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The Croatian Property Market
Tips for buying abroad
Who to Contact

Property Investment* More and more European and Brits are selling up to go and enjoy living the sunshine life in Croatia. Are you one of them? Yes? then read "How to buy property in Croatia" Why buy a property in Croatia? "Beat the rush to the Med’s final frontier. Great climate, clean beaches and cheap houses-Croatia is the latest hot spot for Brits", Sunday Times April 2002. "Along Croatia’s lengthy coastline you can find a wreck to do up for £30,000... ... or treat yourself to your own private island for around £1 million". "But whatever you choose, a home by the country’s unspoiled Adriatic shores guarantees lazy summers swimming in secluded coves, breathtaking scenery of wooded slopes tumbling into a turquoise sea and about 3,000 hours of glorious sunshine a year." Evening Standard January 2003. Croatia is determined to protect what it has and committed to protecting their coastline, so seafront properties will be at a premium. Having said that there is no shortage of stunning seafront properties available. If you buy on the beach the public will have access to the land to at least 6m above the waterline. The Croatian real estate market is in its infancy. Land and house prices are still very favourable, particularly on the islands where there are beautiful stone houses built in the traditional style. Also in the beautiful historic towns such as Dubrovnik, Hvar, Zadar, Korcula there are excellent opportunities to acquire prime location real estate at reasonable prices. It is possible to conclude and verify a sales contract from Britain but it is the best to have it verified in a Croatian embassy or consulate. If you verify such a contract before a public notary, then this verification has to be translated into Croatian by an appointed courts interpreter. Whilst this may seem early in the process I would recommend you to learn some conversational Croatian. There will be moments of confusion on the phone when you cannot communicate and the goodwill you will generate with just a few words like "please" and "thank you" is immeasurable. Our best advice is to buy a language CD Rom. Time for purchasing, steps...

1) Estate Agent
2) Try to obtain a written survey
3) Pre-contact stage
4) Application to Foreign Ministry Department for permission to purchase
5) Certification of contracts by a notary
6) Submission of documentation to Land Registrar
7) Payment Real Estate Purchase Tax within 30-day deadline
8) Visa Requirements and residency
9) Summary
10) Free Tax Guide

1) Estate Agent Find yourself an area you like, then properties you can afford (after allowing for all additional costs - see below). We have produced a property search. We recommend people not to buy the first property they see and to inspect all suitable properties before making final decisions. Vendors on the Adriatic Coastwill probably be more prepared to deal with English purchasers when the main tourist season is over in September, October and November. Please note that normally in Croatia, even the purchasers pay about 2-3% of the purchase price to agents. (The seller also pays a similar amount.) 2) Try to obtain a written survey (and pay to have it translated if need be) 3) Pre-contact stage At this stage you are expected to make a down-payment of 10% of the sales price or different if so agreed between the contractual parties. If the vendor pulls out it should be a condition that they pay you 10% 4) Application to Foreign Ministry Department for permission to purchase When acquiring real estate other than by inheritance U.K. citizens need to obtain the approval of the Ministry of Foreign Affairs of the Republic of Croatia. Prior to reaching a decision the MFA will seek an opinion from the Ministry of Justice, Administration and Local Self - Government, thus the whole process might take a number of months. In Croatia the ultimate proof of ownership is entry of the owners name in the local Land Books (Zemljisne Knjige) on that specific property. The local courts will not allow a foreign citizen to be entered in the Land Books without the MFA approval. The approval is issued if there is reciprocity, i.e. if Croatian persons can purchase real estate in the country of the purchaser. U.K. citizens may, under condition of reciprocity, acquire real property in Croatia either as inheritance or by other legal transactions such as purchases, deeds, trusts etc. Reciprocity is presumed to exist unless proof to the contrary becomes evident. Inheritance - U.K. citizens may inherit property in Croatia. No additional approvals are necessary. While such an approval can take up to 12 months, it can easily be avoided if the property is bought by a domestic company, which can be entirely owned and controlled by a foreign person. In that way, the transfer tax on real estate of 5% can also be avoided during each subsequent sale of the property. Ownership of real property of foreign citizens in Croatia is regulated by Articles 354-358 of the Croatian Property Law (Zakon o vlasnistvu i drugim stvarnim pravima). The law has been published in the Official Gazette No. 91 in 1996 (Narodne Novine 91/96). According to the Law of property and other real estate rights - Article 356 paragraph 2 (Official Gazette of the Republic of Croatia Nos. 91/96, 68/98, 13 7/99, 22/00 and 73/00), foreign citizens and enterprises, who want to become owners of real estate in the Republic of Croatia need to obtain previous consent from the Minister of Foreign Affairs of the Republic of Croatia. In order to apply for consent, applicants must submit a request written in Croatian, either personally or through an attorney, to the Ministry of Foreign Affairs, Consular Department, Meduli-eva 34, 10000 Zagreb, Croatia. In addition, applicants must enclose the following with the application: Basis on which the property is acquired (contract of purchasing the property, gift contract etc.), - original or duly legalised copy. Proof of title (land registry certificate etc.) - original not older than six months; An excerpt from the land books for the particular property (In Croatian ZK izvadak) This document is usually obtained in each municipality (Opcina) at the local municipal court (Opcinski Sud); it’s land book division (Gruntovni Odjel) Certificate issued by authorised authorities for urban planning which proves that the particular real estate is located within the zone in which construction is allowed, according to the zoning plan, - original not older than six months; A document from the local municipality (Opcina), from the following department: "Ured za prostorno planiranje". The document is called "Uvjerenje o namjeni", for the particular property; Proof of buyer’s citizenship (legalized copy of passport, for instance), - original or duly legalised copy; Any photocopies have to be notarized by a Croatian Notary Public. Power of attorney for the attorney - original or duly legalised copy Copy of each document filed with the request. The request with accompanying paperwork is to be sent to:

