•  In the past, properties were bought and sold without proper registration and documentation, occasionally in order to avoid taxes;
•    During the communist regime, significant portions of land and property were confiscated from the wealthy  and divided up into smaller lots, to be given to those in need. The original owners may now have a claim to ownership of the land.
•    Many properties in rural areas were inherited by all siblings in equal shares, however never registered as such. In this instance, no one sibling has the right to sell.

It is part of our diligence to rigorously check for clean title. The requirement to have an updated and effective land and building registration system is recognised by The Croatian Government and the European Commission. We will ensure that the seller has legal authority to sell the property and that there are no pending claims attached to the property before the courts.

Problems with forged planning permission are common in Croatia, so be especially careful of anyone showing you planning permission for a plot that has no sign of construction taking place.

Should you require a survey, although they are not typically commissioned and are not legally required, we would be pleased to arrange this service. Typically, a survey, translated into English, or your native language costs about €500.

Methods of Acquisition:

Private or Company Route?

Private Buyer Route

UK and Irish Citizens, under conditions of reciprocity, may acquire real estate in Croatia subject to approval by the Ministry of Foreign Affairs and possibly the Ministry of Justice. This process of approval can take from 12 – 18 months. Properties listed as cultural monuments or historical buildings (such as in the Old Town of Dubrovnik or Split) have to be offered first to three authorities. PeregrineLaw will advise you as to how to protect your deposit during this interim stage.

We will also advise you on how to avoid being ‘gazumped’ as the market is very buoyant. This is a situation whereby the rising market prices make it worthwhile for the vendor to break the contract and return the deposit plus penalties to the purchaser, and still be way ahead in terms of a sale to another purchaser.

When buying off-plan the payments can be staged with, traditionally, a down payment of 35%  of the contract value,  followed by up to five equal instalments over the development period.

The Corporate Buyer Route

There are definite advantages to purchasing property in Croatia via this route. These advantages need to be offset with the initial and ongoing costs of maintaining the new entity. PeregrineLaw will assess your needs and expectations and then advise on the most appropriate route to meet your objectives.

We can assist you in forming a limited liability company and this can be done in 1 -2 weeks. The average set-up costs and basic capital of  20,000 kuna (€2,800) are €3,500. The initial capital is your’s after incorporation. A bank account has to be open and an accountant must be employed for the running of the company at approx. €150-250 per month.

The three advantages of this corporate buyer route are as follows:

•         Approval by the Ministry of Foreign Affairs is not required and you will have full ownership of the property as soon as the final payment is made.

•      If you plan to sell your property within the first three years, the profit realised (appreciation) from the sale is not subject to Capital Gains Tax (35%). However, company (profit) tax is payable and is currently 20%. There are provisions in the Croatian tax law to account for amounts invested in real estate, as well as depreciation of buildings.

•       When selling the property purchased under the corporate buyers route, depending on the date the property was built, there are additional tax benefits to the seller. The sale of a Croatian company that owns real estate may be the most tax efficient exit strategy for a foreign investor.

Fees and Taxes

•    Transfer tax of 5% must be paid within 30 days of signing the final deeds
•   VAT on new-build homes stands at 22%. However, this is sometimes included in the price.
•    If one uses an English lawyer, legal fees can be as high as 2% but with a local lawyer and PeregrineLaw protecting your interests, you are assured of less than this.
•    Buying through a Croatian company is quicker but the cost is over £1,000.

TOP TIP: Problems with forged planning permission are common in Croatia, so be especially careful of anyone showing you planning permission for a plot that has no sign of construction taking place.