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BUYING PROPERTY IN CROATIAWho can buy property in Croatia? One of the basic preconditions for foreigners to acquire property in Croatia is that of mutuality/reciprocity between Croatia and the country whose national acquires real estate, meaning that Croatia makes the treatment of foreigners conditional upon that country's treatment of her nationals. From our experience on the basis of the information from the Ministry of Foreign Affairs the existence of reciprocity with the majority of countries has been confirmed, including most of the European Union, United States of America, Canada, Australia and the Russian Federation. In the cases of some countries such as Slovenia, Italy, Switzerland and Bosnia & Herzegovina reciprocity is currently conditional on permanent residency of foreign citizens in their own country. Tax A property tax of 5% based on the market value of the property will become payable approximately 2 or 3 weeks after completion and it is usually best to provide these funds to your lawyer at the same time as completion. Where property is held in an individuals name and later sold at a profit a tax liability of 35% is crystallized, unless the property is held for more than three years after which time there is currently no tax liability. For detailed tax information we recommend you take advice from an accountant that is qualified to advice in Croatia. We can recommend one if you contact us. ARE FOREIGN CITIZENS ENTITLED TO PURCHASE REAL ESTATES IN CROATIA? Yes, but after prior consent issued by the Ministry of legal affairs and the Ministry of foreign affairs. These statements on consent are issued to citizens of those countries Croatia signed a contract on reciprocity with and in extraordinary cases, to citizens of other countries as well. The procedure of obtaining the statement on consent is as follows: When a foreign citizen decides to purchase real estate in Croatia first a sales contract is to be signed with the selling party. At this phase the contract does not have to be verified before a public notary jet. Together with respective documentation, this contract is sent to the Ministry of foreign affairs in Zagreb. When the Ministry issues to the customer its statement on consent, the foreign citizen is entitled to register the real estate onto his name at the Municipal court - Cadastry department and pays the real estate purchase tax. Foreign citizens that establish, or already have an established company in Croatia, can purchase real estates on behalf of this company. ARE FOREIGN CITIZENS ENTITLED TO SELL REAL ESTATES IN CROATIA? Foreign natural or legal persons can without any problems sell real estates in Croatia. WHAT IS THE REAL ESTATE PURCHASE TAX IN CROATIA? The Republic of Croatia has a unified tax rate of 5% for all types of real estate and respective transactions. The tax is defined based on the price of the real estate in the sales contract and the value estimate by the authorized tax authority in charge for the area in which the real estate is located. According to the Law, tax on purchase of real estate is paid by the customer or the seller on behalf of the customer, if the parties agree upon this. WHAT IS THE TAX IN CASE OF EXCHANGE OF REAL ESTATE? The same, 5%, but here each of the real estate owners pays 5% of the value of his real estate as tax. WHEN MUST THE REAL ESTATE PURCHASE TAX BE PAID? After conclusion of the sales contract the customer is obliged to register the purchase at the authorized tax authority within 30 days from the day of conclusion of the contract. Public notaries do also submit one copy of the sales contract to the tax authorities. The customer is obliged to pay respective real estate purchase tax within 15 days from the day of reception of the decision received from the tax authorities on the exact tax amount. If this tax is not paid within this term, interest on arrears are charged for every day of delayed payment. DOES THE SELLER HAVE TO PAY TAXES WHEN SELLING HIS REAL ESTATE? No. Only in case the real estate is sold prior to the expiration of three years after it has been purchased and if sold at higher price than originally purchased. In such a case the seller has to pay a 35% income tax on the difference in value of the real estate (purchase and sales price) increased for local taxes, different in every municipality. MUST THE CUSTOMER (ALONG WITH THE SELLER) HAVE TO VERIFY HIS SIGNATURE ON THE SALES CONTRACT? He may, but must not. HOW MUCH DOWN PAYMENT SHOULD BE PAID AT THE CONCLUSION OF SALES PRE-CONTRACT OR CONTRACT? Usually the down-payment is 10% of the sales price or different if agreed so between the contractual parties. IS IT POSSIBLE TO CONCLUDE AND VERIFY A SALES CONTRACT ABROAD? Yes, In such a case it is the best to have it verified in a Croatian embassy or consulate. If you verify such a contract before a public notary, then this verification has to be translated into Croatian by an appointed courts interpreter. IS IT POSSIBLE TO PAY THE REAL ESTATE PURCHASE TAX IN FOREIGN CURRENCY? The tax is to be paid by bank or post office money transfer. The amount is converted into Kuna at the middle exchange rate by the National bank of Croatia at the day of payment. MORTGAGEYou can get a loan from the bank (we will help you) - up to 70% of property’s value. And the collateral (guarantee) will be the property in Croatia, which you are buying. If you are buying a real estate in Croatia, you can get mortgage loan. It does not matter if you are buying with company or as private person, or if you are English or Croat. The ownership has to be clear (I mean the person who sells you have to have clear papers) and there have to be the building permission if you are buying the new already made building. You can get mortgages about 30-70% of the price. Of course the Bank will check also that you earn some money in England. If you buy the plot to build you can get the loan for building, but again the papers have to be clear and you have to have an building permission and already something made, then you can get the rest to finish the building, but you get the money step by step and the Bank control that the money is really invested in this real estate and the building is done. Usually loan volume is about 30 - 50% of its real worth. These mortgages are from Austrian Banks, so the process is fast, but some things have to be made in Croatia with the lawyers and on the court in Croatia- those are not that fast. Answers on frequent questions: Can the mortgage be agreed before a purchaser gets to this stage? It could be. Who produces the valuation? The Austrian Bank, but sometimes they want the Croats do it (Croatian court-appointed expert for estimate). What happens if it's a new company set up to buy the property? They give the proofs what are they earning in their country- private or from the company, but that is not the most important thing, much more important is the real estate value. It also depends from how much mortgage will be taken. Estimate costs for the investment (predracuni za investiciju). Is this the buyers estimate? Here is going if somebody builds (not the furniture or things inside that you can bring and take).For example: somebody builds the house. They have building plot, plans, and building permission and started to build. The building come to the stage brick- work, and now the bank finance the building to be finished, but max 50% of the whole building cost. They do not pay whole mortgage at once, but step by step as you build. In those cases or by repairing would be needed the building estimate and that would be from building company or private builders. What happens if the property is sold before the end of this period are there breakage costs? No costs, but the buyer overtake the mortgage, but the Bank have to agree with the new buyer, or they pay the amount off- no extra costs. If the mortgage is before the period paid off there would be interest charged just for the time you have had the mortgage. (You take a mortgage for 15 years and pay it off in 7 years; you pay interest just for 7 years not 15). Is this a fixed rate of does it varies above Euribor? Vary with Euribor, but very little. Are these fees payable when the money is drawn down or are they added to the mortgage? The mortgage amount - fees (except notary, court and translation) when you get the money. DOCUMENTACION NEEDED FOR MORTGAGES IN CROATIA
Those are general documents, but are from case to case different, so describe your situation and you will get list of the documents we need. Mortgages amount and repayment period Maximal 70% of the real estate value (it is not necessary that the lender except the value from purchase contract or estimate value) Repayment period 10-15 years Rate 7,5 - 8% yearly rate on Euros (depends from real estate and its location) Time needed for mortgages process About 40 days (we inspect each property) Costs
Those conditions are for all citizens that purchase or already own the real estate in Croatia. No costs before the process and no costs if your mortgages failed from lender. Example for monthly payment: For 10,000 Euros mortgage by rate 7,5% you pay by 10 years 120 Euros and 94 Euros by 15 years
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