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Buying a home in Croatia
Foreigners who buy property privately in their own names in Croatia must get authorisation from the Ministry of Justice in order to own property in the country. This is for Scandinavians more or less a formality but the process can take 6-12 months. If foreign citizens set up a Croatian company this authorisation is not necessary. However, a new regulation has recently been introduced and this regulation says that as of January, 1, 2009, EU citizens can buy property in Croatia on the same conditions as Croatian citizens.
The buying process
The first important step in purchasing a property in Croatia is controlling that the property has a so-called free title, that is to say that the owner is the rightful seller and that no legal obstacles or financial undertakings exist on the property. In recent years, this has become easier as the Croatian government is aiming to put all of the Land Registry online. While some parts of Croatia, such as Istria, already have everything available online others, especially the islands, have not yet even started. A good agent will print out in front of buyers an up to date certificate of title and explain it all. Certificates months or years old are no good as debts or ownership could have changed.
A prospective buyer can use a lawyer then notarise the contract, or get the notary to do everything. Notaries are fully experienced lawyers and work to a fixed price list set by the government which is usually cheaper than the lawyers charge. The procedure for registering a property can be handled by the notary if the buyer uses them to do the contract.
The sales contract is signed at the Notary Public but since the sales process can take time there is the possibility for the buyer to sign the contract in his/her home country. At the contract signing, a deposit, usually of 10%, is payed as is often the brokerage.
The procedure for registering a property at the local land registry can be handled by the notary if the buyer uses them to do the contract. The notary/lawyer compiles the documentation to get the buyer approved by the authorities. This documentation contains in addition to the contract:
- a power of attorney giving the solicitor the legal right to represent the buyer
- a copy of the buyer's passport
- a land registration document
- an application form signed by the buyer
Costs
The property transfer tax (RETT) is 5% but the way in which it is levied varies. If the sale is by a private person, it is normally 5% of the value but assessing that on a rising market many months afterwards with insufficient staff means that if the contract price sounds reasonable, they will assess it on the contract price.
If the sale is by a company registered for sales tax (PDV in Croatia), the 5% is levied solely on the land value or a share of the land value. For example, the tax due on one of a block of ten apartments built on a plot of land valued at Eur100,000 would be 5% × (100,000 divided by 10), so 5% of 10,000, rather than 5% of whatever the apartment sold for.
The tax authorities issue the invoice for the property transfer tax after the property is finally registered at the Land Registry. Once the invoice is recieved, the new owner has 15 days to pay.
Brokerage: 3% including tax is common.
Solicitor's fee: 1% of contract value plus disbursements for Land Registry, translation, etc. Should generally not exceed 1.5% overall. Even here a minimum amount is often set, especially in regards to high-end properties. Using a Notary for everything will be under 1%.
Please note! This information should only be seen as general guidance. Since laws, taxes and fees often change, a buyer must always inform himself of the latest rules and regulations.
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