of the way they face, shelter, the sun, the wind, whatever. And then there is no deviation to the left or right, but

just what it says. We approach a village (a rural area) in the same way as we approach a town (an urban area).

Folk architecture is no longer being created, so we have to preserve the little we have. But, who will do this?

The research for a work like this is demanding and takes a great deal of time. How and where did you fi nd the material you needed and what methods did you use?

The material is in situ and it needs to be bitten, I just rummaged around a little, as they say here. The working title of the book was The Architecture of Velebit - by pencil, tape measure and camera. So, you set out, with your tape measure, a pad of paper and a pencil in your hand, always with your analogue camera at the ready (or several of them, just in case). Apart from my two or three co-workers in the fi eld (Professor Glavičić, Darko Tomljanović and Darinka Brušić) no one helped me, whether in terms of organization or fi nances. This was a one woman project in the true sense of that expression! Or, if you like, as Ivan Rogić wrote in the foreword to the book, Concern for heritage in the Mediterranean has always been the work of inspired women.

There really is not much material on the architecture of Velebit, as I have already mentioned, but there is some on settlement, emigration and the way


of life. The most useful here was my personal library, actually my father’s, many of the sources and the wonderful people who kept telling me to go on, deeper: Dr. Srećko Božičević, Dr. Joso Brajković, Milan Krmpotić and others.

What does your scientifi c work mean to you, especially in the fi eld of architecture? What would you say to your colleagues to encourage them to do more scientifi c work?

As architects we are trained to recognize, analyse as professionals and process data about buildings, which I have done in this book, without pretensions of dealing in science. Architecture allows a wide range of activities within the profession, and scientifi c work is one of them. For a general practitioner architect like me, the most important thing is expertise and empathy, but arrogance and intolerance towards capital and authority are fatal. Or as academic Dinko Kovačić puts it, the corruptibility of the conscience is fatal for architecture. Playing with someone else’s money for one’s own promotion is also playing with someone else’s fate.

Today we mainly deal in architecture for the rich, in iconic buildings, because the media are not interested in anything else, and the impoverished society has

no strength for recovery. Professional science does not deal with people on the edge of survival, without water and sewers, where, in our climate, three generations sleep in the same room.

Therefore, I don’t want to say anything to them. My colleagues are doing the best they can in the given circumstances, and those who are paid for scientifi c work are probably doing it.

In the last few years a large part of your professional work has been devoted to the Apolitika (The Architectural Policy of the Republic of Croatia) project. How does this book fi t in with Apolitika?

Yes, this has taken up a lot of my time over the past ten years or so, precisely out of the desire for the specifi c characteristics of Croatian architecture (not just the protected cultural heritage but also recent production) to be evaluated and constantly improved, for the good of the space and the public interest. Research like this is already doing its job in the area of the chapter we called Social Awareness. The descendants of emigrants have been contacting me and thanking me for prompting them to devote themselves in new ways to their native land and relight the extinguished home fi res. Some of them want to build new buildings, in locations with a view. It is important

to make them aware of the existence of the value of the whole. There is also room here for the development of tourism, primarily on the edges of the park, with the expert restoration of buildings, just as the Ministry of Tourism initiated for the Croatian wooden and traditional houses. There are still things that can be restored, so that it all doesn’t end up in the crusher to make hardcore for concrete and tarmac. Apart from tourism as I have mentioned, it is also possible to restore branches of the economy which at one time employed people, but have been forgotten. Who still remembers the collection points for selling Velebit raspberries, milk, medicinal herbs, not to mention wooden items?

In three words: Apolitika in Abundance!

At whom is this book aimed and what was your cooperation like with the local community, the administration of the protected areas in Velebit or those involved in drawing up spatial plans?

The book is primarily aimed at the small number of people who live on Velebit and their descendants, who have emigrated, precisely to arouse their awareness of the signifi cance of their presence on the mountain. It may also be of use to art historians, architects and spatial planners,


sociologists, ethnologists, mountain walkers, potential investors and others, as well as those who should be thinking on a strategic level of the spatial development of Croatia, especially from the aspect of population density.

The cooperation you asked about does not exist, although I occasionally come across commissioned studies that quote me. It is nice that there are many that are expert and even more expert. Like if in your county spatial plan you fi nd a sentence on the need to restore homesteads, or even when a regional offi ce (or a body at state level) requests in the area of Krasno a coastal roof. Many are called but few are chosen, and the copy-paste method is very well-used.

What is your personal message to the readers of your book?

Let us bring people back to Velebit and make life possible there!

