Post by radovic on Sept 7, 2008 14:05:35 GMT -5
Real Estate Market Suffers From Rental Tax Evasions
September 02, 2008
Real estate in Montenegro continues to attract more tenants every year despite rising prices. However, the authorities in Montenegro still do not have any record of the number of flats being rented. Currently average amount charged for a flat ranges between 240 Euros and 800 Euros. To make things worse, the state doesn't even hold records of thousands of real estate owners who rent out their flats every year to travelers or long-term tenants. Montenegro is an attractive alternative for the tourists from neighboring Mediterranean countries as the state has some affordable options even with a sea view.
The most expensive apartments in the country are the most luxurious ones with a price range of 1,500 Euros and 2,500 Euros. Some of the more attractive options are located on the Montenegrin coast. Today, Montenegro has become a hot-spot destination for tourists from Germany, Switzerland, Austria and the U.S. But the authorities have not taken enough measures to keep track of incomes from the real estate industry, despite the Montenegrin tax laws which require records be kept of the incomes of private citizens or companies, including the income received from apartment rentals. Under current laws, the owners have to pay 15 percent of the revenue generated from renting an apartment for families or commercial purposes. But the Tax Authority in Montenegro feels helpless as it is difficult for them to stop practices of renting out real estate without agencies and without contracts.
The government agency said that the situation can only be handled by other state-appointed authorities. There are some real estate agents in Montenegro who have been actively helping home owners rent out real estates in exchange of good commission. However, some home owners have stopped using the services provided by these agencies as they prevent them from evading taxes. Real estate owners have started relying on local newspapers and online websites for advertising. Agencies only come into picture when the real estate is expensive or the apartment should be rented to foreign travelers. Some reports suggest that most of the time the real estate agencies sell and rent apartments and houses without valid contracts.
Since the government cannot keep track of the selling and rental of houses, no one gets caught evading taxes on rentals. Owners do not report apartments that are cheap and they are able to find tenants very quickly. Due to this negligence, the state is loosing profits to the real estate owners. In many cases, the person who is renting an apartment does not even know who the real owner of the building is. Meanwhile, agencies have expressed concern about declining real estate profit and the increase in the illegal renting of apartments. Many agencies are demanding the introduction of European business practices into Montenegro's real estate industry, which would not only restrict the owners from renting out the apartments on their own but also stop illicit practices.
Real estate agents want the Montenegrin government to change property laws and adopt changes similar to the steps taken by Austria, Germany and Switzerland, where a tourist cannot rent an apartment or a house without the intervention of an agency. Property laws can make it compulsory for the people who would like to rent to pay for the lease through a bank account. This will help the government to keep track on the number of purchases or rentals. As a result of restricted real estate laws not many foreigners are able to able to purchase large chunks of land. But real estate in Montenegro may soon change as the majority party in the ruling coalition, Democratic Party of Socialists, which is headed by Prime Minister Milo Djukanovic, is pushing for liberalized rules. It will require a two-third majority to enforce new land purchasing laws.
September 02, 2008
Real estate in Montenegro continues to attract more tenants every year despite rising prices. However, the authorities in Montenegro still do not have any record of the number of flats being rented. Currently average amount charged for a flat ranges between 240 Euros and 800 Euros. To make things worse, the state doesn't even hold records of thousands of real estate owners who rent out their flats every year to travelers or long-term tenants. Montenegro is an attractive alternative for the tourists from neighboring Mediterranean countries as the state has some affordable options even with a sea view.
The most expensive apartments in the country are the most luxurious ones with a price range of 1,500 Euros and 2,500 Euros. Some of the more attractive options are located on the Montenegrin coast. Today, Montenegro has become a hot-spot destination for tourists from Germany, Switzerland, Austria and the U.S. But the authorities have not taken enough measures to keep track of incomes from the real estate industry, despite the Montenegrin tax laws which require records be kept of the incomes of private citizens or companies, including the income received from apartment rentals. Under current laws, the owners have to pay 15 percent of the revenue generated from renting an apartment for families or commercial purposes. But the Tax Authority in Montenegro feels helpless as it is difficult for them to stop practices of renting out real estate without agencies and without contracts.
The government agency said that the situation can only be handled by other state-appointed authorities. There are some real estate agents in Montenegro who have been actively helping home owners rent out real estates in exchange of good commission. However, some home owners have stopped using the services provided by these agencies as they prevent them from evading taxes. Real estate owners have started relying on local newspapers and online websites for advertising. Agencies only come into picture when the real estate is expensive or the apartment should be rented to foreign travelers. Some reports suggest that most of the time the real estate agencies sell and rent apartments and houses without valid contracts.
Since the government cannot keep track of the selling and rental of houses, no one gets caught evading taxes on rentals. Owners do not report apartments that are cheap and they are able to find tenants very quickly. Due to this negligence, the state is loosing profits to the real estate owners. In many cases, the person who is renting an apartment does not even know who the real owner of the building is. Meanwhile, agencies have expressed concern about declining real estate profit and the increase in the illegal renting of apartments. Many agencies are demanding the introduction of European business practices into Montenegro's real estate industry, which would not only restrict the owners from renting out the apartments on their own but also stop illicit practices.
Real estate agents want the Montenegrin government to change property laws and adopt changes similar to the steps taken by Austria, Germany and Switzerland, where a tourist cannot rent an apartment or a house without the intervention of an agency. Property laws can make it compulsory for the people who would like to rent to pay for the lease through a bank account. This will help the government to keep track on the number of purchases or rentals. As a result of restricted real estate laws not many foreigners are able to able to purchase large chunks of land. But real estate in Montenegro may soon change as the majority party in the ruling coalition, Democratic Party of Socialists, which is headed by Prime Minister Milo Djukanovic, is pushing for liberalized rules. It will require a two-third majority to enforce new land purchasing laws.