1) Questions about the commissions and services of EXEAT.
2) Questions about deposit payments, transfer of money, protection of the coast.
3) Questions about the legal and administrative procedure for acquiring real estate in Croatia.
4) Questions about taxes and other topics.
1) Questions about the commissions and services of EXEAT.
1-1) What are the agency fees for services offered by EXEAT?
Apart from a special version « acquisition by a physical person, a Croatian national »,
EXEAT offers its clients, an « all inclusive » formula directed mainly towards foreigners.
EXEAT is a unique interlocutor, supervising and coordinating the entire process within Croatia.
The
all inclusive formula costs 4000 euro + (value added tax of 22%: PDV) for properties equal to or less than 100 000 euro
(excluding agency fee). The commission decreases from 4% to 2% depending on the price of the property which are priced more than 100 000 euro.
This amount not only includes EXEAT's agency fee but it also covers the legal fees for the services rendered by our lawyers:
the control of documents and the drafting/preparation of the contracts.
The cost of authentification, the costs related to the agreement procedure with the Ministry of Foreign Affairs,
and the judicial and administrative costs related to the registration of ownership are all paid by EXEAT.
The total amount paid, in reality, corresponds to the fees of a real estate agency, a lawyer and those of a public notary.
The property transfer tax of 5% must be paid by the client.
Along with the fact that our lawyers and public notaries are those whose competence have been recognized, EXEAT assures to its clients clear, efficient and reliable communication, which are often difficult for a foreigner to obtain from the cultural, administrative and legal systems of Croatia. The supervision and coordination of all the parties involved in the acquisition process (buyer, seller, lawyer, public notary, surveyor, architect, general contractor, insurer, and bankers) are the essential key and success for such a project in Croatia. The choice of course rests with the client. Nevertheless, from experience, we suggest that you consider those services of a unique and professional interlocutor.
The details of our tariffs and our terms can be found on our « legal security » page. We strongly encourage you to compare the quality of service, the benefits and the proposed prices offered by the different intermediaries. Its structure, clear formation, professional civil responsibility, experience, rigorousness, reliability, and availability, must allow the intermediary of your choice to guide you all throughout this very complex and meticulous process.
EXEAT will at the same time consult and assist you, if necessary,
in engaging the services of a surveyor, with tax payments, insurance, as well as opening bank accounts.
1-2) Does EXEAT cover the cost of creating a company in Croatia (in view for example of an acquisition) and all the necessary steps?
The fees linked to the creation of a Croatian company are in addition to the commission paid for the purchase of a real estate property. EXEAT charges 2000 euro for the creation of a company with no special clauses, under the direction of only one director and with a start up capital of 20 000 HKN. One must also consider the expenses of operation. A description of these options and the additional fees are outlined in the purchase contracts.
1-3) Does EXEAT offer renovation services?
As EXEAT proposes many properties for renovation as well as constructible terrains, we offer those who wish to construct, renovate or decorate their properties, references to selected architects and general contractors.
2) Questions about deposit payments, transfer of money, protection of the coast.
2-1) What is the minimum deposit a buyer must pay at the moment of the signing of the contract or pre contract (mutual accordance of purchase-sale)?
There is no legal minimum amount in Croatia but normally the seller demands an advance total of 10% of the purchase price
paid within a delay of 8 to 10 days from the signature of the contract. This sum is a protection not only for the seller who keeps this
deposit in case the sale is annulled due to the fault of the buyer, but also for the buyer who, according to Croatian law, receives
double the amount advanced in case the contract is annulled due to the fault of the Seller.
The payment of the remainder of the purchase price must be transferred according to the delay specified in the final contract signed by the parties
(approximately 1 to 3 months depending on the property and its legal situation). Also, specific reimbursement conditions (without penalty)
could be added in the event that certain conditions are not met (for example receiving a construction permit).
2-2) How is money transferred between Croatia and France?
Most of the time, the buyer transfers onto the Seller's account the sum indicated within the time delay. It is important to anticipate the date of the demand of the transfer from the bank (generally located in the residing country of the buyer) rather than date of reception of the transfer by the receiving party's bank, to avoid becoming a victim of the often inefficient Croatian banking system. Equally, it is also important to anticipate the exchange rate which will appear within the pre contract or contract, as the Croatian seller is unable to receive the sum directly in euros.
2-3) Is new construction permitted just « a few steps from the sea »?
