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Why buy a property in Croatia? "Beat the rush to the
Med's final frontier. Great climate, clean beaches
and cheap houses-Croatia is the latest hot spot for
Brits" Sunday Times April 2002
"Along Croatia's lengthy coastline you can find a
wreck to do up for £30,000... ... or treat yourself
to your own private island for around £1 million".
"But whatever you choose, a home by the country's
unspoiled Adriatic shores guarantees lazy summers
swimming in secluded coves, breathtaking scenery of
wooded slopes tumbling into a turquoise sea and about
3,000 hours of glorious sunshine a year." Evening
Standard January 2003
Croatia is determined to protect what it has and committed
to protecting their coastline, so seafront properties
will be at a premium. Having said that there is no
shortage of stunning seafront properties available.
If you buy on the beach the public will have access
to the land to at least 6m above the waterline. The
Croatian real estate market is in its infancy. Land
and house prices are still very favourable, particularly
on the islands where there are beautiful stone houses
built in the traditional style. Also in the beautiful
historic towns such as Dubrovnik, Hvar, Zadar, Korcula
there are excellent opportunities to acquire prime
location real estate at reasonable prices.
It is possible to conclude and verify a sales contract
from Britain but 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.
Whilst this may seem early in the process I would
recommend you to learn some conversational Croatian.
There will be moments of confusion on the phone when
you cannot communicate and the goodwill you will generate
with just a few words like "please" and "thank you"
is immeasurable. Our best advice is to buy a language
CD Rom.
Time line for purchasing
- Estate Agent
- Try to obtain a written survey
- Pre-contact stage
- Application to Foreign Ministry Department for
permission to purchase
- Certification of contracts by a notary
- Submission of documentation to Land Registrar
- Payment Real Estate Purchase Tax within 30-day
deadline
- Visa Requirements and residency
- Summary
- Free Tax Guide
1) Estate Agent Find yourself an area you
like, then properties you can afford (after allowing
for all additional costs - see below). We have produced
a property search. We recommend people not to buy
the first property they see and to inspect all suitable
properties before making final decisions. Vendors
on the Adriatic Coast will probably be more prepared
to deal with English purchasers when the main tourist
season is over in September, October and November.
Please note that normally in Croatia, even the purchasers
pay about 2-3% of the purchase price to agents. (The
seller also pays a similar amount.)
2) Try to obtain a written survey (and pay
to have it translated if need be)
3) Pre-contact stage At this stage you are
expected to make a down-payment of 10% of the sales
price or different if so agreed between the contractual
parties. If the vendor pulls out it should be a condition
that they pay you 10%
4) Application to Foreign Ministry Department
for permission to purchase When acquiring real estate
other than by inheritance U.K. citizens need to obtain
the approval of the Ministry of Foreign Affairs of
the Republic of Croatia. Prior to reaching a decision
the MFA will seek an opinion from the Ministry of
Justice, Administration and Local Self - Government,
thus the whole process might take a number of months.
In Croatia the ultimate proof of ownership is entry
of the owners name in the local Land Books (Zemljisne
Knjige) on that specific property.
The local courts will not allow a foreign citizen
to be entered in the Land Books without the MFA approval.
The approval is issued if there is reciprocity, i.e.
if Croatian persons can purchase real estate in the
country of the purchaser. U.K. citizens may, under
condition of reciprocity, acquire real property in
Croatia either as inheritance or by other legal transactions
such as purchases, deeds, trusts etc. Reciprocity
is presumed to exist unless proof to the contrary
becomes evident. Inheritance - U.K. citizens may inherit
property in Croatia. No additional approvals are necessary.
While such an approval can take up to 12 months, it
can easily be avoided if the property is bought by
a domestic company, which can be entirely owned and
controlled by a foreign person. In that way, the transfer
tax on real estate of 5% can also be avoided during
each subsequent sale of the property.
