REALWorld Law

Taxes

Croatia

Investment structures
- Routes for investment
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Investors wishing to invest in real estate in Croatia can do so either through a direct acquisition of the real estate or indirectly, through the acquisition of a Croatian corporation.

Direct acquisition of real estate assets by foreign investors other than EU residents (individuals or legal entities) is subject to reciprocity (ie it is permitted as long as Croatian citizens are allowed to acquire real estate in the investor's home country) and subject to written consent from the Ministry of Justice. Agricultural land and forests cannot generally be acquired by foreigners, unless an international agreement provides otherwise.

Four types of corporate structure are available to real estate investors:
- Limited liability company (društvo s ograničenom odgovornošću – doo)
- Public limited liability company (dioničko društvo – dd)
- Public partnership (javno trgovačko društvo – jtd)
- Limited partnership (komanditno društvo – kd)
- Closed-end real estate investment fund (zatvoreni investicijski fond s javnom ponudom za ulaganje u nekretnine)
Real estate ownership is regulated in the same way under all these types of structure.

Last modified 22 Mar 2024
Tax on acquisitions
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

From 1 January 2015 any acquisition of a building and/or a development site from a VAT payer is subject to VAT at the rate of 25%. This rule applies to buildings, which are new, ie have not been in use since their construction and buildings in respect of which the time elapsed since their first use up to the sale is two years or less. Acquisitions of “old” (used) buildings, ie those which do not fall into the above categories, are subject to land transfer tax unless both parties (being VAT payers) agree on VAT and reverse charge. Acquisitions of land which is not a development site are either subject to VAT (if the buyer is also a VAT payer and both the seller and the buyer agree to apply VAT) or land transfer tax. VAT is paid by the buyer.

Acquisition of real estate assets that are not subject to VAT are subject to real estate transfer tax at the rate of 4% (since 1 January 2017). Real estate transfer tax is payable on the market value of the property and the tax authorities have the right to perform their own assessment of this if appropriate. Generally, real estate transfer tax is paid by the buyer. However, the seller is also a guarantor for the payment.

Exemptions from real estate transfer tax (if applicable) apply in the following cases:
- A transfer of real estate made as a contribution to the registered capital or to the capital reserves of a company.
- A transfer of real estate owned by a company as part of a merger, division or restructuring process.
Real estate cannot be contributed to the share capital of a closed end real estate investment fund, so this exemption from real estate transfer tax does not apply to these funds.

Last modified 22 Mar 2024
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

VAT can be payable as an alternative to land transfer tax in the circumstances outlined in the reply to the question on taxation of acquisitions.

VAT can be recovered by the buyer if it is a VAT payer.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

There is a land registry fee for the registration of a transfer of ownership amounting to HRK 250 as well as fees for the public notary and other advisors. Registration fees are payable by the person applying for registration, usually the buyer. Purchase agreements normally stipulate that the notary's fees are met by the buyer.

Last modified 22 Mar 2024
Recurring taxation
- Ongoing taxation
- Ongoing costs of ownership
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

In the case of companies (including closed end real estate investment funds) capital gains are normally taxed as profit at the rate of 18% and in case of a company with less than HRK 3 mil annual income, 12% (since 1 January 2017) . Capital gains are treated in the same way as rental income and other income from real estate ownership. Tax is payable on rental and other income after the deduction of expenses (including interest, depreciation and administrative costs).

An individual's rental income from real estate in Croatia is subject to personal income tax at the rate of 15%. Tax is payable on rental income after deducting 30% to cover expenses. This deemed amount applies irrespective of the actual expenses incurred. If the individual is not a VAT payer (ie has no registered business that is subject to VAT), the income tax payable on rental income may be determined by the tax authority as a flat rate.

No other taxes apply to the ownership of real estate.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Communal charges such as fees, waste disposal charges, etc are payable to the local authorities.

Last modified 22 Mar 2024
Tax on income from real estate
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Rental income can be generated by leasing offices or flats. Income may also be generated from the cultivation of land.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

In the case of companies, tax is payable at the rate of 18% (or 12%) of the rental income after the deduction of expenses (including interest, depreciation and administrative costs).

An individual's rental income from real estate in Croatia is subject to personal income tax at the rate of 25%. Tax is payable on rental income after deducting 50% to cover expenses. This deemed amount applies irrespective of the actual expenses incurred. If the individual is not a VAT payer (ie has no registered business that is subject to VAT), the income tax payable on rental income may be determined by the tax authority as a flat rate.

No other taxes apply to the ownership of real estate.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Foreign investors are entitled to invest, and reinvest, their profits into the economy of Croatia in the same way as residents of Croatia. Income generated by an investment can be freely transferred to a foreign investor. Income from a participation in profit is not subject to income tax, or to withholding tax, if it is transferred abroad to a foreign investor.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

No.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

No.

Last modified 22 Mar 2024
Tax on disposals
- Taxation of disposals
- Other costs of disposals
What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

In the case of companies (including closed end real estate investment funds) capital gains are normally taxed as profit at the rate of 18% (or 12%). Capital gains are treated in the same way as rental income and other income from real estate ownership.

Last modified 22 Mar 2024

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

There is a land registry fee amounting to HRK250 for the registration of transfer of ownership, as well as fees for the public notary and other advisors. Registration fees are payable by the person applying for registration, usually the buyer. Purchase agreements normally stipulate that the notary's fees are met by the buyer.

Last modified 22 Mar 2024
Key contacts
Beata Glinska
Partner Glinska & Miskovic Ltd beata.glinska@gamc.hr T +385 1 61 99 930 View bio

Other costs of acquisition

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Croatia

There is a land registry fee for the registration of a transfer of ownership amounting to HRK 250 as well as fees for the public notary and other advisors. Registration fees are payable by the person applying for registration, usually the buyer. Purchase agreements normally stipulate that the notary's fees are met by the buyer.

Last modified 22 Mar 2024

REALWorld Law

Taxes

Croatia

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

What costs/charges (other than tax and VAT) are payable on completion of the purchase of real estate and who is responsible for paying these costs and to whom are they payable?

Beata Glinska

Other costs of acquisition

Croatia