Two choices exist for purchasing houses in Croatia. As an individual, foreign buyers can own real estate provided that the ‘condition of reciprocity’ is satisfied. Proof is attained from the Croatian Ministry of Foreign Affairs which can take several months.
Alternatively, a foreign individual can register a company in Croatia in order to purchase a house – accordingly, permission is not required. However, purchasing a house via a company does impose tax implications.
Once property has been located and found suitable, an investor can choose to have a structural survey done on the property in Croatia if that property is a resale. There are a number of architects and surveyors in the main towns who can perform such a function although it is not a usual local practice. Once a property has been checked and a property investor decides to buy, an offer should be submitted to the vendor and if accepted the pre-contract is signed by the buyer and seller.
Three key stages exist in the buying process:
1. Reservation Contract – in order to reserve the house.
2. Preliminary Contract – for a foreigner to apply for permission to buy a house via a deposit (circa 10%).
3. Final Contract – upon signing, the final payment is made and the purchase registered with the local Land Registry. A Power of Attorney can be used if the buyer is not in attendance at this stage. It is at this stage that the final balance of the property purchase price is transferred to the vendor and all taxes and fees are due. In terms of the additional costs facing a property investor in Croatia they include but are not necessarily restricted to the following - property purchase tax of 5% and legal fees of around 1% of the purchase price.
When you buy off-plan, you will normally pay in a structured manner according to the developer or agent.
Anyone who wishes to resell their investment property in Croatia within three years of initial purchase will be subject to 35% capital gains taxation and anyone who derives an income from their property will have to pay 25% tax on their profits.
Typical Fees and taxes
• Transfer tax of 5% should be anticipated
• VAT is payable on new-build homes at 22%
• Legal fees can be between 1% and 2%
• Agent’s fees will be between 2% and 3%
Non-residents in Croatia pay income tax levied at 20% on all income earned in the country, as well as an annual property tax.
Should you choose to become officially resident in Croatia, you are liable for tax on your worldwide income.
The advice of an international taxation specialist should save you from paying more than your liability.
When considering buying a property in Croatia be mindful of the fact that Capital Gains Tax of 35% is payable on the profits made on property sold within three years of the original purchase.
After three years, no Capital Gains Tax is payable.
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