Tax rates in Croatia are identical for all citizens as well as for foreigners. Non-residents of the Republic of Croatia can buy real estate in Croatia, i.e. acquire the right to its ownership.
In Croatia, the tax system consists of several types of tax forms. These are the so-called direct and indirect forms. Direct tax refers to income tax, income tax surcharge and profit tax, while indirect tax includes value added tax, excise duties and real estate sales tax.
Taxes are the same as for citizens of the Republic of Croatia, as well as for foreigners.
Can a foreign citizen buy real estate in the territory of the Republic of Croatia?
Every natural and legal person residing in an EU member state has the right to acquire ownership of real estate on the territory of the Republic of Croatia. Exceptions are agricultural lands and protected areas of nature. However, the conditions are the same as for legal and natural persons with their seat in Croatia.
Foreigners who do not live in an EU member state can acquire ownership of real estate within the Republic of Croatia, but only on the basis of the assumption of reciprocity and on the condition that they have obtained the consent of the Ministry of Justice. Exceptions are situations in which a foreigner has taken over real estate in Croatia on the basis of a final decision on inheritance or on the basis of a court verdict. In these cases, consent is not required.
What is the presumption of reciprocity?
Based on the assumption of reciprocity and the consent of the ministry, a foreigner can acquire the right to property ownership in Croatia if he does not live in an EU member state. Both countries must have the principle of reciprocity. It is about the fact that the right of ownership is acquired by inheritance according to the law of the country from which the buyer comes.
To put it simply, a foreigner has the right to own real estate only if Croatian legal and natural persons can acquire the same in the country from which the buyer comes according to the law of that country.
If the Ministry of Justice cannot determine the existence of reciprocity, then the role is taken over by the Ministry of Foreign Affairs, which obtains all the important regulations of the individual country seeking consent.
In order to obtain consent for the acquisition of ownership, it is necessary to attach the following documentation:
• the legal basis for the acquisition of ownership,
• proof of ownership of the seller,
• certificate of the authority responsible for urban planning,
• proof of the acquirer's citizenship,
• certified power of attorney.
What if a foreigner cannot become the owner of the property through inheritance?
Such situations in which a non-resident of the Republic of Croatia cannot acquire ownership of real estate through the process of inheritance are also regulated by law, more precisely by the Law on Inheritance. In that case, instead of real estate, a legal or natural person acquires the right to compensation according to the Expropriation Act. Then the real estate becomes the property of the Republic of Croatia, and the state is also liable for the compensation according to the aforementioned law.
The course of events is such that the foreigner has the right to compensation based on a valid inheritance decision. Expropriation is carried out in such a way as to compensate for what is expropriated.
The real estate transfer tax payer is the buyer
Real estate transfer tax taxes the transfer of ownership rights, not the real estate itself. The tax amount is the same for residents and non-residents of the Republic of Croatia. Therefore, both domestic and foreign natural or legal persons are equal in terms of payment of real estate sales tax, unless otherwise determined by an international agreement. According to the current Real Estate Tax Act, the person who acquires the real estate, or the buyer, is liable for that tax.
If the real estate was acquired on the basis of a lifetime maintenance contract, the taxpayer is also the maintenance provider.
The sales contract is the basis of the tax liability
The sales contract should contain information about the legal construction of the building, about the energy certificate and an extract from the land register. In addition, the contract should specify the method of payment, the agreed price, the down payment, the date of "handover" of the real estate and similar information.
Since buying and selling is a way of acquiring real estate, tax is paid on the same, which is borne by the buyer, not the seller. The tax liability arises from the moment of signing the sales contract. With the delivery of the contract to the Tax Administration, the real estate transaction was reported.
Creation of tax liability
As we stated earlier, the tax liability arises from the creation of a contract by which some real estate is acquired. If the real estate is acquired on the basis of a court decision, the tax liability is valid from the moment it becomes final.
If it is a foreign person, whether natural or legal, who needs the consent of the minister in order to acquire real estate in the territory of the Republic of Croatia, the tax liability arises upon obtaining this consent.
Registration of real estate tax
Given that the notary public is obliged to certify the sales contract between the seller and the buyer, it is up to him to submit a copy to the tax administration within a certain legal period. To put it simply, the notary public has 30 days to submit a copy of the sales document or any other document on which the real estate transaction is based to the tax administration responsible for the area where the real estate is located. Delivery is possible electronically.
By the very act of submitting the previously mentioned documents, the registration of the real estate transaction was made.
In a situation where the sales contract has not been certified or issued by the court, the taxpayer is the one who is obliged to report the transaction to the tax administration that is in charge of the area where the real estate is located. In this case, it is necessary to submit the Real Estate Transaction Report and the document on the acquisition of the real estate. As in the previous situation, the application must be made within 30 days from the date of creation of the document.
There is also a third situation in which the real estate acquisition document was not issued by the court or notarized by a notary public. In that case, the supplier is obliged to report the delivery of the real estate within 30 days by submitting the Transfer Report.
What is a temporary tax solution?
A temporary tax ruling determines the tax liability based on the data provided in the tax return. The Tax Administration has the right to verify the authenticity of these data. In the event that the basis for changing the tax liability is established, a temporary tax ruling is issued, in which the difference between the current and subsequently determined tax liability is stated. Finally, after it has been determined that there is a basis for changing the tax liability based on a temporary tax ruling, a tax ruling is issued.
Tax base and tax rate
Every acquirer of real estate in the territory of the Republic of Croatia pays real estate sales tax. The basis of the tax is the market value of the real estate at the time of its acquisition, and it is determined on the basis of the documents on its acquisition. If the market value of the real estate is not realistic in the opinion of the Tax Administration, the same service has the right to determine its real value. Real estate sales tax amounts to 3% of the determined market value.
Individuals are exempt from paying real estate transfer tax in situations where they are exiles and refugees who have exchanged their real estate abroad, then if they are a spouse, common-law partner or life partner, descendant or ancestor, and adopter or adoptee who has the status of dependent.
Citizens who bought an apartment or land on which they had a right of occupancy also do not pay real estate transfer tax.
Tax collection and refund
The determined amount of real estate tax must be paid within 15 days from the delivery of the decision on its determination.
An individual who pays real estate sales tax is entitled to a refund of overpaid amounts. It is important to note that it is necessary to make a request. Based on the request, the subscribed amount is returned to the customer within 30 days.
What is real estate tax paid for?
Real estate transfer tax is paid on every acquisition of real estate in the Republic of Croatia on which VAT is not paid. VAT is calculated in situations where the supplier is registered in the register of taxpayers and supplies construction land or buildings and some of their parts, including the land on which they were built, but only if the above has been inhabited or used for less than 2 years.
If citizens of the Republic of Croatia or foreigners have acquired real estate on the territory of the state on the basis of their own construction or on the basis of a building permit in their name, they are the owners of the real estate. No real estate transfer tax is paid on it. Tax is paid exclusively on the acquisition of the associated land.