1. What is an OIB?
An OIB is the personal identification number (PIN) that is given to anyone who enters the Croatian financial system. This includes opening a bank account or setting up a company. It is pretty much essential for anyone who owns any property. The OIB is obtained from the local tax office and it is a service that the solicitor handling the property transaction will do - normally as part of his / her fee.
More about Croatian PIN numbers you can find here: http://www.porezna-uprava.hr/en/Pages/PIN.aspx
2. What is RETT or Real Estate Transfer Tax?
The Real Estate Transfer Tax, when purchasing, is 3% (from 1/1/2019). Essentially this is a ‘Buyers Tax’. It is assessed on the value of the property and decided by the local tax authorities, rather than the agreed purchase price. The property value will not be less than the price stated in the sales contract. After the purchase has been registered, the tax office (normally) confirm that the purchase price is in accordance with the market value of the property, after which the Buyer will receive an invoice for the amount of RETT. This can sometimes takes several months, but this doesn’t affect taking possession of a property.
3. Is there always RETT?
No. Some property is exempt. There is NO RETT when the property is sold by a Company which is a VAT paying legal entity, and the company must issue an Invoice which shows VAT for the sold property. This is usually the case with ‘new build’ apartments and houses. There are still a few other exceptions when property will be exempt from RETT, but for more information about particular property you will need to contact our office.
4. Can foreigners buy and own property in Croatia?
Anyone from other EU countries can purchase and own Croatian property provided it is in a designated building zone. Private EU individuals have all the same rights as local purchasers.
Citizens outside the EU are allowed to buy with these same rights with the consent of the Ministry of Justice, provided the country (or state - if from the United States) has a reciprocity agreement between the Republic of Croatia and the country in question. For the latest list of countries where this applies, please see here:
Foreign nationals may not buy land outside designated building zones (which is normally designated agricultural land) in their private names, but they may do so by buying within a Croatian Limited Liability Company (Ltd). If any foreign citizen (EU citizen or citizen outside EU) has founded a company in Croatia, then he may buy real-estate without restrictions.
How to establish a company is explained here: https://www.hitro.hr/en/how-to-start-a-company .
We have helped many clients to buy in this manner, and can recommend lawyers who are familiar with this option, and who would include the company establishment in their fee.
5. When selling a Croatian property is there a ‘Capital gains tax’ on any profit?
For private (individual) sellers, provided that the property has been owned for more than two years, then the seller does not pay tax on any profit.
Should the property be sold within the first two years, then a ‘Capital gains tax’ of 20% is paid on the profit.
This tax is not payable within the two years, if the property was sold, and had been used solely as a private residence by the seller or his close family, throughout this time.
If the property was bought ‘off plan’ it is the land which is being bought/sold then the time starts when the ‘certificate of occupancy’ is issued, rather than when the purchase was made.
There are also tax liabilities for developers where three or more similar properties are sold within a five year period. We can put developers in touch with accountants who will examine individual developments to assess the likely tax implications.
Please note that for companies selling the property different tax rules apply.
For more on this please contact us and we will introduce you to relevant tax and accounting experts.
6. Should I hire a lawyer when I buy property in Croatia?
Yes, essential. And it should be independent, and experienced in Property Sales, not an agency ‘in house’ lawyer. It is essential that you get impartial advice and your interests are represented properly. It would be impossible to get independent advice from an ‘in house’ lawyer and would therefore be putting yourself and your Croatian property investment at risk unnecessarily.
Clients need to have full and independent legal protection when buying. There are several English-speaking lawyers in Split to recommend, and you are free to pick any lawyer you want.
7. Are International escrow account services available in Croatia?
Yes. Solicitors, Notaries Public and banks are all able to provide escrow services.
Of these, solicitors escrow accounts are used most commonly for CPS property clients, should this service be required. It’s a fairly simple option for experienced lawyers. For more information on this you will need to contact our office.
8. Can I take possession of my Croatia real estate immediately?
Usually the buyer can take possession of the property as soon as the following conditions have been met, which is normally all on one day.
1. The final contract has been signed and authorized by both parties.
2. The full purchase price has been paid.
3. A signed receipt from the seller that they have received the money, the “Clausula Intabulandi“.
Clearly this can change if anything else has been negotiated separately between the buyer and seller.
9. Is financing or mortgages available in Croatia?
Yes. It is possible for non-Croatian buyers to purchase property with mortgages in Croatia, through a very few banks, but it is a rarely used option. The reason this is a rarely used method of financing property purchases is that the interest rates are prohibitive, especially compared to other countries, particularly Western Europe. Please contact us for more information about the loan amounts and maturity.