By this I fi rst of all mean the indigenous community, not tourists and the employees of the protected area administration. In the meantime we have protected everything except people. As they were driven away throughout history, so it is today. The bio-centric approach here is completely out of alignment with an anthropocentric approach. Who knows this area better than the original inhabitants and their descendants? Who can protect it better? Since there have been no people on Velebit, there

is no livestock, the meadows are disappearing. It is certainly vital to systematically count the wolves, the bears, salamanders, bats and edelweiss, sibirea croatica and many other valuable species and breeds. We count the people every ten years in the population census, but it seems that it doesn’t bother us that those results show without exception a drastic downward trend. Even without the historical external enemy, in the fi rst independent national state. The national identity does not exist without its architectural heritage, and it, whether it is protected or not, cannot survive without its heirs.

Perhaps there is someone like that amongst the readers of my book, or of this issue of CREN?!


Thank you on behalf of our editor’s offi ce and our readers for this interview for the CREN. We kindly ask you to introduce yourself to our readers.

I am director in the Tax Division of Deloitte Croatia, and head of division for tax services in Croatia and Bosnia and Herzegovina. My career began in Arthur Andersen, and after that I worked for 4 years in the industrial sector (Holcim, Lura), at various positions in the fi nancial department, and for the past 7 years I have worked in Deloitte.

Since 2006, I have been the president of the Association of Tax Experts, which is an association that gathers people who work in the fi eld of taxes and tax advisory services.

I actively participate in the work of the Round Table, which gathers leading experts, analysts, architects, urban planners, sociologists and economists. For more than two years, we have systematically worked on developing measures to revive the real estate

This system has its advantages and disadvantages.

What are in your opinion the advantages, and what are the disadvantages of this system?

Experience of countries that introduced this system showed that such a uniform tax rate and a simple taxation system usually reduces gray economy. And precisely due to these effects, some countries recorded a growth of tax revenue after the introduction of this scheme. In some countries, this increase amounted to as much as 20% in the fi rst year. Furthermore, a simpler system usually

market, inform the public and improve the overall business and investment climate in Croatia.

Can you please comment on proposals made in relation to introducing the system of proportional tax rates, or the “fl at tax” and explain what kind of a tax system this is?

The proportional tax rate or as it is called the “fl at tax” is the one where tax rate does not change by changing the taxation base. This means that for any taxation base amount, the applied tax rate is the same, but nominal amounts of tax are different.

Dražen NimčevićDirector, Tax Advisory Division Deloitte Croatia

“I feel that moving a part of the taxation burden from income to other taxation forms (rents, capital income), and even the controversial property taxation, is necessary if we want to improve our competitiveness.”



reduces the tax collection costs, so that the net effects of taxation are even higher.

Critics feel this is not just, because different levels of income are taxed with the same rate, which undermines the principle of just progression, under which higher income is taxed with higher rates.

What would this be like from Croatian perspective?

As for Croatia, I feel this is a better model than the existing one. In Croatia, there is a great imbalance of taxing labour and consumption in comparison to capital.

Namely, almost the entire tax burden in Croatia relies on the gross prices of labour and on consumption. We are among the leading countries in terms of levies on salaries, and we are paying almost the highest VAT rate in the EU. The consequence is too expensive labour force, which pays very expensive prices for its consumption. Furthermore, Croatia has quite a high level of prices in comparison to other transitional countries. High personal income tax and social contributions make labour more expensive, and expensive products and high VAT result in high prices, which reduce the purchasing power, the consequence of which is pressure on employers to increase net wages.

I feel that moving a part of the taxation burden from income to other taxation forms (rents, capital income), and even the controversial property taxation, is necessary if we want to improve our competitiveness.

The new VAT Act, which came into force on the day of Croatia’s accession to

the European Union, introduced some amendments. To what extent did the VAT taxation scheme change? What operations will be most infl uenced by those changes and in what way?

The new VAT Act is fully aligned with the Directive 2006/112/EC and with other directives, which regulate this area at the EU level. Although the old VAT Act, which was in force in Croatia until July 1, was for the most part aligned with the mentioned directives, there were signifi cant changes with respect to business operations between entrepreneurs who have their registered headquarters in different member states. Namely, the transactions between those entrepreneurs are no longer considered export-import, and the rules applied to them are the rules on the acquisition and supply of goods within the EU. Given that the Customs Administration no longer has its role with respect to those transactions, the burden of collecting adequate evidence for transactions with other EU entrepreneurs is on the taxpayers themselves. The taxpayers will have to harmonise and organise their operations in a way that they ensure availability of all evidence related to these transactions, in order to avoid potential taxation in both states.

The taxpayers have to inform the Tax Administration on these transactions

using the new forms, which are regulated by the new VAT Regulation.

As for service provision, the main rule on the place of taxation in relations between taxpayers has changed, and the services are taxed in the place of headquarters of the service recipient, although there is a series of exceptions to this rule.

