Taxes Related to the Real Estate’s Purchase/Ownership Process in Croatia
Igor Katušić, Monday, 18 November 2013
In a legal matter of owning a real estate here in Croatia, you will come across two general taxation regulations which correlate with your general obligations as the buyer and later owner of the real estate itself.
This article is part of a series of 8 articles about buying property in Croatia. The other articles in the series cover the following topics:
Real Estate Transfer Tax
First is implemented and effective in the very moment of buying process final step – finalizing the contract’s terms and becoming a legal owner of a real estate. This obligation is incorporated within the Law on Possession and other Material Rights regulations and it is obligatory for the buyer to pay this specific tax.
You will have to report your tax obligation incurred in the moment of buying the property to the Tax Administration Authority of the county.
The general Real Estate Transfer Tax is 5 % of an average market value of the real estate you bought. It doesn’t necessary mean that the Tax Administration Authority will take the price stated within the contract as the bonding reference for establishing the transfer tax. In other words, they will use a specific procedure to establish current and real market price of your new real estate - and based on their calculations they will implement the final taxation.
So it’s in vain to try to play with the prices within your property purchasing contract because it is irrelevant for the taxation procedure.
Tax Reporting Deadlines
Depending of your status as the buyer (EU citizen, non-EU citizen of the country that has signed the Mutual Reciprocity Agreement, non-EU citizen of the country that has not yet signed the Reciprocity Agreement); you have to report Real Estate Transfer Tax obligation to the Tax Administration Authority within the 30 days from the day you:
After that, you are the rightful owner of a real estate in Croatia.
Property Related Taxes – Other Taxation Obligations
Once you make a payment of the Real Estate Transfer Tax, you will fall under a different set of tax obligations related to your new real estate. Just to mention a few: you have an annual vacation property tax, local government’s tax and one to which we didn’t correspond earlier – the VAT if you decide to sell your property in less than a 3-years time frame from the moment you bought it, while selling it for a higher price than you purchased it.
Annual Property Tax – Local Government’s Taxation Regulations
This is the type of tax every vacation real estate (property) owner has to pay on an annual basis and it corresponds to a local government’s regulation policy relative to the real estate’s location. In practice, that tax ranges between 5 KN and 15 KN per square meter of space, and can be calculated accordingly. Additionally you have two choices:
Under the presumption that you are a citizen of a country which signed a mutual agreement with Croatia regarding the avoidance of a double taxation, you will fall under this specific tax regulation in a case where you sell your property any time sooner than 3 years from the date of the purchase for a higher price.
Now this is something you should know about this matter. Let’s say you bought the house at the Adriatic for 150.000 € in January 2011. You sold it in September 2013 for 215.000 € - which is a regular case here in Croatia due to the increase in demand.
You will pay the 25 % of tax on the difference between the purchase value from 2011 and income value from the sale in 2013 (the income value will be calculated based on the current market trends and average real estate’s value in a real time – not according to the price within the Sales Contract). The purchased value will be increased based on the prices growth of the building materials involved in the construction and other correlated expenses in that period of time.
From the moment you receive the official request to pay the tax; you’ll have exactly 15 days to do that.
Generally speaking, tax values related to the real estates in Croatia are not that high as it might seem. Of course, if you are aiming for some top location such as Dubrovnik or Croatian capital Zagreb, that value will increase which is quite usual and it happens in every single country. But even in this case; you’ll end paying a much lower amount for the total taxation obligation annually than in some other European country.
In a legal matter of owning a real estate here in Croatia, you will come across two general taxation regulations which correlate with your general obligations as the buyer and later owner of the real estate itself.
This article is part of a series of 8 articles about buying property in Croatia. The other articles in the series cover the following topics:
Real Estate Transfer Tax
First is implemented and effective in the very moment of buying process final step – finalizing the contract’s terms and becoming a legal owner of a real estate. This obligation is incorporated within the Law on Possession and other Material Rights regulations and it is obligatory for the buyer to pay this specific tax.
You will have to report your tax obligation incurred in the moment of buying the property to the Tax Administration Authority of the county.
The general Real Estate Transfer Tax is 5 % of an average market value of the real estate you bought. It doesn’t necessary mean that the Tax Administration Authority will take the price stated within the contract as the bonding reference for establishing the transfer tax. In other words, they will use a specific procedure to establish current and real market price of your new real estate - and based on their calculations they will implement the final taxation.
So it’s in vain to try to play with the prices within your property purchasing contract because it is irrelevant for the taxation procedure.
Tax Reporting Deadlines
Depending of your status as the buyer (EU citizen, non-EU citizen of the country that has signed the Mutual Reciprocity Agreement, non-EU citizen of the country that has not yet signed the Reciprocity Agreement); you have to report Real Estate Transfer Tax obligation to the Tax Administration Authority within the 30 days from the day you:
- Finalized the contract’s terms, hence acquired the property if you are EU citizen; or
- Received the official Approval from the Ministry of Justice of Republic of Croatia to claim the ownership of the property if you are non- EU citizen.
After that, you are the rightful owner of a real estate in Croatia.
Property Related Taxes – Other Taxation Obligations
Once you make a payment of the Real Estate Transfer Tax, you will fall under a different set of tax obligations related to your new real estate. Just to mention a few: you have an annual vacation property tax, local government’s tax and one to which we didn’t correspond earlier – the VAT if you decide to sell your property in less than a 3-years time frame from the moment you bought it, while selling it for a higher price than you purchased it.
Annual Property Tax – Local Government’s Taxation Regulations
This is the type of tax every vacation real estate (property) owner has to pay on an annual basis and it corresponds to a local government’s regulation policy relative to the real estate’s location. In practice, that tax ranges between 5 KN and 15 KN per square meter of space, and can be calculated accordingly. Additionally you have two choices:
- One time annual payment; or
- Monthly payment option (good choice if you would have to pay a greater tax if buying a rather large real estate especially if it’s located at some top location as there are more than few of those in Croatia these days due to the increase of the tourist visits each year.
Under the presumption that you are a citizen of a country which signed a mutual agreement with Croatia regarding the avoidance of a double taxation, you will fall under this specific tax regulation in a case where you sell your property any time sooner than 3 years from the date of the purchase for a higher price.
Now this is something you should know about this matter. Let’s say you bought the house at the Adriatic for 150.000 € in January 2011. You sold it in September 2013 for 215.000 € - which is a regular case here in Croatia due to the increase in demand.
You will pay the 25 % of tax on the difference between the purchase value from 2011 and income value from the sale in 2013 (the income value will be calculated based on the current market trends and average real estate’s value in a real time – not according to the price within the Sales Contract). The purchased value will be increased based on the prices growth of the building materials involved in the construction and other correlated expenses in that period of time.
From the moment you receive the official request to pay the tax; you’ll have exactly 15 days to do that.
Generally speaking, tax values related to the real estates in Croatia are not that high as it might seem. Of course, if you are aiming for some top location such as Dubrovnik or Croatian capital Zagreb, that value will increase which is quite usual and it happens in every single country. But even in this case; you’ll end paying a much lower amount for the total taxation obligation annually than in some other European country.
All types of property for sale in Croatia by private sellers and estate agents. Find your perfect villa, farm or apartment along the coastline or on one of the more than thousand Croatian islands.
There are two ways to buy a house in Croatia as a foreigner, as an individual or through a private company. Both approaches have their advantages and
disadvantages. E.g., If you buy privately and own the house for three years you don’t have to pay any capital gains tax if you sell of your home.
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