Different rules for EU and non-EU citizens
All foreign citizens from EU countries can buy and own real estate in Croatia without restrictions, provided that the real estate is located within the construction zone, except for agricultural land and protected parts of nature, under the same conditions that apply to the acquisition of property rights for citizens of the Republic of Croatia and legal entities with based in the Republic of Croatia. Citizens and legal entities from countries that are not members of the European Union may, under the assumption of reciprocity, unless otherwise stipulated by law, acquire ownership of real estate in the territory of the Republic of Croatia, but on the condition that the consent of the Minister of Justice of the Republic of Croatia, if their country of domicile has concluded an agreement on of reciprocity (reciprocity) between the Republic of Croatia and the said state.
If there is no reciprocity between the Republic of Croatia and the country from which the acquirer of real estate comes, then the real estate can be purchased so that the acquirer establishes a trading company with headquarters in the Republic of Croatia, which could then be the buyer of the real estate. That new company is a Croatian company and in that case it would be the owner of the property, while a foreign citizen would be the owner of a share in the company. The most common form of company in the Republic of Croatia is a limited liability company, which can be founded and be a member by only one person.
On the basis of real estate turnover by non-residents in the Republic of Croatia, real estate turnover tax is calculated and paid. A non-resident, i.e. the acquirer of real estate, is considered a taxpayer. Real estate sales tax is determined by the competent office of the Tax Administration according to the location of the real estate, on the basis of the acquisition documents, that is, on the basis of the sales contract. If the turnover of real estate is not reported according to the market value of the real estate, the Tax Administration is authorized to determine the market value of the same by assessment. The tax base for tax calculation is represented by the market value of the real estate at the time of tax liability. The market value of the real estate is understood as the price of the real estate that is achieved, or can be achieved on the market at the time of the tax liability. Real estate sales tax is calculated and paid at a rate of 3%, but there are exceptions when this tax is not paid. These are the cases when the real estate is sold by a company that is in the VAT system. The company must then issue an invoice showing that VAT is included in the price of the property, and in that case there is no double taxation. This is usually the case with apartments and houses in new construction.
In Croatia, all “holiday properties” are subject to annual real estate tax. The amount of tax is prescribed by the local self-government body and it can vary from HRK 5 to HRK 15/m2 per year depending on the area where the property is located. The annual real estate tax applies only to properties used as vacation homes. If the luxury villa owner has registered residence in that villa, in that case the real estate owner will be exempt from paying this tax.