An important amendment is also that according to the new Act, the VAT and the right to deduct input VAT are calculated in the same month (same taxation period), and this will certainly have a positive impact on taxpayers’ cash fl ow.

According to the new VAT Act, as of 1 January 2015, building plots, which are now taxed at 5% will become subject to VAT taxation. What is your opinion on that?

Although this will require some time to adjust, just like the whole new system, I believe that the mentioned provision is good, because property transfer tax is a non-deductible cost in a large number of cases, although the property remains in the commercial sphere.

Let me explain, the act proposes that buildings or parts or buildings and land, on which they are built are taxed with VAT before they are occupied for the fi rst time, and after they become occupied, they will no longer be subject to VAT. However, it needs to be mentioned that the act also gives the right to choose the tax on acquisition of buildings and land, provided that the taxpayer has the right to fully deduct the input VAT. This right can be

“An important amendment is also that according to the new Act, the VAT and the right to deduct input VAT are calculated in the same month (same taxation period), and this will certainly have a positive impact on taxpayers’ cash fl ow.”

“DITS is the acronym of Deloitte International Tax Source, it’s a tool, which makes it possible to have constant online access to up to date information about tax rates and taxation forms in almost all countries across the globe, and also to the basic information on the way of taxation in those countries.”


HRK 12,000 net salary per month, which objectively is not a high income level. Should anybody who can live a decent life off their salary be taxed at such drastic rates?

Have you identifi ed what are the main obstacles in the Croatian taxation system, which infl uence the investment activity? How would you remove them, and what effects would be made by removing these obstacles?

Besides the high rates, investment activity is hindered by frequent and unclear changes to tax legislation, and the fact that new legislation is sometimes even applied retroactively and has effects on past business operations, which results in a lot of legal uncertainty. The example of introducing the capital gains tax, which is also applied to profi t retained from previous years, where the criterion for taxation is the moment when the

dividend is paid, and not the period for which this dividend is paid, is unfortunately one example of this approach.

What is your opinion on the Strategic Investment Act?

It is obvious that the existing Investment Promotion Act was not

suffi ciently attractive for investors, so I welcome any change that can alter the investment climate. However, the controversial bill is not in line with European good practice, particularly not with respect to environmental protection, so I hope that the altered version will remove the defi ciencies of the previous act.

In cooperation with the business daily magazine Business.hr, Deloitte presents the project of 500 largest companies in Central Europe, at the annual level. What is the ratio of Croatian companies in this listing at the level of Central European region, and how competitive are we?

Same as last year, this year Croatian companies accounted for 2.4 percent of the Deloitte list, looking at the number of companies, and also in terms of revenue they had in 2012. Situation was somewhat better two years ago, when the share of Croatian

companies amounted to 3 percent. Traditionally, it is the companies from Poland and the Czech Republic that are most represented, with the Polish companies accounting for as much as one third of this list. On the other hand, the banking sector is somewhat more developed in Croatia, so the share of banks among the 50 largest in Central Europe accounts for 6 percent. The

applied at the moment of performing the transaction, provided that the Tax Administration is notifi ed of this.

Your company, which does business internationally, has developed the DITS system. What is DITS?

DITS is the acronym of Deloitte International Tax Source, it’s a tool, which makes it possible to have constant online access to up to date information about tax rates and taxation forms in almost all countries across the globe, and also to the basic information on the way of taxation in those countries.

It’s an extraordinary tool for any company that plans to expand its business anywhere in the world, and it provides you more than just basic information, it makes it possible to compare individual locations by individual tax forms, it provides you the fresh news on any changes to the taxation rates and their infl uence on business operations.

What is the Croatian taxation system like if compared to the taxation systems of the neighbouring countries?

Unfortunately, it is largely uncompetitive and expensive, I should say. The fact that we are among the leading countries in the world in terms of the amount of taxation on salaries up to USD 100,000 gross per year, and the fact that we have had this leading position for almost a decade, has a negative impact on any potential investor.

In most countries of the region, the level of taxation and contributions at that income level is approximately one third to the state, and two thirds to the worker, whereas here it’s the opposite, approximately one third to the worker, and almost two thirds to the state. Many will say that USD 100,000 is a large amount, so that it is logical that high salaries are taxed progressively. However, when you turn this USD 100,000 gross into USD 30,000 net, and divide it by 12 months, you will arrive at the amount of approximately

“Besides the high rates, investment activity is hindered by frequent and unclear changes to tax legislation, and the fact that new legislation is sometimes even applied retroactively and has effects on past business operations, which results in a lot of legal uncertainty.”

“The only way out of this is to reduce taxes and contributions from salaries, and to move the tax burden to those forms of taxation, which can lead to lowering prices, and to increasing the purchasing power. ”


situation on the scale of 50 largest insurance companies is identical to the situation on the scale of 500 largest companies, with Croatian insurance companies accounting for 2.3 percent of the Deloitte scale. In future, we can certainly expect this industry to develop further.

