How to buy?
Buying process in Croatia
Buying a real estate in Croatia has many similarities to buying real estate anywhere in the world and therefore the same caution and common sense you would apply elsewhere should always be applied when buying Croatia property.
Therefore with some caution and common sense coupled with the full support of expert team of industry professionals the buying process can be straightforward and easily manageable.
This section of our site is intended as a guide only, giving you some basic information with regard to questions that are often asked by our clients buying in Croatia. For more detailed information about property in Croatia and information with regard to a specific purchase please contact us directly.
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much.
When you find a property in Croatia, you should arrange to look at it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money. If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If you are going to buy a property without assistance of an estate agent be sure to ask for advice from other professionals.
Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to six months. However, if there are any problems the time taken may be longer. On of the buying procedures is illustrated below.
One of the most important aspects of purchasing a house in Croatia is establishing that the property has ‘clean title’. There are many houses for sale in Croatia but a large majority of them are unclean especially old stone houses and land. In simple terms, ‘clean title’ means the seller has the legal authority to sell the property and there are no pending claims on the property before the courts.
All properties that are displayed on our website or in marketing material have clean title unless otherwise stated. We meticulously check all of our properties paper work prior to putting them on sale to ensure this is the case.
In the event a property that we advertise or introduce to you has unclean title, we will already have a good understanding and overview of what legal situation and the risks involved with regard to cleaning the title, all of which will be explained to the you prior to viewing the property. Subject to the site inspection and if you are interested to investigate the possibility of purchasing the property, it is then necessary to instruct a lawyer to do detailed legal due dilligence and subsequently advise you of the likely problems you may encounter and the potential associated risks. It is our experience that in most cases, clean title can be resolved.
Croatia Property Buying Process
The following is a summary of the stages of the property buying process in Croatia and assumes if you are buying with a Croatian company, that the company has already been established for the purchase.
- Give us a detailed description of the type of property in Croatia you are looking to buy
- First will then point you to relevant properties on the internet site or alternatively provide you with information of properties that have not yet been put up or are off-market.
- Arrange a viewing time that suits your schedule
- Find a property you like and on your instruction, we will open negotiation.
- Assuming an acceptable price and key terms can be agreed your designated lawyer in conjunction with the vendors’ lawyer (if he has one) will draw up the Croatian property purchase agreement.
- You open a foreign currency bank account (with internet banking), assisted if need be.
- The contract is then signed and exchanged in the presence of a Croatian notary public. However, if the buyer is not present, the contract can be signed in their country of residents or a power of attorney given to their designated representative or lawyer.
- Payment is made
- The documents are submitted to the local land registry department.
- Your lawyer will also register the Croatia real estate purchase agreement with the local tax authority. On receipt of the tax calculation for the property from the tax office, you have 30 days to pay before penalties interest of 17.5% is accrued.
- Where necessary the application for permission to purchase is prepared by your lawyer and sent to the Croatian Ministry of Justice. In this case after gaining approval and within 30 days, your lawyer must register the purchase agreement with the tax authorities.
Method of Purchasing Croatian Real Estate
There are two methods of purchasing property in Croatia, a brief explanation of which follows. This information is intended as a guide only. For additional information FIRST will put you in contact with an experienced and reputable tax advisor and / or accountant depending on the complexity of your situation and / or purhcase.
As of February 2009 citizens of European Union have the same property purchase rights as Croatian citizens and can therefore buy property in Croatia as private individuals and without the need to gain permission from the Ministry of Foreign Affairs, as was previously necessary.
For individuals who are not members of the European Union but have nationality in a country with which Croatia has established reciprocity in property purchase (contact us for further information) they need an approval from Croatian Ministry of Justice. They must apply for approval once the final contracted price has been paid.
The approval can take from 6 months but during which time you will be allowed to enter into possession of the property. When the approval is granted, your contract can be deposited at the Court and processed enabling you to obtain the title dead. At this point the relevant Tax Authority will invoice for the real estate purchase tax.
People buying property in Croatia as private individuals are not subject to capital gains tax on the sale proceed of their property so long as they sell it later than 3 years from the date of purchase.
A Foreign legal entity or natural person may establish a private limited company in Croatia, known as a doo i.e John Smith doo
Incorporating private limited company is a process that takes up to 14 days and involves your lawyer, notary public (fee of ca 700 EUR required) and the Commercial Court. Authorized capital (HRK 20,000) equal to ca. 2,700 EUR must be paid in cash onto the company bank account, and the receipt of deposit should be enclosed when registering a company. If you wish, you can open a simple Ltd. In this case, you need only 10 HRK as start-up capital.
An accountant needs to be engaged in running the company during and after the buying process. The cost of running a company in Croatia starts at €100 / month for a basic service upto €300 / month for a full service. The basic service is the most relevant for those clients who are buying a single property for rental. A full service is necessary for those with a diverse portfolio and who are generating sizeable income through the business.
When the company buys the property, the contract is deposited at the local Court and is processed in order to obtain title dead. As is the case in most countries, capital gains tax does not apply to a Croatian doo. Instead, company (profit) tax is payable and at a rate of 20% . If a client buys a company that owns a single piece of real estate the property is not subject to the Croatian real estate transfer tax. (stamp duty).
Buying property in Croatia via company route is recommended if the property will be used in commercial purposes (renting) and if the vendor is a VAT registered developer (in case of which you could claim back VAT contained in the property price), or by a person with citizenship in a country that does not have recipricol ownership rights which includes most countries outside of the EU.
It is important the clients appreciate that owning a Croatian doo comes with additional costs and must be monitored properly. This is especially the case if the company is registered for VAT and VAT is being claimed by the company against the purchase of the property or for furnishings or other. Understandably if your company is claiming VAT, the Croatian Tax Authorities will expect to see the company is generating income of some kind.
If you require further information before making a decision regarding purchasing via the company route we will put you in contact with an established and competent tax advisor.
Viewing Croatian Properties for Sale
It is important to arrange viewing times in advance and we therefore recommend that as soon as you find a property that is of interest and you are able to come to Croatia, you contact us and book time. Within reason we do operate an open all hours’ policy meaning we will work to fit around your schedule. You can either make an appointment over the phone or via email.
If you require travel to Croatia and accommodation when you arrive, we will happily put you in contact with our travel partner who will make the necessary arrangements. Please contact us via email or telephone for us to do so.
Croatian Real Estate Transfer Tax (RETT) & VAT
Stamp duty, property tax or locally know as Croatian real estate transfer tax (RETT) is 5% and paid by every buyer (domestic or foreign). The Tax application is sent by the lawyer within 30 days from the date of signing the sales / purchase contract and must be paid within 15 days from receiving the resolution from the Tax office. Any outstanding payments to the tax office incur 17% interest until settlement.
RETT is charged on the contractual sales price of the property, if a property is built before January 1, 1998 or is on sale by any entity that is outside of the VAT system.