Croatia became an independent state in 1991 following the break-up of the former Yugoslavia.

The Zagorje region, north of the capital Zagreb, is a land of rolling hills, while the fertile agricultural region of the Pannonian Plain is bordered by the Drava, Danube and Sava rivers in the east. Over one third of Croatia is forested.

The Croatian Parliament (the Sabor) is a single-chamber legislative body made up of between 100 and 160 members elected by popular vote to serve four-year terms. Croatia has an economy based mainly on light industry and services. Tourism is a notable source of income. Tourists are most familiar with Croatia for its Dalmatian coast with hundreds of islands as well as the historic cities of Dubrovnik, Split and Zadar.

Six World Heritage sites and eight national parks bear witness to Croatia’s immense cultural and natural wealth. The richness of Croatia’s culture is a result of its sometimes turbulent history, first as part of the Roman Empire and then as a frontier region on the border between the Austro-Hungarian and Ottoman Empires.

Croatian cuisine includes dishes such as grilled meat, Dalmatian smoked ham, salted pilchards, sheep's cheese and paprika-flavoured salami. Croatia produces many fine wines.

Why invest in Croatia? It has much to offer the property purchaser, including an enormous variety of landscapes, a wide choice of cities, towns and villages, a great climate and wonderful beaches.

Its popularity really took off in 2001, and it promptly became one of the countries that were part of the ‘emerging market’ phenomenon. It opened up to foreign investors, who quickly took advantage of the inexpensive properties that were to be found throughout the country.

Anyone who wants ease of access from the rest of Europe, the clear waters of the Adriatic and an ever-improving infrastructure has got to consider Croatia. Croatia officially became an EU candidate country in 2004 and opened formal accession talks the following year, with a view to full membership of the European fold sometime in 2011. This is a result of the impressive progress made by the country as an independent state, and will help promote the long-term prosperity of the country.

As of February 2009, the property market in Croatia became more open to foreigners, as are now able to buy on the same terms as local Croats. This burning of red tape in the buying process will not only speed up the property buying procedure, it should encourage more buyers to purchase in Croatia with confidence.

Implications: The main issue with buying property in Croatia is to establish whether the property has a "clean" title. The property market in Croatia has only really existed in its current form for the last 10 years.  Prior to that time records were not as rigorously kept as they are now. Properties would be handed down from generation to generation and as a result a particular property could well have ended up being co-owned by several members of the same family. In some cases it could be difficult and time consuming to trace all the co-owners.

When buying a property in Croatia, it is imperative that the precise ownership of the property being purchased is established as soon as possible. It is important to verify that the seller is indeed the owner entitled to sell that property, and that the property complies with all building regulations.

Buying Process: The information below provides a simplified outline of the buying process and the typical costs involved.

Stage 1: Offer Acceptance;  The Vendor accepts buyers offer

Stage 2: Goodwill Deposit; Buyer deposits a refundable "Goodwill Deposit" usually amounting to 3% of proposed property purchase price. Funds can usually be deposited in a UK solicitors account. 

Stage 3: Initial Searches; Solicitor is engaged to carry out property searches in order to verify that the property title is clean & undisputed. Preparation of pre-contract and contract. 

If searches are OK the buyer can proceed. If the searches are not OK the Goodwill Deposit will be returned to buyer.

If the searches are OK but the buyer decides not to proceed he/she will forfiet the Goodwill deposit.

Stage 4: The buyer has to decide if he wants to buy the property privately or as in a  Company Ownership?  If the buyer decides on private ownership he/she can proceed to the next stage.

With Company Ownership there can be some advantages to creating a Croatian Limited Liability company that will own the property. Fees for this typically = Legal: €2000 Company operating capital deposit = €3000. However this needs dealing with before proceeding to stage 5.

Stage 5:  Pre-Contract; The pre-contract defines the terms of the final contract (deposit, payment terms and settlement date) Fees; These are typically - Property Deposit: 10%, Legal Fees: 1%. Should the buyer NOT proceed with the purchase past this point, the buyer forfeits the full Property Deposit, Part-Fees & Legal Fees. Should the vendor NOT proceed with the sale past this point, the vendor refunds the buyer double the Property Deposit.

Stage 6:  Contract; The contract is the final binding document. Settlement results in full payment of the final purchase price less deposit paid. Also payable is the Legal Disbursements approx €200.

Stage 7:  Ministry of Justice (MOJ) approval is required for non-EU citizens if the private ownership route taken. The MOJ verifies that the buyer is a citizen of an approved country & that the property to be purchased is of an approved type (eg, not farmland, forests, etc). Approval is not required for EU citizens or if the company ownership route taken.

Stage 8:  Land Registration; Registration of ownership with the Land Registry.

Stage 9:  Real Estate Transfer Tax (RETT). This is similar to UK Stamp Duty, 5% RETT is payable to the authorities.  Any improvements made to the property prior to MOJ approval will result in RETT being applied to the property valuation after the improvements.

LEGAL OWNERSHIP Final costs typically 109% of purchase price + Legal Disbursements (excluding Company set-up costs if that route is taken.

Taxation: Residents and non-residents in Croatia. Personal taxation: non-residents
Generally, non-residents are subject to tax on income sourced in Croatia. The current rate is 20 per cent.

Non-residents also have to pay a tax of 10 kuna (around £0.90) per square metre of their property annually.

Personal taxation: residents
Anyone spending more than 183 days per year in Croatia and/or having a property there (whether rented or owned) available for his exclusive and continuous use is considered by the authorities to be a resident for tax purposes.

Residents of Croatia pay tax on worldwide income. Rental income is normally taxed at 15 per cent. It is worthwhile looking at the exemptions that exist, as there are definite advantages in terms of ‘deemed residence’. This means that it is possible for foreigners to keep legal residence in Croatia without having to be there for any minimum length of time.

There is no wealth tax or inheritance tax in Croatia. The country has entered into double taxation treaties with 35 countries (such an agreement exists with the UK), and pensions received from abroad are exempt from Croatian tax.

Capital Gains Tax is payable by private citizens on selling their property if it is sold within the first three years of ownership, and is charged at 35 per cent of the gain. After three years, the tax is not charged, and it does not apply to private companies selling property at any time. However, company profit tax is payable at a rate of 20 per cent at all times.

Map of Croatia

LINKS

Investors

Investors Buy Leads
Investors Sell Leads
Buying in Europe
Andorra
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Gibraltar
Greece
Hungary
Iceland
Ireland
Italy
Latvia
Liechtenstein
Lithuania
Luxembourg
Malta
Netherlands
Norway
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
Switzerland
United Kingdom

Buying Worldwide
Australia
Canada
Cape Verde
Morocco
New Zealand
St Kitts and Nevis
Turkey
USA

Vendors, a Quick sale of your property
UK and Ireland
Europe

Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may also vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

12-06-2011

Click BACK TO HOME PAGE