Real estate transfer tax in Croatia
Real estate transfer tax in Croatia

Real estate transfer tax in Croatia

Real estate transfer tax in Croatia: Buyers of real estate in Croatia are subject to paying real estate transfer tax which is set at the level of 3%. If you buy an apartment, the tax applies to the cost of the land corresponding to the M2 of your apartment and is part of the entire building. The actual rate is usually 1% of the value of the contract.

What is the value of the sale and purchase contract?

The tax offices in the Republic of Croatia estimate the value of properties in this or that region and they will calculate their tax on that figure.

If they find that the value of the property is too low (some buyers and sellers agree to impose the lowest price in the official agreement to reduce taxes on both parties), they can declare the agreement null and void. Therefore, we would recommend avoiding such a tax reduction scheme. Another tax deduction method has recently become popular: 

investing property in the company as share capital and then selling shares in the company. If the value of the property was more than 500 000 Euros, it was deemed.

Otherwise, the cost of court-certified assets, the cost of company incorporation, and the increase in share capital (since it is first made with a normally minimal share capital) correspond to a 3% tax. However, in case the share capital and the assets of the company are more than 50-60%, the tax office can apply 3% tax on the value of the shares. 

VAT – retrieved or not?

Buyers of real estate in Croatia, Europe should know that if they buy a new property from a company developer, then this new cost of the property includes a 25% value-added tax. This is one-fourth of the purchase price!

If you are planning to buy real estate to use in Croatia, not for your enjoyment, but for commercial purposes – there is a way to withdraw VAT.

If you register a Croatian legal entity, immediately enter the VAT area and buy a property in the name of that company – this company will reimburse VAT. However, the state will recognize that the property is used for commercial purposes. Otherwise, the Republic of Croatia will increase doubly, with the company seeking to refund VAT in 2-3 years.

To include or not to hire a lawyer to support the procurement process in Croatia?

We will say yes in 90% of cases. In only 10% of cases, the entire situation is 100% transparent and clear. If you buy new apartments in Croatia built within the latest 1-3 years that have received the Upparbona Dijhola (Use Permit), you can be sure that there is no requirement in the Advocate. If you are considering the purchase of a self-sustainable home in Croatia, or a plot of land, or some commercial property – a lawyer is strongly recommended.

You will spend 0,5-1,25% + VAT for services, but you will avoid surprises in the future. We would recommend you to the best advocates in the relevant field in Croatia who specialize in real estate issues.

Payments for real estate in Croatia – Bargain or not?

As professionals we will show you the best offer in the market, however, it is always recommended to bargain the selected property. The general rule is that sellers decline in price mainly in the low season from October to May and are not prepared to discuss the property price in the high summer season when they have many buyers.

Where to invest in Croatia

Private investment

  1. If you just want to invest and get a profit, Croatia has tourism residences of several major maritime locations, operating on a leased model. They offer 3-5 weeks of personal use of the property per year and rent it during the high season which brings 4-5% annual income to the owner. At the top, the prices of properties in those resorts are increasing by 3-6% per year as they are quite rare in the market. The buyer does not need to look for tenants or think about cleaning and maintenance, all areas of services are provided by the management company who are ready to sign an agreement with the owner for 20-30 years. 

  2. The crisis has opened up interesting opportunities for investors in Croatia. Many properties were offered in 2008–2009, with a 30–50% discount off the price. This is a chance to buy the property now cheaply for resale in the future. We recommend listening to real estate agents who monitor the market and focus on ocean properties as they are usually the most sought after.

  3. The renovation business is becoming popular. Buying ruins for redistribution and resale can bring up to 30% of the profits. Special attention should be paid to the location and type of property. The best option is the conversion of an old building into an old resort town center such as Split or Trogir.

Corporate investment

About medical services – High technology medical and rehabilitation centers are in high demand. It is proposed to focus on three high-potential profit-producing areas – aesthetic care surgery, cardiology, reproductive technology. The seawater structure, mountain air have great uplift capacity. It was to be recognized at the end of the 19th century when the best Austro-Hungarian clinics were opening associate organizations at Optica.

It has now been welcomed to establish its subsidiaries in Croatia, using its tourist facilities at major clinics in the world.

Regarding schooling and education, it is recommended to establish the first 2 international schools with tuition in English and German language (Rijeka, Split), with subsequent early schools in Dubrovnik, Zadar, and Pula. Higher-level educational projects (Cambridge, Oxford-oriented programs, MBA) are also in demand. The French model of Sophia Antipolis near Nice must be taken as a specimen where the combination of the coastline, the availability of an international airport, a scientific and university center laid a core for uplift.

The aim is not only to upgrade Croatian education and make it more European-oriented but also to stop the migration of the young population and to prepare staff for advanced projects in Croatia.

The integration of the European Union’s economic space for Croatia information requires better transport connectivity.

Plots of land by the sea are something that will never be generated in the future. It particularly concerns the construction of plots included in the detailed urbanization schemes of the regions. It is hardly possible that the plans will be reviewed in the nearest 10–15 years, so all the seabed plots allowed for construction will inevitably increase in value. If you are willing to build, please note that there is a demand for new modern beach cottages and villas by the sea in Croatia.

Companies wishing to do their business primarily in construction for the sale of residential units should focus on lease-back prospects in Croatia. It turned out to be an excellent model, which sold units several times. It is a lot more profitable than being operated as a normal hotel. In addition, the market for tourist lease-back residences is almost empty, and at least 10 and higher grade properties are required for its construction.

Other areas for investment:

  • Winter sports infrastructure and tourism development
  • Hotel & Resort for Tourism Business
  • Development of interior areas of Croatia for freshwater fishing farms
  • Construction, expansion, and modernization of new navies
  • Development of event-tourism, archaeological, religious, sports tourism
  • Models of Italian parks (Gardaland, Aquafan, Mirabalandia, Gulliverlandia, etc.) followed by recreational facilities (Aqua-Park, Disneyland, etc.).
  • Organizing many fairs of boats, diving, windsurfing equipment in different parts of Croatian beach
  • Investment in solar and wind energy (under state-guaranteed purchase price, like Slovenia, Spain)
  • Development of warehouses and terminal centers to become warehouses for Northern Italy at the crossroads of European freight transport

The very location of the country makes it a model for investment and prosperity as a highly developed region.

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