The purchase process
Foreigners have the same rights to property ownership as Croatian nationals and purchasing process is quite straightforward. One of the most important aspects of the property purchase is establishing that the property has a “clean title”, meaning that the seller has legal authority to sell the property and there are no pending claims on the property before the courts. It is therefore important that this is thoroughly checked in advance of any purchase and to ensure you deal with an independent lawyer when purchasing property there.
The ownership and possession status of the real estate can be determined by accessing the Land Registry and Cadastre at the Municipal Court. It is necessary to check the zoning documentation in order to determine the land allocation (for example, construction, tourism, agriculture). This is followed by the real estate purchase procedure and the signing of the contract.
Surveys are not usually carried out, but it is wise to insist on one, particularly in the case of an older property.
Once a price has been agreed and the preliminary searches have been conducted, a deposit is paid to secure the property and a pre-contract signed. When all searches are complete, buyer and seller sign the final contract of sale in the presence of a notary public. However, if the buyer is not present, the power of attorney can be provided for the lawyer.
The finalised and certified contract establishes the legal ownership and all monies and contracts must be exchanged by the agreed completion date. A 3 per cent purchase tax is paid at time of completion and then the documents are submitted to the local land registry department and the change in ownership registered. This registration can take up to 10 days.
Fees, taxes, and legal costs
Croatia has signed double taxation treaties with most European countries including the UK and Ireland, so you are not liable for double taxation.
VAT - value added tax - is currently set at 22 per cent. There are no annual property taxes, but real estate transfer tax is levied when buying real estate. Currently the tax is set at 5 per cent; this is paid by the buyer and must be included in the sales contract. If you buy a newly built property (off-plan apartments), the 5 per cent will be levied just on the cost of the land; for older properties the tax will be on the entire value.
Unlike in the UK, both the vendor and purchaser pay fees to the estate agent in Croatia. These feels tend to be around 3 per cent (although even 6 per cent is not unheard of) of the agreed purchase price. Some agents offer a "one stop service" that includes both agency and legal fees.
Legal fees and stamp duty are approximately 1.5 to 2 per cent of the purchase price. If a property in private ownership gets sold within three years, the capital gain tax is levied at 35 per cent. After three years, you are not liable for capital gain tax.
In total, you have to add about 10 per cent of the quoted price to cover the notary and legal fees, real estate transfer tax, and estate agent's fees.