Croatia Real Estate- Introduction
To some, Croatia is reminiscent of how the Mediterranean once was.

Regardless of the property you are after, it is wise to work with a real estate agent in Croatia. Agents may offer a one-stop service to accommodate the increasing interest in Croatian property from foreign investors. The one-stop service should include contacts to notaries, solicitors and builders. For best results, commit to work with a reputable agent.

The real estate agent will most likely charge fee between 40 and 80 euro ($50 to $100US) for showing a property to you. The fee is refunded if the property is bought. Individual properties will also likely be listed with several agents with various prices, so check these prices to make sure a low price is found.

Croatia Real Estate- Restrictions on Foreign Ownership
To purchase real estate in Croatia, foreign buyers must submit an application to the Ministry of Foreign Affairs. The time to get approval from the Ministry can take up to 12 months, and then the foreigner is free to purchase property. By taking advantage of the power of establishing a Croatian corporation, this lengthy process may be avoided.

Croatia Real Estate- Ownership Options
Foreigners will find three ways to purchase property in Croatia, and be able to take advantage of the growth the country is experiencing. For each of the three ways to purchase real estate, there is lots of paperwork involved, but the process is fairly simple. The major difference between the three options is the time involved with the title transfer.

1- Purchase through a Croatian company
Incorporating a Croatian company will be the easiest and fastest way to purchase real estate. A company is considered an entity in Croatia and will not be subject to the lengthy waiting times others would encounter at the Ministry of Foreign Affairs.

A foreign person is able to entirely own and control a domestic company in Croatia, and this is also the most tax efficient way to buy and sell in Croatia. No restrictions are in place when purchasing land of any type in Croatia, when doing so through a company. A company is able to purchase coastal, forested, and agricultural land, as well as the possibility of cultural monuments. More advantages of buying property in Croatia through a company apply to purchasing large properties, investing in several properties, or running them as a business.

Registering your company in the district the property is located is required, and this process can take from a week to a month, depending on how backed up the court is.

In Croatia, the process of incorporating is straightforward. A lawyer will be able to deal with the majority of the paper work by signing a Power of Attorney. The cost to incorporate in Croatia can be as much as $5,000, and, during the process of incorporating, an additional capital reserve of around $3,700 will need to be in a Croatian bank account, in your name. The start-up capital may be withdrawn the day the company is listed in the corporate register.

Registering your property with the Land Registry can be done once all the legal and contractual obligations related to the incorporation of your company and the sale of the real estate is complete. The final and most significant step of land ownership in Croatia is the physical signing of the Land Registry ledger, then allowing you to claim the title.

Purchasing property in your own name is another way to purchase real estate, and there are two options. Both options require the application for permission to purchase the land through the Ministry of Foreign Affairs. The process of purchasing property in your own name can take from three weeks to 12 months and possibly longer.

The system is slow, but one advantage of waiting for the Ministry of Foreign Affairs to manually process the paperwork, is that the purchase will go through many checks reducing the chance of any problems with the title or the validity of the sale.

If any papers needed is missing from the application, the Ministry of Foreign Affairs will return your application to you, requiring you to possibly restart the process from the beginning, so make sure everything is in order.

Having proper, current paperwork in Croatia is a must. Any document that is six months or older at the time of application, a new one will be required. You could be set back a whole year by not having the correct paperwork when submitting your application.

2- Purchasing property in your own name- the 10% pre-contract method
To have the property removed from the market, a down payment of at least 10% must be made. 10% is usually all that is needed, but with the growing demand for Croatian real estate, the whole amount may be required to be held for deposit.

It is Croatian law, that all documents must be translated and notarized for all people who do not speak Croatian. So this is an essential step to complete before handing over any money or signing anything. The notary fees for this will be minimal, for only the names of your self and the seller will be verified in the Notaries presence.

Applying to the Ministry of Foreign Affairs is the next step, to get the necessary approval for the purchase. Upon granted approval, and the documents and final contracts are checked, translated and notarized, they are then submitted to the office of the Land Registry. There, the title will be conveyed, and once the ledger is signed, the property is yours.