Ministry of Foreign Affairs of the Republicof Croatia
Trg N. S. Zrinskog 7-8
10000 Zagreb
Croatia
Phone 4569 964
Fax. 4551 795
4920 149
Email: mvp@mvp.hr

The applicant shall deliver other necessary documents on request. The fees for the application includes HRK 20.00 application fee pursuant to Article 1 of the Croatian Law on Administrative Fees (Official Gazette of the Republicof Croatia Nos.8/96, 77/96-Decree, 131/97, 68/98, 66/99-Decree, 145/99-Decree, 30/00-Constitutional Court Decision, 23/02 and 91/02); plus, pursuant to Article 2 of the above mentioned law, HRK 50.00 per applicant for the Decision. If the fee exceeds HRK 100.00, it shall be payable directly to the national budget of the Republic of Croatia (account No. 100 1005-1863000160, reference No. 24, first adjacent field No. 5002, plus first and last names and address of the applicant, pursuant to Article 13 of the above-mentioned law. If the fee is paid from abroad, according to Article 15 of the above-mentioned law, the payment shall be effected in foreign currency at the mean exchange rate determined by the Central Bank of Croatia. After the application has been completed and submitted, it shall be referred for regular procedure to the Ministry of Foreign Affairs that shall decide on each application individually. Pursuant to Article 357 paragraph 2 of the above-mentioned law, the administrative procedure requires previous opinion from the Ministry of Justice of the Republicof Croatia, particularly focusing on the following: Foreign citizens and enterprises cannot acquire ownership of agricultural land, pursuant to Article 1 paragraph 3 of the Law on Agricultural Land (Official Gazette of the Republic of Croatia Nos. 66/01 and 87/02); Foreign citizens and enterprises cannot acquire ownership of forests and forest land, pursuant to Article 1 paragraph 32 of the Law on Forests (Official Gazette of the Republic of Croatia Nos. 54/83, 32/87, 47/89, 41/90, 52/90 - final version, 51/91, 61/91, 26/93, 76/93, 29/94, 8/00 and 13/02); If the object of acquisition is a protected cultural monument, it shall be offered to the authorities first (Republic of Croatia, Municipality, City, County), and only if they decline to exercise their pre-emptive right may the property be offered to foreign citizens and enterprises, pursuant to Article 37 paragraph 1 of the Law on Protecting and Preserving Cultural Monuments (Official Gazette of the Republic of Croatia No. 66/99) In deciding on each individual application, the Ministry of Foreign Affairs shall determine whether there is reciprocity between the Republic of Croatia and the applicant’s state in real property matters. The Ministry of Foreign Affairs collects and examines foreign laws concerning reciprocity with respect to foreign nationals. Interested parties can contact the Ministry of Foreign Affairs for information on reciprocity between the Republicof Croatiaand other states. For any additional information regarding reciprocity between the Republicof Croatiaand other states please contact the Ministry of Foreign Affairs, Consular Department, (Meduli-eva 34, 10000 Zagreb, Croatia 5) Certification of contracts by a notary The notary’s fees are very low since the notary only certifies the signatures. 6) Submission of documentation to Land Registrar where the property is registered at the Court The estate agent or lawyer requests the registration of the property on behalf of the buyer. 7) Payment Real Estate Purchase Tax within 30-day deadline A unified tax rate of 5% of purchase price for all types of real estate-based on the price of the real estate in the sales contract and the value estimate by the authorised tax authority in charge for the local area. It is possible to pay this tax in pounds. The tax is to be paid by bank or post office money transfer. The amount is converted into Kuna at the middle exchange rate by the National bank of Croatia at the day of payment. The tax is paid after conclusion of the sales contract the customer is obliged to register the purchase at the authorized tax authority within 30 days from the day of conclusion of the