10. Is it straight forward to transfer utility bills into my name?
Yes. One of our agents or the solicitor will explain this process which is straight forward, once the property has been handed over to you. The seller must give meter readings to the relevant utility companies to enable them to issue him / her with a final bill up to the date of hand over. The seller must settle any outstanding payments and then, with a copy of the real estate purchase contract, you can be registered as the new owner on the utility accounts. Our agents are happy to sort this on your behalf. Some utility companies require the Buyer to come personally to sign transfer of utilities to his name, in which case our agent will be happy to go with you.
11. What is the Annual (or Yearly) property tax in Croatia?
In Croatia, every property which is not a primary residence has to pay a local property tax. The amount is prescribed by the local government body. It depends on the location, but it varies from €0,75 to €2/ per m2 yearly. The annual property tax applies for properties used as holiday homes or second homes. If the property owner has signed up his residency in the property in question, then there is no annual tax on such property.
More on this: https://www.porezna-uprava.hr/en/Pages/Taxes/Tax-on-Vacation-Houses.aspx
12. Is now a good time to invest in the Croatian real estate market?
Yes. Every year since independence, and looking into the future, Croatia still offers the best value for safe, clean coastline property in the Mediterranean. Tourism is a thriving business, with easy access from Central Europe, and the ‘Return on Investment’ remains excellent.
13. What is the VAT rate in Croatia?
The current Standard VAT rate in Croatia is 25%.
14. You will hear about a ‘Notary Public’. What Do They Do?
The Notary Public is a solicitor appointed by the Croatian Government. Their role is to ensure that all the documents involved in the property transaction are valid and legal, making the transaction binding. Specifically, it is a requirement of Croatian ‘Property law’ that the Notary Public witnesses the signatures of the Sellers on the Final Contract – and he will check and witness this signature against the Identity card/or passport. Without this witnessing stage the Final Contract is not legally binding. The Buyers signature on the Final Contract does not need notarisation by a Notary Public.
Although the Notary Public notarises the signature of the Sellers on the contracts, this is not registering you as the new owner in land registry or court books. This is done by your lawyer.
Notary Public will also provide Escrow Services if required.
15. Is it possible to complete a real estate sales contract entirely from outside Croatia?
Yes. A contract can be completed from abroad.
It is a requirement of Croatian ‘Property law’ that the Notary Public notarises only the signatures of the Sellers on the Final Contracts. There is no need to notarise Buyers signatures. Buyers just need to sign the Final Contract and send it back via a guaranteed courier to Croatia.
Croatian citizen /Seller/ needs to go to any Croatian embassy or consulate in the country they are currently located (some countries don’t have an embassy or consulate, so the nearest is a compromise).
A foreigner /Seller/ can also have a contract verified outside Croatia (or other legal document) for the purposes of selling real estate in Croatia. They need to provide signed notarized Final Contract together with an accompanying Apostil Seal, if needed. For more details, then please research at http://en.wikipedia.org/wiki/Apostille_Convention.
This process of notarizing and obtaining the Apostil Seal takes up to 10 days. Documents must then be delivered via a guaranteed courier to Croatia, and must be translated into Croatian language by an official court translator, before it is able to be used as a legal document. This is an outline of the alternative way to purchase Croatian property, and we recommend planning this very thoroughly. Please consult our office before commencing this process.
16. Can a foreign company buy property in Croatia?
Yes. Foreign companies are allowed to purchase any type of property in Croatia, apart from agricultural land, forest land or national monuments.
Companies from the EU countries are allowed to purchase property with the same rights as private EU individuals.
Companies from the countries outside the EU are allowed to purchase property under the same rights as private citizens from outside the EU i.e. if there is a reciprocity agreement between the Republic of Croatia and the country in question. For more see Q/A no. 4.
17. Which services do solicitors include in their fee?
You can expect the following services to be included:
- checking the ownership and legal status of the property,
- checking the legality of the project documentation for the building,
- drafting of Real Estate Sale & Purchase Pre-contract,
- drafting of Real Estate Sale & Purchase Contract,
- applying to the Land Registry for registration of new owners of the purchased property,
- receiving of the purchase price (if necessary) to the Attorney's escrow account,
- making the payment of the purchase price based on the provisions in the Pre-contract and Contract, as well as per instructions of the Client,
- managing and co-ordinating the entire purchase process,
- any other legal services that might be necessary during the purchase process, and which are of no great scope or value.
18. Why Croatia Property Sales should be your agency of choice?
- We are Specialists in Selling Croatian Property and Real Estate to International Clients.
- We are Licenced agency and we have huge experience, being one of the busiest agencies in the Country.
- All our staff are experienced and trained negotiators who have sold hundreds of properties successfully over the years.
- All of them are Croatians who speak English and many at least one other language.
- Our agency has the widest selection of all types of property. We have exclusive real estate, luxury villas, land, high quality modern apartments in the towns and villages as well as more modestly priced property all along the entire coast and islands from Dubrovnik to Zadar.
