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Information on buying property in Croatia. |
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Buying property in Croatia - A buyers guide to purchasing property in Croatia
The following is a brief outline of the structures and process for buying a property in Croatia. The information is intended as a general guide. Investors should seek independent Legal and Financial advice.
A buyers guide to purchasing property in Croatia Structures available for buying in Croatia There are two options available to a foreign individual wishing to buy property in Croatia; as a private individual or using a Croatian company established by the foreign individual. Whichever method chosen, you will need the services of a Croatian lawyer to assist you. We can recommend a lawyer or you can find your own (Back to top of the page) Foreign individuals can purchase and own property in Croatia without restriction provided that the condition of reciprocity is satisfied. The condition of reciprocity is satisfied if Croatian individuals can legally purchase and own property in the country of origin of the foreign individual who intends to purchase property in Croatia. This would apply, for example, to British citizens. Buying as a private individual requires permission from the Ministry of Foreign Affairs. This permission is based upon the condition of reciprocity and is largely procedural. The application is made after the purchase; the buyer signs a contract then applies. It usually takes from 6 to 10 months. Approximately 98 % of all of the applicants receive approval. The process The steps involved in completing a purchase by a foreign individual are as follows: The foreign individual and vendor should each sign a pre-contract then later a contract for the sale and purchase of the particular property. A lawyer drafts these documents. It is common, although not necessary, for the same lawyer to act for both parties. The contract, along with certain other simple documents specified below, must be submitted to the Ministry of Foreign Affairs with a request for confirmation of reciprocity. Once again this will be handled by the retained lawyer. Once confirmation of reciprocity is received from the Ministry of Foreign Affairs the purchaser is obliged to pay the property transfer tax to the local tax office. Following this, the foreign individual purchaser must apply to the local Land Registry to register title. In practice, once again, these steps are performed by the lawyer.
The documentation which the purchaser must submit to the Ministry of Foreign Affairs is as follows: The Certificate of Title or equivalent and the plan from the local planning authority (Cadastre Plan) A valid Building Permit and a valid Usage Permit, which will be provided by the developer The Certificate issued by the local planning authority confirming that the property is in the construction zone envisaged by the zoning plan. Again this will be supplied by the developer The costs As in all jurisdictions, private purchasers will pay certain taxes and incur certain costs in completing their property purchase and owning their property thereafter. These are as follows There is a 5 per cent real estate tax on the purchase of property, payable on the land value There is no monthly tax such as rates on the property. However, fixed utilities costs (electricity, water and communal charges) need to be paid monthly and would probably amount to 25 to 50 Euros. In case you wish to rent out the property you would need to notify the Croatian Tax Service. Tax is payable at 25% of the declared profit. This applies to owners renting out their property as an individual rather than a company. If the property is in private ownership and sold within three years of purchase then there is a capital gains tax of 35 per cent of the difference between the purchase and the selling price. However, if the property is sold after three years there is no capital gains tax involved. Legal fees will be around 1% -1.5% of the purchase price.
A property can be purchased, held and subsequently sold through a Croatian company and foreigners singularly or together are entitled to found, and own 100 per cent, a company. Setting up a company and completing a property purchase usually takes approximately six weeks. The minimum basic capital is 20,000 Kuna (approximately 2,700 Euro), which can of course be applied toward the purchase. Having established a company, the owner is obliged to keep the accounting books for this company regardless of whether there is any activity. There are locally available English speaking accountants who can fulfill this requirement at a relatively small cost. The process of acquisition of the property, using a Croatian company, is the same as that for a private individual except, in this case, there is no need for the formal Ministry approval.
The costs The approximate costs associated with purchasing through a company are as follows: Initial capital of company: 2.800 Euros (can be invested in the property) Legal fees: 1.000 Euros plus VAT ( PDV ) Fees for the public notary: approximately 300 Euros Court fees and announcements: up to 165 Euros Accountant’s fees: Between 300 and 1300 Euros per year depending upon volume of transactions in the company Other important information regarding company purchases: If the property was constructed after December 31st, 1997, then VAT at 22 per cent is applicable. The buyer receives the VAT back if the property is purchased through a company. If the property is bought as a private person, there is no VAT return. VAT is returned after 45 days following the claim being made to the tax authority There is a 5 per cent land tax that is not included in quoted prices, and is payable approximately 60 days after the contract is signed. Corporate profit tax of 20% will be payable on profits from asset disposals. Rather than selling the property itself, an alternative solution could be the complete sale of the company with the property as its asset. In this case no tax is payable to the Croatian state. This is however dependent upon their being a willing purchaser for this structure. The foreign individual or Croatian company should sign a Pre-Contract, then a Contract for the purchase of the particular property with the vendor of the property. The balance of the purchase price will be paid in several instalments each tied to production of specific legal documents required for the process of purchasing and registering the Title in the Land Registry or to the completion of stages of construction. A typical payment schedule might be as follws: first payment – deposit second payment – upon production of a valid Building Permit (permission to start construction) At this point, the Principal Contract is normally signed and further payments are triggered as follows: third payment – upon completion of the foundations fourth payment – upon completion of the main construction fifth payment – at handover, by which time the Vendor undertakes to have completed the house, delivered it into the unimpeded possession of the Buyer, entered the house into the land registers and finalised the principal contract by delivering the appropriate documentation into the ownership of the Buyer
Our advice is to look only for registered Real Estate companies. These companies should:
It is a good idea to look at a few chat sites to identify agents who have already successfully managed property purchases for non- croatians.
Chat Sites : http://croatiaproperty.proboards16.com Property Sites worth checking out: http://www.croatiapropertyservices.com
The foreign individual or Croatian company should sign a Pre-Contract, then a Contract for the purchase of the particular property with the vendor of the property. The above information is intended as a general guide. Investors should seek independent Legal and Financial advice.
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