Minister vows to make sure VAT on tourist accommodation be lowered

ZAGREB, 24.7.2014.

Croatian Tourism Minister Darko Lorencin said on Thursday that, until the end of his mandate, he would try to see to it that the Value Added Tax (VAT) rate on tourist accommodation be brought back to 10% after it was raised to 13% at the start of 2014.

The minister gave this promise after, earlier in the day, the Croatian Hospitality Employers' Association (UPUHH) called on the government to reduce the VAT rate on tourist accommodation from the present 13% to 5% as of January 1, as that would bring 15 billion kuna in new investments, 11,000 new jobs in the hotel industry and an extra 6 billion kuna for construction workers' wages over the next five years.

Lorencin said that an increase in this rate was the contribution of the tourism sector to the consolidation of the state finances.

The higher VAT on tourist accommodation has helped collect some 700 million kuna in the state budget, he said, admitting, however, that this measure lowered the sector's profitability.

Lorencin believes that this VAT rate should be a maximum 10%, and he would battle for this goal until the end of his term.

UPUHH said that this year's increase of the VAT rate on accommodation from 10% to 13% further threatened Croatia as a tourist destination and investments in the tourist industry.

Croatia, with the 13% VAT rate on tourist accommodation, is followed by Spain, France and Italy, where this rate is 10%, Slovenia (9.5%), Bulgaria and Cyprus (9%). The lowest VAT rate on accommodation is recorded in Portugal (6%), Greece (6.5%) and Malta (7%), the association reported.