A guide to property tax in Croatia

British citizens are permitted to buy property in Croatia, either under their own name, or through a company which has been setup in Croatia.

Private Purchases
All private purchases must be approved by the Croatian Ministry of Foreign Affairs. This process can take up to 18 months to complete, on top of the normal house-buying process time. This way is a good way though as it means that if the property is sold after three years of ownership, no gains value tax is charged. However this route does mean that you can not claim VAT back on purchase costs.

Private Taxes
– There is a 5% real estate tax on the full value of the property for anything built before December 2007. For anything build after 31st December 2007, the taxes are calculated as follows:
If the seller is not VAT registered then the buyer pays 5% real estate transfer tax on the whole purchase price (in which case the VAT does not apply).
If the seller is VAT registered the buyer pays 5% real estate transfer tax on the land value of the real estate, and 22% VAT on construction value of the real estate (which is included in the purchase price);
– If you are going to rent out the property, you must notify the Croatian Tax Service. Tax will be applied at 25% to all profits.
– If you sell the property, you must pay tax of 35% of the difference between the selling price and the purchase price (assuming you make a profit) if the property is sold within three years of purchase. If the property is sold after three years, no capital gains tax is payable.
– Legal fees on the property will be around 1.5% of the purchase price.

Company Purchases
A company purchase will allo for fast deed transter, VAT reclaim and the option of reselling the entire company with the house as an asset with 0% profit tax at any time. However, as with any company, finances must be kept up to date and it can require a lot more work. Also, any utilities will be charged at commercial rates rather than domestic, and this means they will be higher. However, the rental of the property is easier, especially for foreign owners.

To setup your own company and purchase a house will take around about 2 months. Once you have setup your company, you must keep up to date with your books, regardless of whether any money is going through them or not.

Company taxes
– There is a 5% real estate tax on the full value of the property for anything built before December 2007. For anything build after 31st December 2007, the taxes are calculated as follows:
If the seller is not VAT registered then the buyer pays 5% real estate transfer tax on the whole purchase price (in which case the VAT does not apply).
If the seller is VAT registered the buyer pays 5% real estate transfer tax on the land value of the real estate, and 22% VAT on construction value of the real estate (which is included in the purchase price). Through the company purchase you are entitled to the VAT return.

– VAT will be returned to use about 1 1/2 months after the end of the month in which the payment was made.
– For new constructions, there is a 5% tax on land value and a 22% tax on constructed value.
– There is a tax of 5% (known as the Real Estate Transfer Tax or purchasing tax) that must be paid 60 days after the contract has been signed.
– Corporation tax of 20% must be paid on all profits from your assets. An additional 15% taxis levied if the money goes out of the country.
– If you sell the property on it’s own, you will need to pay more tax. If you sell the company with the property as an asset, you will not need to pay any more tax.

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