These guidelines are meant for guidance only and describe a straightforward purchase scenarios. However this information is not meant to replace proper legal advice, which we always insist you take.
Any foreign buyer considering purchasing investment property in Croatia should be aware that their right to own real estate in Croatia is based on the reciprocity principal whereby theoretically a Croatian has to be entitled to freehold ownership of property in the foreign purchaser’s country of origin.
For citizens of the US, UK and most European nations this stipulation is automatically satisfied; for anyone else wishing to purchase it is possible to incorporate a local Croatian company and buy investment property via the company structure.
As with many emerging property markets there is a requirement in Croatia for all foreign purchases of property to be approved by the Ministry of Foreign Affairs and this process can actually take up to a year which would suggest that an individual has to wait for approval for up to twelve months before any investment can actually be made. This is not actually how the process works as it is possible for an investor to make his purchase and then apply for permission afterwards - of course if permission is denied then the investor can resell his property assets.
In reality permission is seldom ever declined as long as the principles of the reciprocity agreement are adhered to.
As stated earlier, where an investor is aware that there is no reciprocal arrangement between his country and Croatia for the foreign freehold ownership of property, that individual can incorporate a company in Croatia, be the sole shareholder of that company and buy real estate through the company structure. This action avoids the need to fulfill the reciprocity principle but it does mean that the company has to submit annual accounts and adhere to various legislative regulations which can be an annoyance.
The first step of the Croatian investment property buying process for any investor, whether they purchase through a company or as an individual, is to find land or real estate that matches specific investment objectives and to that end many property hunters employ the services of an estate agent in Croatia. Local agents have the best working knowledge of the property market across the country and can be called upon to give complete assistance and advice throughout the buying process.
An overseas investor should also employ a local solicitor to translate key documents, run title searches and basically represent their interests throughout the buying process.
Once property has been located and found suitable, an investor can choose to have a structural survey done on the property in Croatia if that property is a resale. There are a number of architects and surveyors in the main towns who can perform such a function although it is not a usual local practice. Once a property has been checked and a property investor decides to buy, an offer should be submitted to the vendor and if accepted the pre-contract is signed by the buyer and seller.
The pre-contract - or preliminary contract - is conditional to the satisfactory title searches that the property investor’s solicitor will run against the land and real estate. A deposit of between 5 and 10% of the final purchase price is usually paid upon the signing of this contract and it is usual to have as a condition of the contract a stipulation that states the vendor will make payment of the same amount as the deposit if they withdraw. Of course if the buyer pulls out for any reason they lose their deposit.
As soon as the pre-contract is signed it’s usual for the property buyer’s solicitor to apply to the Ministry of Foreign Affairs in Croatia for the investor’s permission to purchase.
The final contract of sale is signed when all conditions for the sale have been satisfied. This contract is signed in front of a public notary and subsequently all documents are submitted to the Land Registrar for registration.
It is at this stage that the final balance of the property purchase price is transferred to the vendor and all taxes and fees are due. In terms of the additional costs facing a property investor in Croatia they include but are not necessarily restricted to the following - property purchase tax of 5% and legal fees of around 1% of the purchase price.
Anyone who wishes to resell their investment property in Croatia within three years of initial purchase will be subject to 35% capital gains taxation and anyone who derives an income from their property will have to pay 25% tax on their profits.
Steps in registering Property in Croatia
1. Obtain a land registry extract from the competent land register court
2. Notary notarizes sale contract
3. Submit the sale contract to the municipal tax administration to pay land transfer taxes
4. Pay transfer taxes, stamp duty and registration fees at a commercial bank or post office
5. Register title transfer at Land Registry Court
Find detailed info on registering property in Croatia HERE.