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Purchase Process in Croatia

Below is the standard purchase process in Croatia, and issues that may affect that purchase:

• Foreign individuals can purchase and own property in Croatia without restriction provided 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.
• 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.
• 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.
• 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 the title. These steps are performed by the lawyer.

Costs of a standard property purchase in Croatia include the following:

• A transfer tax of 5% of the market value of real estate is imposed on the transfer of real estate ownership.
• Land and buildings are not taxable at the national level, although some taxes can be imposed on holiday houses at the local level between 5 HRK and 15 HRK per square meter. However, according to the Law on the Financing of Local Entities, a local tax between 250 HRK and 1,000 HRK per hectare can be levied for uncultivated land, depending on the type of land. Furthermore, there is a tax on unused industrial land. This tax is between 1 HRK and 5 HRK per square metre. (100HRK is worth approximately £9).
• Capital gains from the sale of immovable property is a 25% flat rate. The sale of real estate is exempt from capital gains tax under three scenarios; either the sale is made more than 3 years from the purchase date, the sale is between spouses or family members, or the property is the residence of the taxpayer or taxpayer’s family.
• VAT is levied at a rate of 22% on the leasing of real estate, except on real estate used for residential purposes, e.g. apartments.
• Rental income, excluding deductible expenses, is subject to income tax. There is no separate local income tax. However, according to the Law on the Financing of Local Entities, there is a local tax of 5 HRK to 15 HRK per square metre for business premises vacant for more than a year.

The Obelisk Advantage:

As Obelisk approaches its projects purely from an investment perspective, its priority is to deliver each real estate product with an emphasis on simplicity and transparency throughout the purchase process. Therefore, Obelisk has already identified the purchase procedure for its clients as a simple, four step process:

1. The client chooses and reserves the unit that best suits their investment requirements, and Obelisk takes the client through a compliance procedure.
2. An independent lawyer, sourced and appointed for the client by Obelisk, will have already carried out full due diligence on the real estate product. They will issue all purchase contracts and paperwork to the client.
3. On receipt of this contract, the client will sign and make the first payment. The lawyer will notify the client of all further payments when required.
4. The appointed lawyer will also represent the client in all aspects legally required within the country of purchase, ensuring that clients of Obelisk enjoy the benefits of simple and hassle-free real estate investment.