Ilej & Partners in cooperation with Karanovic & Partners
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
EU citizens/legal persons may acquire real estate in Croatia under the same conditions as Croatian citizens/legal persons, with exception of real estate located in protected areas of nature.
A foreign natural/legal person with its residence outside of the EU, may acquire ownership of real estate located in Croatia based on: (i) inheritance, under the assumption of reciprocity; or (ii) transaction, which must be approved by the Croatian minister of justice.
The agricultural land may be acquired by a foreign, non-EU natural/legal person, only based on inheritance under the assumption of reciprocity. Real estate located in protected areas of nature cannot be acquired by anyone except Croatian citizens/legal persons.
There are no restrictions for holding shares in property owning companies.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
No; however, when dealing with transactions and clients coming from high-risk countries under the Croatian AML regulation, local banks must follow special procedures and request additional documentation. If the bank finds the transaction to be of high risk after assessing it individually, they might reject it (e.g. in cases when third-country citizens request Croatian citizenship in exchange for investing in Croatian companies, transferring capital, or occupying real estate).
Sanctions that EU imposed against transactions with Russian banks and restrictions imposed by EU credit institutions against Russian entities need to be taken into consideration in this regard.
The adequate security must be provided for the loan, and the loan must be reported by the borrower to the National Bank of Croatia.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
The buyer is obliged to pay a real estate transfer tax at the rate of 3% of the real estate market value at the time of acquisition, if VAT is not payable. The buyer can opt for VAT taxation using the reverse charge mechanism, if it is a taxable person with right to deduct input VAT in full.
Sale of new buildings (not older than two years) and the land where they are located is VAT taxable at the standard rate of 25% VAT.
A court fee for registration or ownership transfer in the amount of EUR 33.18 is payable, as well as notarial fees, such as costs of notarization of the seller’s signature, which is a legal requirement for registration of the ownership.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
The local government units are obliged to introduce a tax on a real estate, ranging from EUR 0.60 to 8.00 per square meter of usable area of a real estate. Taxes on real estate must be paid by its owner, domestic and foreign legal and natural persons.
However, certain real estate is exempt. This includes real estate used as a permanent residence or rented under a lease agreement for permanent housing, as well as real estate intended for institutional accommodation. Real estate recorded in a company’s business books as held for sale is exempt if less than six months have passed from the date of entry into the books until 31 March of the tax year. The same applies to real estate acquired in exchange for unpaid claims if less than six months have passed from the date of acquisition (until 31 March of the tax year). Also exempt is a real estate unfit for housing due to natural disasters or other justified reasons, and real estate used as a permanent residence by registered hospitality providers.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
No. The law does prescribe certain exceptions from obligation to pay taxes, but such exceptions are applicable regardless of the nationality of the purchaser.
Regarding the real estate transfer tax, there is a tax break only for companies when they are inserting the real estate in its capital or capital reserves.
How is the ownership of Real Estate evidenced in your jurisdiction?
The ownership of real estate is evidenced by registration in land registries held by municipal courts. A competent court is the one where the real estate is located. The ownership of the real estate is acquired when the owner is registered in the land registry book.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
No. The land registries, as well as the companies’ registries held by commercial courts, are publicly available.