Ownership of real property of foreign citizens in
Croatia is regulated by Articles 354-358 of the Croatian
Property Law (Zakon o vlasnistvu i drugim stvarnim
pravima). The law has been published in the Official
Gazette No. 91 in 1996 (Narodne Novine 91/96). According
to the Law of property and other real estate rights
- Article 356 paragraph 2 (Official Gazette of the
Republic of Croatia Nos. 91/96, 68/98, 13 7/99, 22/00
and 73/00), foreign citizens and enterprises, who
want to become owners of real estate in the Republic
of Croatia need to obtain previous consent from the
Minister of Foreign Affairs of the Republic of Croatia.
In order to apply for consent, applicants must submit
a request written in Croatian, either personally or
through an attorney, to the Ministry of Foreign Affairs,
Consular Department, Meduli-eva 34, 10000 Zagreb,
Croatia. In addition, applicants must enclose the
following with the application: Basis on which the
property is acquired (contract of purchasing the property,
gift contract etc.), - original or duly legalised
copy. Proof of title (land registry certificate etc.)
- original not older than six months; An excerpt from
the land books for the particular property (In Croatian
ZK izvadak) This document is usually obtained in each
municipality (Opcina) at the local municipal court
(Opcinski Sud); it's land book division (Gruntovni
Odjel) Certificate issued by authorised authorities
for urban planing which proves that the particular
real estate is located within the zone in which construction
is allowed, according to the zoning plan, - original
not older than six months; A document from the local
municipality (Opcina), from the following department:
"Ured za prostorno planiranje". The document is called
"Uvjerenje o namjeni", for the particular property;
Proof of buyer's citizenship (legalized copy of passport,
for instance), - original or duly legalised copy;
Any photocopies have to be notarized by a Croatian
Notary Public Power of attorney for the attorney -
original or duly legalised copy Copy of each document
filed with the request.
The request with accompanying paperwork is to be sent
to:
Ministry of Foreign Affairs of the Republic of Croatia
Trg N. S. Zrinskog 7-8 10000
Zagreb
Croatia
Phone 4569 964
Fax. 4551 795 4920 149
Email: mvp@mvp.hr
The applicant shall deliver other necessary documents
on request. The fees for the application includes
HRK 20.00 application fee pursuant to Article 1 of
the Croatian Law on Administrative Fees (Official
Gazette of the Republic of Croatia Nos. 8/96, 77/96-Decree,
131/97, 68/98, 66/99-Decree, 145/99-Decree, 30/00-Constitutional
Court Decision, 23/02 and 91/02); plus, pursuant to
Article 2 of the above mentioned law, HRK 50.00 per
applicant for the Decision.
If the fee exceeds HRK 100.00, it shall be payable
directly to the national budget of the Republic of
Croatia (account No. 100 1005-1863000160, reference
No. 24, first adjacent field No. 5002, plus first
and last names and address of the applicant, pursuant
to Article 13 of the above-mentioned law. If the fee
is paid from abroad, according to Article 15 of the
above-mentioned law, the payment shall be effected
in foreign currency at the mean exchange rate determined
by the Central Bank of Croatia.
After the application has been completed and submitted,
it shall be referred for regular procedure to the
Ministry of Foreign Affairs that shall decide on each
application individually.
Pursuant to Article 357 paragraph 2 of the above-mentioned
law, the administrative procedure requires previous
opinion from the Ministry of Justice of the Republic
of Croatia, particularly focusing on the following:
Foreign citizens and enterprises cannot acquire ownership
of agricultural land, pursuant to Article 1 paragraph
3 of the Law on Agricultural Land (Official Gazette
of the Republic of Croatia Nos. 66/01 and 87/02);
Foreign citizens and enterprises cannot acquire ownership
of forests and forest land, pursuant to Article 1
paragraph 32 of the Law on Forests (Official Gazette
of the Republic of Croatia Nos. 54/83, 32/87, 47/89,
41/90, 52/90 - final version, 51/91, 61/91, 26/93,
76/93, 29/94, 8/00 and 13/02); If the object of acquisition
is a protected cultural monument, it shall be offered
to the authorities first (Republic of Croatia, Municipality,
City, County), and only if they decline to exercise
their pre-emptive right may the property be offered
to foreign citizens and enterprises, pursuant to Article
37 paragraph 1 of the Law on Protecting and Preserving
Cultural Monuments (Official Gazette of the Republic
of Croatia No. 66/99) In deciding on each individual
application, the Ministry of Foreign Affairs shall
determine whether there is reciprocity between the
Republic of Croatia and the applicant's state in real
property matters. The Ministry of Foreign Affairs
collects and examines foreign laws concerning reciprocity
with respect to foreign nationals. Interested parties
can contact the Ministry of Foreign Affairs for information
on reciprocity between the Republic of Croatia and
other states. For any additional information regarding
reciprocity between the Republic of Croatia and other
states please contact the Ministry of Foreign Affairs,
Consular Department, (Meduli-eva 34, 10000 Zagreb,
Croatia
5) Certification of contracts by a notary The
notary's fees are very low since the notary only certifies
the signatures
6) Submission of documentation to Land Registrar
where the property is registered at the Court The
estate agent or lawyer requests the registration of
the property on behalf of the buyer.
