In the process of harmonisation of the Croatian VAT system with the Sixth EU Directive, certain changes will need to be introduced in the taxation of real estate. According to the provisions of the Sixth Directive, buildings and building land are subject to VAT when they are delivered by a VAT-registered entity. But deliveries of buildings after first occupation and deliveries of undeveloped land are exempt.
The objective of the research was to determine the economic effects of the introduction of VAT on building land. The effects on the price of real estate, the effect on the costs of the taxpayer, and the effects on local and central government budgets were analysed. The study, which was prepared for the needs of the Tax Administration in 2007, was updated with new data in 2009.