How should tax policy be designed to increase GDP?

As I have said, the key problem is the fact that the budget system is focused

on taxing consumption and income from labour, i.e. salary contributions. Such a tax system makes life in Croatia expensive, and the purchasing power based on salaries, which are so burdened with the tax, is low, it results in trade unions pressuring the employers to raise the salaries. The result is that our average salary level is among the highest in Eastern Europe, but with this salary you can buy much less than in other parts of the region. All this robs Croatia of its competitiveness in terms of prices and generally.

The only way out of this is to reduce taxes and contributions from salaries, and to move the tax burden to those forms of taxation, which can lead to lowering prices, and to increasing the purchasing power.

That is why I welcome the changes to the taxation system.


3. STATISTICS3. STATISTICS

3.1. Average Asking Prices of Real Estate Offered for September 2013.

Average is calculated on the basis of the currently quoted prices on the Burza nekretnina d.o.o. (Real Estate Stock Market ltd.), which is available online: www.burza-nekretnina.com.

According to gross indices, in July 2013, as compared to July

2012, construction works decreased by 0.7%. According to

working-day adjusted indices, in July 2013, as compared to

July 2012, construction works decreased by 4.5%. According

to seasonally adjusted indices, in July 2013, as compared to June 2013, construction works decreased by 1.3%.

Advice: Construction work indices, July 2013, Central bureau of statistics, Zagreb, 2013

3.2. Statistical Reports of the Central Bureau of Statistics from the Area of Construction

3.2.1 Construction work indices, July 2013

average price EUR/m² price range EUR/m²

ZAGREB

Housing

Apartments 1.933 549 – 6.667

Houses 1.443 312 – 9.167

Commercial space

Offi ces 1.839 700 – 4.865

Business premises 1.985 722 – 7.500

Offi ce blocks 2.059 132 – 3.793

COAST

Housing

Apartments 2.378 214 - 8.196

Houses 1.646 90 – 18.269

Commercial space 1.845 80 - 4.338

Tourist facilities 1.915 146 – 15.748


Value of new orders:

- in the second quarter of 2013 increased by 9.7%, as

compared to the same period of 2012.

- in the period from January to June 2013 decreased by

1.0%, as compared to the same period of 2012.

Value of construction works done with own workers:

- in the second quarter of 2013 decreased by 0.1%, as

compared to the same period of 2012.

- in the period from January to June 2013 increased by

1.3%, as compared to the same period of 2012.

In the period from January to June 2013, business entities

employing 20 or more persons completed 1.327 dwellings,

which was by 1.3% less than in the same period of 2012. At

the end of June 2013, these entities were working on 3.500

dwellings (uncompleted dwellings), which was by 22.7% less

than in the same period of 2012.

Advice: Completed construction works, orders and residential

construction, business entities employing 20 or more persons,

second quarter of 2013, Central bureau of statistics, Zagreb,

2013

3.2.2 Completed construction works, orders and residential construction, business entities employing 20 or more persons, second quarter of 2013

In 2012, there were 6.047 buildings completed, of which

81.8% were residential and 18.2% non-residential ones.

The fl oor area of completed buildings was 2.690.013 m2,

which was by 1.1% more than in 2011. There were 11.792

new dwellings completed with the average useful fl oor area of

86.3 m2. By type of works, the greatest number of dwellings

(92.8%) was built as new constructions (including renewals of

dwellings heavily damaged in the war etc.), 6.5% as additions

(extensions) on existing buildings and 0.7% as conversions of

a non-residential space into a residential one.

Advice: Completed buildings and dwellings, 2012, Central

bureau of statistics, Zagreb, 2013

3.2.3 Completed buildings and dwellings, 2012


PUBLISHER:

Filipović Business Advisory Ltd.Trg bana Josipa Jelačića 3/V10000 Zagreb – CroatiaTel: +385 1 481 69 69 Fax:. +385 1 483 80 60e-mail: cren@fi lipovic-advisory.com

It is our wish that the Croatian Real Estate Newsletter / CREN be a sour-ce of speedy and quality information for all who are active in the real estate sector – developers, planners, contractors, mediation agencies etc.

Please send your comments, proposals and opinions to cren@fi lipovic-advisory.com to help us improve CREN and make it the leading medium on the Croatian real estate market. Editorial staff: Vladimir Filipović – editor-in-chief, Natalija Kordić, Tanja Marković, Bojana Mikelenić, Marija Noršić and Petra Škevin.

Croatian Real Estate Newsletter - NIVAS · Croatian Real Estate Newsletter Volume 86, October 2013...

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