1 January 2006: 10% VAT Rate in Tourism and Division of HŽ in Four Companies

Starting with 1 January 2006, Croatia introduces the new unified 10% VAT rate for tourism (services of accommodation with/without breakfast, half/full board accommodation in all types of commercial hotel-restaurant objects, agency provisions for the named services). All that will finally level the VAT rate for domestic and foreign tourists.

Up until now the percentage rate for foreign tourists visiting Croatia via agencies, was 0% while domestic tourists as well as foreign tourists visiting Croatia on their own had to pay a 22% VAT rate when it came to accommodation and other services.

According to the Croatian Ministry of Finance in 2006 their losses will be approximately HRK 100 million, based on the described VAT novelties.

At the same time will be introduced the bill regulating the division of the Croatian Railways (HŽ) into four companies: one in charge of HŽ management, maintenance and construction of rail infrastructure, one in charge of passenger transport, a cargo transport company, and a rail haulage company. Also planned is the founding of an umbrella railway company owned exclusively by the state.

The whole division process should last approximately six months, ending with 1 July 2006.