7) Payment Real Estate Purchase Tax within
30-day deadline A unified tax rate of 5% of purchase
price for all types of real estate-based on the price
of the real estate in the sales contract and the value
estimate by the authorised tax authority in charge
for the local area. It is possible to pay this tax
in pounds. 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. The tax is 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 is charged for everydayofdelayedpayment.
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. You are also
exempt if you sell it to your spouse or members of
your immediate family.
Income Tax Croatia has a generally high taxation system,
but its tax laws offer unique advantages for persons
who receive certain foreign income or a foreign pension.
Croatia also offers important tax advantages to yacht
owners. As it is not as yet an EU member, Value Added
Tax can be avoided if resident in Croatia. VAT of
22% was introduced in 1998 and applies for most goods
and services. However, if you do not receive a salary,
consultancy fees or similar income in Croatia, the
tax situation is very favourable and the following
income is tax-free:
Pensions received from abroad Interest payments on
loans, investments, deposits with financial institutions,
public loans and securities and similar income. There
are no controlled foreign corporation rules, anti-avoidance
provisions or similar regulations in Croatia so that
the use of offshore structures is possible for tax
planning and financial privacy
8) Visa Requirements and residency A visa is
not required for UK citizens to visit Croatia. See
full listing of visa requirements.
A foreign national can stay up to three months in
Croatia without any complications. Following this,
it is necessary to obtain a residence permit. Having
a yacht moored in a Croatian marina, renting or owning
a property in Croatia is sufficient to obtain a residence
permit. This does not mean that one is automatically
deemed a tax resident.
A person is resident based on physical presence in
Croatia if he stays during a period of at least 183
days. Short absences are not considered as breaking
this period of stay. The period can include two calendar
years. One would not be considered resident if the
stay is exclusively for the purpose of a visit, vacation,
therapy or for the purpose of satisfying similar personal
needs, providing it does not last longer than one
year. A person is resident based on maintaining a
home in Croatia if he has accommodation at his exclusive
and continuous disposal in Croatia for 183 days and
if it can be concluded from his circumstances that
he will keep and use that accommodation. The length
of stay in the accommodation is not important nor
whether the accommodation is owned or rented. This
provision of deemed residence is very attractive for
foreigners who wish to maintain legal residence in
Croatia without having to physically be there for
any minimum length of time.
If a foreign national wishes to be a tax resident
based on maintaining a home in Croatia, he needs to
have accommodation at his exclusive and continuous
disposal for at least 183 days. If he wishes to be
a tax resident based on physical presence in Croatia,
he must stay continuously during a period of at least
183 days for business, or more than one year for the
purpose of tourism, health or similar personal needs.
9) Summary As you can see this is a complicated
and time-consuming process.
If you are a non-Croatian speaking foreigner, the
easiest route might be to go through an agency, as
they are more than likely to have staff that speak
foreign languages, who know local lawyers, who have
probably had foreign clients in the past and who will
look after your application.
About the Author
Website www.Croatia-HolidayandHome.co.uk
The site to visit for buying property or holidaying
in Croatia info@Croatia-HolidayandHome.co.uk
Telephone +44(0) 1202 259155 Fax +44(0) 870 1693701
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