became an independent state in 1991 following the break-up of the former
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
Sava rivers in the
east. Over one third of Croatia is forested.
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
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
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.
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.
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.
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.
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
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.
Final costs typically 109% of purchase price
+ Legal Disbursements (excluding Company set-up costs if that route is
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
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.