- Sellers come to us because we sell property so efficiently, and buyers come to us for the same reason. Our contracts with sellers ensure that the price of any of our property is the lowest advertised.
- We pride ourselves on the fact we have always responded quickly and efficiently to all calls or emails.
- Have confidence in us. We have been established as a company since 2009, growing annually into one of the leading agencies along the Dalmatian coast, with offices on the major islands off Split.
- We give sound advice on the back of many years’ experience and we will lead you through all the different stages of purchasing.
19. Property purchasing costs in addition to the agreed purchase price
- Agency commission of 3%+VAT = 3.75 % (min €3,000 + VAT).
- Legal fee of 1%+VAT = 1.25% (min €1,000 + VAT) plus small statutory fees.
- Property transfer tax (RETT) 3% - it's a one-time payment.
- Annual Holiday home tax is between €0,75 to €2/ per m2 of the property paid once a year
These costs are the same for both International and Croatian Buyer.
20. What are Property Running Costs?
There is a holiday home tax, in the amount of approx. €2 /per m2 of the property per year (depends on the location). In addition there is a monthly communal charge which depends on the local municipality, as well as normal utilities that are paid as per consumption (water, electricity etc). These costs are the same for both overseas and domestic owner.
Here are some approximate figures per month for a 100m2 property:
- Electricity ------------------------------------ €50 to €100
- Water ------------------------------------ €20 to €50
- Garbage and other local services ----- €15
- Internet and TV --------------------------- €30
- Annual property tax ----------------------- max €2/per m2 (i.e. €200 per year)
21. What are Company incorporation Costs, taxes and running costs?
Foreigners can acquire properties that are not in the building zones (i.e. agricultural land) only by setting up a Croatian Limited Liability Company (Ltd) - for more see Q/A 4.
Owning a Croatian Ltd comes with additional costs and it must be monitored properly.
- Minimum incorporation capital is 20.000 HRK (approx. €2,700) which can be withdrawn for company purposes immediately after incorporation.
- Notary public fees for incorporation are around €600-€800
- Even a ‘non-operating’ company has to have an accountant. Accountants charge’s vary from €100/month up to €300/month for a fuller service, depending on the amount of work the company generates ( no. of invoices and data to process)
- There are small monthly/quarterly fees to be paid to the State.
- Monthly bank charges for account maintenance around €15.
- If company income is less than HRK 7,500,000 per year, income tax is 10%. If company income is equal to or greater than HRK 7,500,000.01 per year then income tax is 18%.
- Tax on withdrawn profit is 12%.
- Capital gains tax does not apply to Croatian Ltd companies.
Our partner Lawyers assist in company incorporation process within a regular fee charged for the buying process (1% + VAT).
Many of these costs and charges alter from time to time, so to have confidence the information is completely accurate, please contact us and we will introduce you to relevant tax and accounting experts in and around Split. More about company incorporation process at https://www.hitro.hr/en/
22. Do I automatically get a Resident’s Permit if I buy a property in Croatia?
No. Buying a property in Croatia does not automatically qualify you for a Resident’s permit.
Here you can read more about Residents for Foreigners: https://mup.gov.hr/aliens-281621/stay-and-work/permanent-stay/281682 or http://ie.mvep.hr/en/consular-information/granting-stay-in-croatia/
23. How can you be sure the Property and its Property title is completely safe and legal?
Lawyers must carry out a detailed check of the documents relating to the property, often called “due diligence”, in order to ensure it is completely legal and ready for sale without any disputes attached to it. There are no grey areas when purchasing a property in Croatia.
24. Can I let my property for Short-Term holiday rentals?
A Letting licence is not transferable, so you can’t just continue letting a building which already has a licence. You need to re-apply and EU citizens can get them under the same conditions as Croatian citizens.
US nationals, and any other non-EU nationals, cannot ‘let’ under the same conditions as Croatian citizens. They cannot get the letting licence as private owners. However, there are three ways a non EU buyer can buy a property and use it for rental purposes:
1) Non-EU nationals would have to purchase the property within a company (registered for tourism rentals)
2) Buy the property as a private person and set up a ‘tourism management’ company in Croatia once you decide to let the property
3) Buy the property as a private person and sign a contract with a Croatian tourist management agency and in return pay an agreed amount for the season.
25. Can the Property Purchase price be paid in EUROs or other foreign currency?
Although prices are in Euros, payment must be made in Croatian national currency – Kuna (KN). This applies to both individuals and businesses, but there are several exceptions when the property purchase price may be paid in Euro. To find out more about, contact our office.
The Croatian Kuna joined ERM-2 on 10 July 2020 and is aiming to introduce the Euro in 2023, January the 1st.
26. What is Tourist Rental Tax?
This is the tax on income from tourist rentals. It depends on property owner`s citizenship and if the person is registered in the VAT system in their own country. For more details please contact us and we will put you in touch with tax and accounting experts.