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Buying a Property in Croatia

Taxation for Residents and non-residents in Croatia

Personal taxation: non-residents
Generally, non-residents are subject to tax on income sourced in Croatia. The current rate is 20 per cent.

Non-residents also have to pay a tax of 10 kuna (around £0.90) per square metre of their property annually.

Personal taxation: residents
Anyone spending more than 183 days per year in Croatia and/or having a property there (whether rented or owned) available for his exclusive and continuous use is considered by the authorities to be a resident for tax purposes.

Residents of Croatia pay tax on worldwide income. Rental income is normally taxed at 15 per cent. It is worthwhile looking at the exemptions that exist, as there are definite advantages in terms of ‘deemed residence’. This means that it is possible for foreigners to keep legal residence in Croatia without having to be there for any minimum length of time.

There is no wealth tax or inheritance tax in Croatia. The country has entered into double taxation treaties with 35 countries (such an agreement exists with the UK), and pensions received from abroad are exempt from Croatian tax.

Capital Gains Tax is payable by private citizens on selling their property if it is sold within the first three years of ownership, and is charged at 35 per cent of the gain. After three years, the tax is not charged, and it does not apply to private companies selling property at any time. However, company profit tax is payable at a rate of 20 per cent at all times.

Passports, visas and residency

As part of Croatia's preparation to become a full member of the EU, visa and passport requirements for UK or other EU citizens have fallen very much in line with the rest of the Europe. This means EU citizens arriving into Croatia need only a passport or national identity card.

Foreign nationals can stay in Croatia for a maximum of 90 days without having a residence permit. Those wanting to stay longer can apply for a temporary residence permit, which will be granted without difficulty to anyone owning a property.

Temporary residence permits are issued for twelve months and can be renewed, though a foreign national is now only permitted to be in Croatia for six months out of 12. The first permit must be applied for from outside Croatia, and can be obtained from a Croatian consulate in the country in which the applicant is currently resident.

To obtain a temporary residence permit, the applicant will have to supply two photographs, a photocopy of a valid passport, proof of sufficient funds, plus his or her birth certificate as well as a marriage certificate if you are married. also required are proof of medical insurance and a criminal records check no more than six months old. The permit is kept with the passport, which must have at least three months left on it at the end of the permit’s validity.

Extensions to the permit can be obtained from a local police station in Croatia, but must be applied for at least 30 days before the current permit expires. After five years of residence in Croatia, you will be eligible to apply for full residency should you wish.

Further details are available from the Croatian Embassy website.

The Croatian economy

Croatia's economy has undergone a profound transformation since the country gained independence in the early 1990s. Today, it is a functioning market economy with stable macroeconomic indicators, but structural reforms are yet to be completed. The microeconomic environment and, in particular, the competitiveness of the local economy need to be enhanced rapidly.

In 2005, the economy enjoyed relatively fast growth, low inflation and a stable exchange rate. However, the fiscal deficit remains above EU levels – it is expected to be around 4.2 per cent of GDP. The current account deficit is high and the state still plays a significant role in the local economy. Unemployment is very high as the economy adapts to the new systems and demands placed upon it..

This is the anomaly of buying in Croatia – while the property market is thriving and there is more inward investment in the country than ever before, there are still issues to be tackled by the government to improve the lives and prospects of ordinary Croatians. Strides forward in GDP growth and infrastructure are helping develop the country, and the future looks positive.

And finally...

Croatia has really arrived in the family of countries that are attracting those seeking a home in the sun. Prices are still reasonable, there’s a great deal to do, the people are fun, and the country is attractive.

Do remember, though, that buyers of a home abroad should always, without exception, take independent legal advice. The legal adviser should be fluent in both the purchaser’s language and that of the country in which the property is located. Under no circumstances should he or she be connected with the estate agent, the developer (if the property is located on a new development), the notary or anyone else. The only person he or she should be working for is the purchaser.

Those who are accustomed to taking two holidays a year may well find that buying a home in Croatia will change all that, and that they’ll be heading to their new home rather more often.

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More pages

Page 1: Why Croatia?
Page 2: Property in Dubrovnik & Dalmatia
Page 3: Taxation for Residents and non-residents in Croatia

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