The Property Banks Buyers Guide to Croatia
Any
foreign buyer considering purchasing investment property in Croatia
should be aware that their right to own real estate in Croatia is
based on the reciprocity principal whereby theoretically a Croatian
has to be entitled to freehold ownership of property in the foreign
purchaser’s country of origin.
For citizens of the US, UK and most European nations this
stipulation is automatically satisfied; for anyone else wishing to
purchase it is possible to incorporate a local Croatian company and
buy investment property via the company structure. This article is a
complete guide to the Croatia investment property buying process for
non-resident purchasers.
As with many emerging property markets there is a requirement in
Croatia for all foreign purchases of property to be approved by the
Ministry of Foreign Affairs and this process can actually take up to
a year which would suggest that an individual has to wait for
approval for up to twelve months before any investment can actually
be made. This is not actually how the process works as it is
possible for an investor to make his purchase and then apply for
permission afterwards - of course if permission is denied then the
investor can resell his property assets.
In reality permission is seldom ever declined as long as the
principles of the reciprocity agreement are adhered to.
As stated earlier, where an investor is aware that there is no
reciprocal arrangement between his country and Croatia for the
foreign freehold ownership of property, that individual can
incorporate a company in Croatia, be the sole shareholder of that
company and buy real estate through the company structure. This
action avoids the need to fulfil the reciprocity principle but it
does mean that the company has to submit annual accounts and adhere
to various legislative regulations which can be an annoyance.
The first step of the Croatian investment property buying process
for any investor , whether they purchase through a company or as an
individual, is to find land or real estate that matches specific
investment objectives and to that end many property hunters employ
the services of an estate agent in Croatia. Local agents have the
best working knowledge of the property market across the country and
can be called upon to give complete assistance and advice throughout
the buying process.
An overseas investor should also employ a local solicitor to
translate key documents, run title searches and basically represent
their interests throughout the buying process.
Once property has been located and found suitable, an investor can
choose to have a structural survey done on the property in Croatia
if that property is a resale. There are a number of architects and
surveyors in the main towns who can perform such a function although
it is not a usual local practice. Once a property has been checked
and a property investor decides to buy, an offer should be submitted
to the vendor and if accepted the pre-contract is signed by the
buyer and seller.
The pre-contract - or preliminary contract - is conditional to the
satisfactory title searches that the property investor’s solicitor
will run against the land and real estate. A deposit of between 5
and 10% of the final purchase price is usually paid upon the signing
of this contract and it is usual to have as a condition of the
contract a stipulation that states the vendor will make payment of
the same amount as the deposit if they withdraw. Of course if the
buyer pulls out for any reason they lose their deposit.
As soon as the pre-contract is signed it’s usual for the property
buyer’s solicitor to apply to the Ministry of Foreign Affairs in
Croatia for the investor’s permission to purchase.
The final contract of sale is signed when all conditions for the
sale have been satisfied. This contract is signed in front of a
public notary and subsequently all documents are submitted to the
Land Registrar for registration.
It is at this stage that the final balance of the property purchase
price is transferred to the vendor and all taxes and fees are due.
In terms of the additional costs facing a property investor in
Croatia they include but are not necessarily restricted to the
following - property purchase tax of 5% and legal fees of around 1%
of the purchase price.
Anyone who wishes to resell their investment property in Croatia
within three years of initial purchase will be subject to 35%
capital gains taxation and anyone who derives an income from their
property will have to pay 25% tax on their profits.