General country information
Formerly part of Yugoslavia, Croatia declared its independence in 1991, sparking a war with Serbia that lasted for over four years. Following elections in 2000 which brought defeat of the former right wing nationalist government, the country has undergone democratic reform. It currently has EU candidate status and is due to become the EUs 28th member state in 2013.
Bordering the Adriatic Sea and having borders with Slovenia, Hungary, Bosnia and Herzegovina, Serbia and Montenegro, Croatia is one of the main holiday destinations in the region.
Comprising both mainland and a multitude of islands (1,185 in total), Croatia has a spectacular coastline extending some 5,835 km (the mainland coastline is 1,777 km long) boasting a Mediterranean type climate with hot dry summers and mild winters.
The Croatian Government has taken steps to preserve the country’s unspoilt coastline, which means planning regulations are tight. In the past illegal building has been common, although generally authorities turned a blind eye. More recently they have started to issue knock down orders on illegal buildings or extensions. So again care needs to be taken to verify that necessary permissions have been issued.
Taxation is moderate in Croatia with rental income, of non-resident foreigners considered ordinary taxable income and taxed at 15%. Capital gains are taxed at a flat withholding rate of 25%. Capital gains realized from properties held for more than three years are not subject to capital gains tax.
Total property transaction costs are high, ranging from 10.33% to 14.11% for old properties. The bulk of the cost is accounted for real estate agent’s fees, at 6% to 12%, split between buyer and seller. The real estate transfer tax is 5% but does not apply to the first sale of new buildings. Instead, the sale is subject to 25% VAT on the net construction value.
Direct ownership by foreigners of Croatian property is regulated by the Croatian Property Law (amended in July 2006) which generally requires approval from the Ministry of Justice before a purchase can be made (MFA). The ultimate proof of ownership is entry of the owner’s name against the property in the local Land Registry and Katastar maps. Local courts will not allow the names of foreign citizens to be entered in the Land Registry without MFA approval. However, common practice is for foreigners to set up a Croatian company, a procedure which does not require permission and which can be used to buy the property.
Foreign nationals are not permitted directly to own their property if they wish to let it out to tourists. This activity is strictly regulated and requires a rental licence which can only be obtained for properties owned by Croatian companies, and not foreign citizens. However this is expected to be relaxed with Croatia’s forthcoming accession to the EU.
The Croatian property market is expected to remain down in 2013, according to local real estate experts. The property market has been adversely affected by the country’s stagnating economy and the Eurozone sovereign debt crisis. Croatia’s economy is estimated to have contracted by around 1.5% in 2012, after annual declines of 0.01% in 2011, 1.4% in 2010, and 6.9% in 2009, according to the International Monetary Fund (IMF). But with the due relaxation of ownership rules for EU citizens and the current depressed prices a change of fortune could be on the horizon.
Area: 56,594 sq km
Population: 4.41m (July 2011 est.)
Principal cities: Zagreb, Dubrovnik
Median age of population: total: 40.3 years, male: 38.3 years, female: 42.1 years (2004 est.)
Language: Croatian 96%, other 4% (including Italian, Hungarian, Czech, Slovak, and German)
Employment rate: 82%
Flying time from UK: 1.5 hrs Currency: 1 kuna (HRK) =100 lipa
Time difference from UK: Zagreb – UTC/GMT +2 hour
Rate of inflation: 4% (2012 est.)
International dialling code: +385
GDP per person: $14,488