Since the house is truly located just « a few steps from the sea », this excludes any questions with respect to public maritime domain. Croatia has adopted a new law and carefully applied (OJ of the Republic of Croatia YEAR CLXVI, number 128 Zagreb 13 September 2004, ISSN 0027-7923) with the objective of protecting its coastline (inhibiting, for example, the construction of new buildings within a coastal band of 100 m, in limitation of constructible zones).
3) Questions about the legal and administrative procedure for acquiring real estate in Croatia.
3-1) Can a foreigner purchase real estate in Croatia?
There are two possible and distinct procedures in which one can acquire a real estate property in Croatia. The purchase can be made in the buyer’s rightful name (as an individual physical person, foreigner in Croatia) or by an intermediary Croatian company. The physical person is an associate of the company who may purchase a property like all other physical or legal entities of Croatian nationality.
3-1-1) As an individual:
- Procedure: After signing the sale purchase contract and gathering all the necessary documentation, a foreigner in Croatia must receive consent from the Croatian Ministry of Foreign Affairs. This ensures that the completion of the file and its submittal to the Ministry of Justice. This final step verifies that the person has not been criminally punished or is not being searched for committing a crime. If the Ministry of Justice refuses its consent, the Ministry of Foreign Affairs cannot reverse the decision. On the other hand, if the Ministry of Foreign Affairs awards it consent, the Ministry of Justice has the right to reverse the decision and refuse consent. Practically, apart from the long administrative delay, refusal of consent is rare (not one of our clients have been refused consent).
- Exception: If in principal, within these conditions, a foreigner, as an individual, can purchase all types of properties, certain types of properties are excluded: agricultural terrains, or protected national parks.
- The resale or transfer of the property by a physical person (the owner) is permitted and the consent to transfer or resale is not necessary. Although this is allowed, this activity is subjected to taxation, according to the bilateral conventions between Croatia and the owner's residing country.
3-1-2) Through a Croatian company:
- Procedure: To create a company and depose the company statutes with the competent court. It is necessary to indicate the location of the main office (headquarters), the administration of the company and the name of the director who will be in charge of making all the necessary decisions for the company. Lastly, it is this company which will sign the contract, while the physical persons, are considered the associates of the company.
- Exception : None
- The transfer or resale: can occur in two ways. The property can be sold by the company or by selling the shares of the company (as the property is in the ownership of the company) to the buyer. The transfer of property is permissible but is subjected to taxation.
3-2) How do I choose between « purchasing as an individual » and « purchasing through a Croatian company »?
What are the main advantages and disadvantages?
3-2-1) Purchasing as an individual obliges the buyer to tolerate the administrative delay in obtaining consent from the Ministry. It is only at the reception of consent, that the buyer may register himself as the rightful owner in the national land registry books, confirming his ownership of the property. After the signature and authentification of the purchase contract and once all the documentation has been gathered and sent to the Ministry of Foreign Affairs in Zagreb, the client must wait, on average, one year (give or take a few months). During this wait, the new owner has full access to the property but may not resell or destroy it. Renovations and transformations are permitted, only if they do not require a building permit, which needs to be demanded by the new owner. A clause is added to each purchase contract, which allows the buyer to secure his purchase and investment in case, a rare exception occurs in which consent is not granted. This clause foresees that in the case that consent is denied, the owner must sell the property to the company created by the buyer.
3-2-2) The procedure for acquiring property through « an intermediary Croatian company » avoids the administrative and legal delays in obtaining consent from the Ministry of Foreign Affairs. Subsequently, there are additional costs linked to the creation and operation of the company (statutes, registration, annual financial statement, and annual assemblies).
- A maximum of 45 days is necessary, after the signature of all the documentation including the Power of Attorney, which permits EXEAT to conduct the formalities needed to open the company, in the name and in the interest of the client. After a delay of approximately 15 days upon submitting the documentation to the court, the company receives a registration number, with which the company can legally sign the purchase contract.
- A start up capital (reusable after a court has registered the company) of 20 000 HKN (less than 3000 euro) is indispensable during the creation of the company of limited responsibility in the form of d.o.o. The amount of approximately 6000 HKN is needed to cover the public notary fees, state and court taxes. One must also generally add the legal costs of a lawyer who prepares the company statutes and supervises the registration of the company with the competent court.
