Real estate taxes in Croatia

Croatia is one of those countries in which taxes and social contributions account for about half of the income of individuals - this is due to the fact that its territory has a high level of VAT and the amount of income tax. However, there is a relatively low bar for taxes on real estate and on transactions related to it. At the same time, the annual real estate tax is not levied on all properties.

Taxes on the purchase and sale of real estate

Local experts in the real estate market, when deciding on the purchase of real estate in Croatia, advise in advance to take into account the additional costs that the buyer will incur. These will primarily be:

• transfer tax at the rate of 3% of the amount
• sales contract agency commission 3% + VAT on it
• notary and registration fees 0.01-0.05% payment
• services of a certified translator 200-300 euros lawyer services 0.5-1% + VAT on their cost

These expenses do not include some services that may also be needed in case of buying real estate in Croatia: technical examination of the building, drawing up business plans, market analysis, as well as obtaining a building permit. When purchasing a secondary property and land in Croatia, the buyer also pays a transfer tax of 5% of the market value of the property. The tax is paid by both Croatian and foreign individuals and legal entities. When purchasing a new building, the buyer pays VAT in the amount of 23% of the market value, usually it is included in the price announced by the developer or agent. In this case, the tax on the transfer of property rights is charged only on the value of the land. In the case of buying an apartment, the share attributable to the apartment is calculated - in reality, in this case, the tax is 1-1.5% of the value of the object instead of the usual 5%. When it comes to the acquisition of a new building, the VAT on its purchase in the amount of 22%, as a rule, is already included by the developer in the total cost of the object, and if he acts as a legal entity that is included in the VAT payer zone, then the buyer is also exempt from tax. 3% for the transfer of ownership. But if the new object was rented out within two years before the purchase, then the developer is exempt from VAT, and the buyer is again obliged to pay 3% tax. When a real estate object is on the balance sheet of a company, it is possible to purchase not the object as such (asset deal), but 100% of the company's shares (share deal). Hypothetically, this exempts the buyer from paying tax of 3%, however, the tax authorities may decide that the purchase and sale of shares was carried out exclusively for the acquisition of real estate, then the tax can be charged in full.

Purchase schemes can be very different, they depend on the current form of ownership, on the buyer's plans for the further use of the object, on the cost of the audit when acquiring the company, on its other identified obligations to third parties. Therefore, in any case, it is recommended to entrust the development of the purchase scheme to a lawyer or tax consultant. Especially when it comes to buying a land plot (for a correct assessment of the building potential), shares of a company, an object from a large number of joint owners, objects with ambiguous documentation that requires legal clearance, in transactions at the construction stage, long-term transactions for a period of more than 3-4 months, transactions with payment by installments, upon receipt of a concession for the coastline and sea belt, etc. A professional will help you quickly resolve all the necessary issues, protecting the buyer's investment as much as possible. The tax on the sale of real estate in Croatia is 25% of the difference in the value of its purchase and sale. This also takes into account the costs of its maintenance, arrangement and repair, which are deducted from the total amount. It does not need to be paid in cases where three years have passed since the purchase of the property, if the object was used as the owner's main residence, and also if the sale involves divorce or inheritance.

Property ownership taxes

In Croatia, there is no mandatory annual compulsory tax on property ownership for everyone, but in the case of resort housing, the owner will have to pay for it at a rate of 0.66-1.98 euros per sq. M per year, depending on specific area of the country. The tax year in Croatia starts on January 1st and ends on December 31st. There is also an annual tax on country houses, which ranges from 5 to 15 Croatian kuna (from about 70 euro cents to 2 euros) per 1 sq. M, depending on the location and condition of the property. Municipal taxes may also be charged on unused commercial real estate, undeveloped construction sites, and uncultivated agricultural land. Russians most often buy real estate in Croatia for a company that they establish in the country. In this regard, additional obligations to the state arise: the owner of the company must pay a tax “on the name of the company” - usually 2,000 Croatian kuna (about 270 euros) per year, as well as corporate income tax (20% of the annual profit).

Renting taxes

In the case when in Croatia the owner rents his property for rent, he needs to pay tax on this income. Its size will be from 10% to 18%, depending on the region of the country.

Gift and inheritance tax

When a real estate object acquires a new owner through donation or inheritance, then in both cases it is necessary to pay a tax in the amount of 4% of its market value of the object, from which liabilities, debts and expenses for obtaining the property are deducted. Thank you for your help in preparing the material: Elena Nevskaya, consultant-expert of the ADRIONIKA company. The article was prepared by Dinara Gracheva, Irina Filatova.