PURCHASING AS A PRIVATE INDIVIDUAL

In general, foreign individuals can purchase and own property in Croatia provided that the condition of reciprocity is satisfied. The condition of reciprocity is satisfied if Croatian individuals can legally purchase and own property in the country of origin of the foreign individual who intends to purchase property in Croatia.

It may take the Ministry of Foreign Affairs up to eighteen months to process and grant permission to purchase providing the condition of reciprocity is satisfied. The solicitor acting for the Purchaser will be notified when this is confirmed and he may then proceed with registration of Title in the Land Registry.

In addition to the purchase price of the property, the Purchaser would be wise to budget for an additional 10-12% to cover agent’s fees, solicitor’s fee, notary’s fee, property transfer tax of 5%, and utility transfer fees.

The requirement of a foreign individual to obtain confirmation of reciprocity from the Croatian Ministry of Foreign Affairs to purchase real estate can be avoided if the foreign individual registers a corporate entity in Croatia, such as a Croatian Limited Liability Company for which the foreign individual can be sole shareholder.

Once an intending purchaser opens up a company in Croatia, that company can enter into a contract for the purchase of property and avoid having to wait for permission from the Ministry of Foreign Affairs.

The base capital required is kn20,000 (approx..€2,700).

The fees for setting up a company are listed in our Fee Schedule.

Please note that it is advisable to have a solicitor undertake a title search and to participate in the drafting of any contract for the purchase of property in Croatia.
Please note that for title and planning searches outside of the lawyer’s jurisdiction, additional expenses will be due. Legal fees are generally a matter of agreement between the lawyer and the client. In some cases the lawyer may require a retainer fee or deposit to apply to his expenses or future charges.

If the services of the lawyer are terminated prior to the conclusion of the sale, the client will be responsible to pay for the time that the lawyer has spent performing the legal work, i.e. meetings, research, drafting documents, translations, phone calls, depositions and any out-of-pocket expenses.

Once you and your solicitor are satisfied that everything is in order, the contracts can be exchanged. You sign a copy of the contract which is passed to the seller, and the seller signs a copy of the same contract which you receive. Once contracts have been exchanged both parties are legally bound to follow through with the transaction. You can no longer change your mind – if you pull out you will lose your deposit. You also now have no need to worry about gazumping because if the seller pulls out he will have to pay double the deposit. At this point you hand over a non-refundable deposit. This is normally 10% per cent of the purchase price.

Real Estate Transfer Tax

Real Estate Transfer Tax applies to every sale of property, new and resale, in the amount of 5%.

Generally speaking there are two types of tax, tax on new-builds and tax on second hand property. The basis on which Property Transfer Tax is calculated depends on whether the seller is a VAT registered company or a private individual. If the seller is a private individual then Property Transfer Tax at 5% is payable on the total value of the property. If the seller is a VAT registered company then the price is inclusive of VAT and 5% is payable on the value of the land only.

Real Estate Transfer Tax is assessed on the market value of real estate, as determined by the local tax authorities.

If the property is sold within a period of three years after purchasing, and is sold for a higher price than originally purchased, the seller is obliged to pay Capital Gains Tax at 35% on the difference between the purchase price and sales price.

It is advisable to have a solicitor undertake a title search and to participate in the drafting of any contract for the purchase of property in Croatia.

Holiday Home Tax

Taxes on holiday homes are charged per square meter based on living space depending on the area where the property is location. The County Council determines the rate but as a general rule the rate is Kn8-Kn15 per square meter.

Personal Income Tax

The rates of personal income tax in Croatia are 15%, 25%, 35% and 45%.

Tax on Rental Income

There is a personal allowance of 30% after which income is taxed at 15% up to a total annual gross rental income of Kn85,000 per owner. When this level is achieved then the owner is obliged to registered a limited liability company in Croatia.

Capital Gains Tax (CGT)

Capital Gains Tax is payable at 35% of the gain from real estate if sold within three years of purchase.

Capital Gains Tax is not payable on real estate if sold to an immediate member of the family or close relative.

Tax on other gains such as shares and bonds is nil.


Wealth Tax

There is no Wealth Tax in Croatia.
Pensions that are received from abroad are exempt.

Commercial and private transactions in Croatia are highly bureaucratic and tend to take more time and effort to complete in comparison with the same procedures in Western European countries.

1. AGENT’S FEES (Our Fee: 3% of purchase price plus VAT)

• Sourcing, arranging viewings, assisting in negotiations, carrying out simultaneous translations.
• Introduction to a property surveyor, land surveyor, architect, accountant, public notary..

2. COMPANY FORMATION (On Request)

• Arranging company formation with a Notary and registration in the Chamber of Commerce. (Notary’s fees + taxes priced separately).
• Arranging registration of the company with the State Statistics Bureau
• Arranging simultaneous and/or written translations of company documents by court appointed translator (priced separately).
• Arranging Company Bank Account in kunas and foreign currency.
• Arranging the request for transfer of the Company’s share capital to the Company Bank Account.
• Introduction to an Accountant for accounts maintenance, VAT registration, annual tax returns, etc.
• Arranging Rubber Stamp

3. REGISTERED COMPANY ADDRESS (On Request)

• Receiving, holding/forwarding of post.

4. TRANSFER OF UTILITIES (On Request)

• Telephone
• Electricity
• Water
• Communal Levies

5. SOLICITOR – CONVEYANCING (On Request)

• Title/Planning Searches
• Preparation of Preliminary Contract (translations priced separately)
• Preparation of Final Contract (translations price separately)
• Application to Ministry of Foreign Affairs (private individuals only)
• Arranging valuation of the property by the local tax authorities
• Arranging the payment of Stamp Duty to the Tax Authorities
• Registration of Title in the Land Registry.