- Less than the average practical costs, with the direct and lasting collaboration with our selected legal consultants,
EXEAT offers to create a Croatian company for a fixed fee of 2000 euro (+ PDV) which includes all the corresponding legal and tax fees..
The complexity of national-transnational organization, the diversity of commercial activities,
Tax optimization for the company and individuals, are charged to the client after an estimate has been discussed and accepted by the client and EXEAT-consulting.
The annual operation expenses must be taken into consideration.
3-2-3) To choose, t is necessary to make a clear decision and decide on the procedure which best suits your interests, needs and reasons for investing. A property destined to be used as a vacation home, even to be rented during the season, does not necessarily demand the creation of a Croatian company. Conversely, if a short term investment (less than three years) is in question and/or if the goal is to conduct commercial, touristic or service activities, or if taxation issues are important, than the creation of a Croatian company would be the better solution.
4- Questions about taxes and other topics.
4-1) If purchasing a property as an individual, which documents must be submitted to the Ministry of Foreign Affairs in order to attain consent ?
A foreigner who wishes to attain consent from the Croatian Ministry of Foreign Affairs must submit the following documentation:
- Purchase agreement in the original or a duly legalized copy.
- Seller's proof of title i.e. land registry certificate, in the original or a duly legalized copy, not older than 6 months.
- Original certificate (not older than 6 months) issued by the authorities of the local administration responsible for urban planning (county departments), confirming that the property is within the construction zone envisaged by the zoning plan.
- Proof of citizenship for the buyer (legalized copy of a passport).
- Proof of citizenship for the Seller (a copy of his ID or passport).
- If an attorney is involved, it is necessary to submit the Power of Attorney, in the original or duly legalized copy.
4-2) What is the amount of the tax to be paid to the Croatian state for the transfer of property? Is a property acquired by a foreigner subject to VAT?
If the real estate property is acquired (less important than the date of construction either before or after 1st of January 1998) by an owner (a physical or moral entity) who did not opt to be subjected to the VAT system (thus does not have the permission to charge VAT), this transaction is not subject to VAT. The new owner must pay the property transfer tax of 5%. The base of this tax is generally the purchase price agreed upon by both parties and which is stated in the contract. The Croatian Tax Administration can put into question this base if it is estimated that the purchase price is significantly below the market value of the property. This tax is generally bourn by the buyer.
If the purchased property was constructed after 1st January 1998 and was subjected to VAT and not the 5% property transfer tax in precedent sales and purchases, then this property is subjected to VAT (22%) (assuming that the land on which the property is situated is and was subjected to the transfer tax of 5%). The land is thus never subjected to VAT.
4-3) When must the property transfer tax of 5% be declared and paid?
If the buyer is a Croatian national or a Croatian company, the acquisition with the tax authorities must be registered within 30 days from the signature of the contract. The public notary must also submit a copy of the contract to the tax officials. Once the buyer receives the decision from the tax authorities, the payment must be made within 15 days. The payment must be made in total in HKN.
If the buyer is a foreigner, the acquisition must be registered within 30 days from the reception of consent from the Ministry of Foreign Affairs. Along with the corresponding tax form, the buyer must also submit two copies of the final contract, cadastre extracts as well as a copy of a document stating the manner in which the seller acquired the property.
4-4) What is the capital gains tax rate in Croatia?
The capital gain (in general, the difference between the purchase price and the resale price) generated varies between 20% and 45%.
Tax non residents, after selling property in Croatia, are bound by bilateral and international tax conventions. In general, the costs of reconstruction
and renovation can be deducted from the base of the capital gains tax (equal to the difference in profit generated by the sale and the
expenses linked to the profit). It is important that these expenses are justified by documentation (for example invoices).
The capital gains tax is not applicable if three or more years have passed from the date of purchase and the date of the resale.
The capital gain generated by a Croatian company is subject to corporate income tax of 20% as all profit generated by the company. Reconstruction and renovation costs are deductible (with supporting documentation).
4-5) Are there any other applicable taxes on properties acquired by foreigners?
The Republic of Croatia applies a special tax on vacation houses. It is paid on an annual basis by the owner of the house (applicable to both individual and legal entities). Tax amounts from 5 to 15 HKN per square meter of the useful surface of the house. The actual price is determined by the local authorities according to the location of the house. If the house cannot be used because of its poor condition then the tax is not applied. There are also various duties related to owning a house, but there are no additional property taxes. In addition, each company is subject to various additional taxes and charges, which are not applicable to individuals.
