For several years, it has been proclaimed the fastest growing tourist destination in the Mediterranean, which in addition to its recognizable coast has a significant offer of natural beauty in the rural area, as well as protected cultural heritage sites such as the medieval old town of Dubrovnik. But apart from the generally known destinations, Croatia is full of hidden treasures, through which we can take you. In addition, according to the requirements of our clients, we can confirm that we are witnessing a turnaround in the trend of real estate demand and location requirements. People are looking for idyllic places, one in lifetime purchase, even if that means living without a single retail chain in the surrounding area.
| Country profile | |
|---|---|
| Land area | 56.594 km² |
| Population | 4,070.000 |
| Population density | 72 |
| Tourist arrivals | 60.021.000 (2019, before Covid measures) |
| Number of transactions | 102.008 of properties (2020) |
Pros and cons of buying real estate in Croatia
Pros
According to Eurostat data from 2020, the price of land for arable land in Croatia was 3,285 euros per hectare, which makes this country one of the most favorable regions for the purchase of agricultural land in Europe. We must be honest and make it clear that on the ground the price is certainly much higher, but it is still within acceptable limits compared to other countries in the European Union.
A list of the main advantages from our point of view:
1. Prices are still below EU market averages
2. Good return on investment in certain types of real estate
3. Geographical proximity to the Central European market - is within reach of road transport
4. Stable political situation with EU "background"
5. Existence of a digital nomad visa - residence permit can be issued by simple online procedure which brings as well the right to tax-free work on the territory of the Republic of Croatia
Cons
- The main problem is unregulated land plots, i.e. inconsistency of land registers. As a result, a lot of land plots cannot be sold, and those that are listed are not regulated, although the sellers claim that. The reason mainly lies in dual keeping of land registers through the last century, when the real owners and users of land were separated into two land registers for the purpose of paying taxes: the Land Register and the Cadastre.
- If you come from a country with which Croatia has signed a reciprocity agreement, it does not mean an automatic right to acquire real estate and move to the purchase process. Namely, it is necessary to submit a request for approval of the purchase and verification of the conditions of reciprocity to the Ministry of Justice, and this can take time, especially in COVID times.
- Sellers can be very difficult and fickle in negotiations. We usually describe it this way - they would like to sell the land but still wonder what you will do with it next.
Suggestions for purchase
The advice is to go in search for real estate from January to April, because a vast part of the year the real estate that is for sale can be filled for the purposes of tourist season. Croatians traditionally do not give up money easily from the tourist season, so every day of unoccupied accommodation is a great tragedy. Also, it is important to make a decision to buy a property in peace and calm, and you will not be able to count on it for sure in the summer period. And yes, it is important that you visit the property in winter, when not everything is as idyllic as in summer. Then you have already achieved something.
More or less all Mediterranean destinations where we offer our expertise in the process of property acquisition, in Croatia we warn of the importance of the micro-location of any property. Namely, everything that seems idyllic at the beginning, in reality, can easily not reveal such an image. Therefore, it is very important to have information from the field, if you go looking for real estate on your own, be sure to afford a few days of accommodation nearby and see how the neighborhood breathes.
Not everything is as idyllic as in summer, so be aware of importnace of visiting desired location during the winter days.
Real estate proceedings for foreign legal and natural persons
A foreign natural person is considered to be one who does not have the citizenship of the Republic of Croatia, and the citizenship of the Republic of Croatia is proved by a valid identity card, military card, passport or birth certificate. The status of a foreign natural person is determined by inspecting the passport or other documents.
A foreign legal entity is considered to be one that has its registered office outside the Republic of Croatia, which is determined by inspecting the excerpt from the commercial (court) register.
The first category of foreign nationals are those coming from the EU. They can be the owners of real estate in Croatia without any legal obstacles, but only in the case of construction land and everything related to that land (house, apartment, etc.).
This legal presumption does not apply to agricultural land, which is prohibited for purchase by all foreigners, including EU citizens. Exceptionally, foreign legal and natural persons may acquire the right of ownership of agricultural land by inheritance on the condition of reciprocity.
As part of the Treaty of Accession of the Republic of Croatia to the European Union (July 1, 2013), a transitional period of 7 years was approved, in which only Croatian farmers could buy agricultural land on Croatian territory. However, the Croatian Government used the decision to extend it for another 3 years, so that this provision should be repealed in the summer of 2023.
On the other hand, citizens of other countries can acquire ownership of real estate in Croatia in situations where there is reciprocity between the Republic of Croatia and the state of residency of potential buyer, with the approval of the Ministry of Justice after all.
Taxes related with purchase of real estate - short overview
Real estate (construction and/or land) can be taxed with VAT at the rate of 25% or real estate transfer tax at the rate of 3%. Taxation depends on the status of the supplier or recipient of the property, the status of the property (unused or used) and the type of property (land or building).
So there is no dual taxation, tax applies only in one form. Applying the provisions of the Law on VAT and the Law on Real Estate Transfer Tax, it follows that real estate transfer tax is paid if the delivery of real estate is not subject to VAT.
Value Added Tax (VAT)
From 01.01.2015. the real estate transaction on which value added tax (VAT) is paid is considered to be:
- Delivery of buildings or their parts and land on which these buildings are located, before the first occupancy or deliveries where no more than two years have passed from the date of first occupancy, and delivered by a taxpayer who is in the register of taxpayers value added tax
- Delivery of construction land, if a taxpayer who delivers it is registered in VAT system.
Therefore, paying VAT is exempted on the delivery of construction property or part of the building, including the land on which it is located, if more than 2 years have passed from the date of first establishment or use of the building to the date of the next delivery.
If the real estate is handed over by a person who is not entered in the register of VAT payers, the real estate transfer tax is paid regardless of the status of the acquirer of that real estate.
Real estate transfer tax
The real estate transfer tax is currently set at 3%.
If it is a matter of delivery of construction land by a person who is not registered in the register in VAT system, then the supplier of the land does not calculate VAT. The buyer is obligated to pay real estate transfer tax on the delivery of the subject land.
The delivery of agricultural and forest land is exempt from VAT in all variants, with the acquirer paying 3% real estate transfer tax.
Other tax liabilities
Of course, there are also many tax exemptions for certain groups of taxpayers and certain legal situations, which we can discuss according to your need.