While waiting for the Ministry of Foreign Affairs to do their part, as a buyer you will have some protection. If the seller breaks the contract, the seller will be required to pay double the 10% deposit to the buyer. For this reason, and because property prices have been appreciating of up to 30% a year, it would be better to start the deal with a higher deposit of 20% or 30% or more. Breaking contracts is not the best way to do business, but is has happened in Croatia.

This route of purchasing property has disadvantages; the first being that the property cannot be occupied while waiting for the Ministry of Foreign Affairs, unlike the full payment method, and you will not be able to obtain financing.  

3- Purchasing property in your own name- the full payment method
 By paying for a property in full, you will be able to occupy the property while waiting for approval from the Ministry of Foreign Affairs. Because the land registrar has not been signed at this point, the property will not be yours legally and the authorities will recognize this fact. Until the land registrar is signed, utilities and building permits will not be possible to obtain.

So if you pay in full, occupy the premises and require utilities, arrange with the previous owners to keep the utilities in their name. If the utilities are shut off before the property is legally yours, only the previous owners will be able to turn them back on, unless approval from the Ministry of Foreign Affairs comes through. It is possible for both seller and buyer to personally make arrangements with the utility office for the utilities to remain in the seller’s name, and the payments will be debited from the buyer’s bank account.

A positive aspect of paying in full is having the ability and authorization to start refurbishments or renovations on any buildings or structures as long as the modifications stay within the foundation of the pre-existing structure.

Another important step to protecting yourself is to have your lawyer put markers on the deeds, so it is clear that ownership of the property is being applied for. Otherwise, the property could be mortgaged or sold from under your feet by the vendor while permission is being applied for from the Ministry of Foreign Affairs.

  Croatia Real Estate- Transaction Costs

You will find the fees charged by real estate agents in Croatia are reasonable. Both buyer and seller will generally each pay about 2% to 3% of the purchase price. Some agents may charge commissions up to 5%. Fees relating to legalities will amount to 1% or 2% of the purchase price.

Croatia Real Estate- Real Estate Taxes

Transfer Tax- Registering the purchase with the local tax authority must be made within 30 days of the finalization of the sales contract, so payment of the Croatian equivalent of stamp duty can be arranged. This tax rate is 5% of the purchase price for all types of property built before December 31, 1997. The price of the real estate in the sales contract and the value estimated by the tax authority in charge of the local area determines this figure.

The tax authorities must be paid in full within 15 days of receiving the news of the exact tax amount. Interest is charged for everyday the payment is late if the is not paid by the due date.

This tax can be paid in a foreign currency as well through a bank or post office money transfer. On the day of payment, the amount can be converted into Croatian kuna by the National Bank of Croatia at the middle exchange rate.

Inheritance and Gift Tax- Exemption from this tax may be possible depending on the relationship between the recipient and the donor. Otherwise, the recipient of inherited or gifted Croatian real estate may need to pay the standard tax rate of 5% for inherited or gifted property or estates.

Sales Tax- VAT applies to the purchase of new property through a Croatian corporation, meaning buildings constructed after December 31, 1997. The tax rate is 22%. VAT will not apply to individual buyers.

Property Tax- Property tax is not applicable in Croatia.

Rental Income Tax- Any earnings made from renting a Croatian property is subject to Croatian income tax. The income tax rate for corporations is 10%. Companies operating in the Free Zones are subject to a 0% tax rate. Individuals are subject to a rate of 25%.

Capital Gains- No capital gains tax on your Croatian property will be made if one of the following requirements is met:
-    The property was occupied by you while you owned it.
-    The property was held by you for more than three years.
-    The property was sold to your spouse or member of your immediate family.

Croatian companies will pay a standard corporate income tax rate of 20%. For companies operating in the Free Zones this is reduced to 10% or in some cases 0%.


Croatia Real Estate- Financing

Financing in Croatia is a difficult endeavor. Foreigners with income remitted from abroad will find that domestic banks will prefer not to lend to them, and foreign banks prefer not to lend to those who would like to purchase real estate in Croatia. This is a result of a maxed out legal system. Banks will usually charge a fee on incoming transfers.