contract. Public notaries do also submit one copy of the sales contract to the tax authorities. The customer is obliged to pay respective real estate purchase tax within 15 days from the day of reception of the decision received from the tax authorities on the exact tax amount. If this tax is not paid within this term, interest on arrears is charged for every day of delayed payment. DOES THE SELLER HAVE TO PAY TAXES WHEN SELLING HIS REAL ESTATE? No. Only in case the real estate is sold prior to the expiration of three years after it has been purchased and if sold at higher price than originally purchased. In such a case the seller has to pay a 35% income tax on the difference in value of the real estate (purchase and sales price) increased for local taxes, different in every municipality. You are also exempt if you sell it to your spouse or members of your immediate family. Income Tax Croatia has a generally high taxation system, but its tax laws offer unique advantages for persons who receive certain foreign income or a foreign pension. Croatia also offers important tax advantages to yacht owners. As it is not as yet an EU member, Value Added Tax can be avoided if resident in Croatia. VAT of 22% was introduced in 1998 and applies for most goods and services. However, if you do not receive a salary, consultancy fees or similar income in Croatia, the tax situation is very favourable and the following income is tax-free: Pensions received from abroad Interest payments on loans, investments, deposits with financial institutions, public loans and securities and similar income. There are no controlled foreign corporation rules, anti-avoidance provisions or similar regulations in Croatia so that the use of offshore structures is possible for tax planning and financial privacy 8) Visa Requirements and residency A visa is not required for UK citizens to visit Croatia. See full listing of visa requirements. A foreign national can stay up to three months in Croatia without any complications. Following this, it is necessary to obtain a residence permit. Having a yacht moored in a Croatian marina, renting or owning a property in Croatia is sufficient to obtain a residence permit. This does not mean that one is automatically deemed a tax resident. A person is resident based on physical presence in Croatia if he stays during a period of at least 183 days. Short absences are not considered as breaking this period of stay. The period can include two calendar years. One would not be considered resident if the stay is exclusively for the purpose of a visit, vacation, therapy or for the purpose of satisfying similar personal needs, providing it does not last longer than one year. A person is resident based on maintaining a home in Croatia if he has accommodation at his exclusive and continuous disposal in Croatia for 183 days and if it can be concluded from his circumstances that he will keep and use that accommodation. The length of stay in the accommodation is not important nor whether the accommodation is owned or rented. This provision of deemed residence is very attractive for foreigners who wish to maintain legal residence in Croatia without having to physically be there for any minimum length of time. If a foreign national wishes to be a tax resident based on maintaining a home in Croatia, he needs to have accommodation at his exclusive and continuous disposal for at least 183 days. If he wishes to be a tax resident based on physical presence in Croatia, he must stay continuously during a period of at least 183 days for business, or more than one year for the purpose of tourism, health or similar personal needs. 9) Summary As you can see this is a complicated and time-consuming process. If you are a non-Croatian speaking foreigner, the easiest route might be to go through an agency, as they are more than likely to have staff that speaks foreign languages, who know local lawyers, who have probably had foreign clients in the past and who will look after your application. By Martin Westby, source www.croatia-holidayandhome.co.uk/

 

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