Here we give you the answers to FAQ concerning purchase of real estates in the Republic of Croatia. In Croatia we have plenty of legal acts and laws concerning traffic of real estates and in connection with real estates in general. It is not our intention to bore you with the local legislation, but to give short and simple answers on issues that might be of interest to you. In case there is questions that are not contained here, feel free to contact us directly. WHICH DOCUMENTATION IS TO BE PRESENTED BY THE CUSTOMER WHEN PURCHASING REAL ESTATES IN CROATIA ?
Proof of Croatian citizenship, either in form of citizenship certificate, passport or personal identification card. A copy of any of the above is accepted in case the original can be shown simultaneously.
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. Acquisition of Immovable Property in Croatia Incorporation of a Croatian Company Information on legal requirements and costs related to acquisition of immovables in Croatia.
1. When a natural (or legal) foreign person purchases immovables in Croatia
A foreign person (either natural or legal) may acquire the ownership of an immovable property in Croatia only - if the Croatian citizens may acquire ownership in that person's homeland (mutuality), and - subject prior approval of the Croatian Ministry of Foreign Affairs. Before the approval of the Ministry of Foreign Affairs is given, a positive opinion of the Croatian Ministry of Justice has to be obtained. Following documentation has to be presented to both Ministries: - Sale and Purchase Contract (which, until we get the approval is not legally valid), - Extract from the Land Register for the property in question, - Evidence of Citizenship for both the Buyer and the Seller(s), - Evidence that
the land is not for agricultural use If the land is for agricultural use, it cannot be acquired by a foreign person.
2. Operating a business in Croatia
A Croatian company may acquire immovable property in Croatia without limitation, notwithstanding the origin of the company's capital (i.e. even if it is fully owned by foreign legal or natural persons). The exception is the land for agricultural use, where the companies with foreign capital may not acquire ownership. Foreign entrepreneur can run business activities in Croatia either by establishing a registered branch office of a foreign company, or by incorporation or investment in an existing Croatian company. 3. Incorporation of a Croatian company (CC) There are four types of company, but we shall mention only the two ones with the limited liability ( company limited by shares) and the company with limited liability, leaving the two others (partnership and limited partnership) out of the consideration. 1. Company limited by shares, is a company with the strictest legal regime. It is a company the basic capital of which is divided into shares, which are, more or less available for public trade. 2. Company with limited liability Members' liability is limited to the investment quote in the company's capital, which is stated in the Act of Incorporation, but the company is not entitled to issue shares. The company may be incorporated by and can have only one or more members. Once all documents are prepared, it may take approx. 1 month to complete the registration. Since the Act of Incorporation has to be a Croatian notarial deed, the Buyer has to come in Croatia to sign it before a Croatian Notary Public in the presence of a sworn Court interpreter . If the Buyer does not want to travel to Croatia , he may execute a special power of attorney (specifying all details of the company such as name, scope, capital etc.) authorising an attorney to execute the Act of Incorporation in Croatia on his behalf. The special POA has to be notarised and apostilled in the Country of issue and translated in Croatian. If a corporation is the founder of CC, then an original extract from the registry of the domicile country has to be provided, certifying the authority of the corporation's representative to sign the POA and other corporate papers for CC. To draft the special power of attorney and prepare the incorporation the following is needed:: - Proposals for the name of the Company. The name needs to be in Croatian or ancient languages. The use of the incorporator's name is permitted. - Address of the Company. - Names, address, passport nos. of all the incorporators (I have your name and passport no, but not the address, and I understood that you would not be the sole incorporator). - Name, address, ID no. of the director of the Company (a foreign person may be the director, and you can
authorise another person with the domicile in Croatia to effect the transactions on behalf of the Company, which have to be done on day by day basis). - activity of the Company, - capital amount
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 A 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
