FAQ - Frequently Asked Questions

1. What should an agency do for you?

According to the Business conducting rules for agents, the foremost issues of real-estate trade are the following activities performed by agents:
- The person who demanded the service has to be brought into connection with another person for the purpose of concluding the business determined in the Contract of commercial brokerage
- Estimate the market value, i.e. provide an opinion on the market value of the brokered real-estate
- Warn the ordering party about any deficiencies of the real estate
- Check the ownership documents required in order to validly conclude a specific business
- Inform both parties about their legal, tax, and other duties regarding the business in question
- Perform all activities required for the presentation of the brokered real estate in the real-estate market, as well as other activities agreed upon in the Contract of commercial brokerage
- Ensure that all interested parties are allow to have a look around the real estate
- Act as a mediator towards the conclusion of the sales contract or other contract
- Keep personal and other data that represents a trade secret
- Inform the ordering party of all circumstances that might be of any significance for a certain business
- Perform all other jobs and activities the agent agreed upon in the Contract of commercial brokerage

2. What is the land-registry?

Land-registry entries are public documents kept by Municipal courts (the so-called 'gruntovnica') which everyone has the right to check, or obtain a report, print or transcript thereof (in the presence of the land-registry supervisor). The land-registry, as well as all of its reports, have the power of a public document.

3. What is a plot?

A plot is a part of land surface, which is marked by a special number in the cadastre, as well as with the name of the cadastre municipality it belongs to (the cadastral plot).
Anything that is permanently connected with the plot on its surface or below it is an integral part of the plot and shares its legal destiny (unless otherwise prescripted by the law).

4. What is real estate?

Real estate is a piece of land including the air above it, and the ground below it, and any buildings or structures on it.

5. How is the value of real estate established?

The price of real estate is established by the owner with regard to the actual prices of real estate on the market. The minimum market price for real estate is defined by the government, but when seeking the estimate of real estate for credit from any bank, then a licensed appraiser is used.

6. Who may purchase real estate in the Republic of Croatia?

There are no obstacles or sanctions in purchasing real estate in Croatia, although the buyer is obliged to present proof of Croatian citizenship when defining ownership in the land-registry office.

7. Who is allowed to sell real estate in the Republic of Croatia?

Each and every owner of property whose ownership is listed in the land- registry office, and is able to transfer ownership to an interested buyer. Property owners not listed in the land-registry are also able to sell property but the buyer is not listed in the land registry and has to present legal concession in order to be able to list the real estate in his name in the land registry.

8. Are foreign citizens allowed to buy real estate in the Republic of Croatia?

Starting with February 1st, 2009 the Stabilisation and Association Agreement became valid, which stipulates that the same standards are used both for all citizens of the European Union and for Croatian citizens, which removes previous administrative obstacles, such as reciprocity (meaning that Croats were expected to have the same rights when buying real estates as the citizens of that country have in Croatia), and there is no longer a need for an approval issued by the Croatian Ministry of Justice).
For citizens of non-EU countries, the regulations remain the same as they were before (the reciprocity condition and the need to obtain an approval from the Ministry of Justice).
Conditions are different for individuals and for legal entities. It is easier for foreign companies to acquire a real estate here. It suffices to establish a subsidiary in Croatia, which automatically enables them to buy all the real estate that is available to Croatian citizens.

9. What obligations do the buyer and seller have by law?

The buyer is under obligation to pay the seller the full price as agreed upon in the contract, and the seller is obliged to turn over the real estate in question and allow the new owner to sign the real estate in his or her name in the land-registry.

10. The relationship between the buyer or the seller and the mediator (the agency)

This relationship is regulated by the Contract of commercial brokerage, which the contractual parties mutually sign, thus accepting its provisions.
With this contract, the agency commits to find a real estate or a buyer. In turn, after the potential conclusion of the real-estate sales contract or precontract, they commit to paying the commission fee for the mediating service they agreed upon.

11. What is the real estate agents sales provision?

The buyer who has signed a sales contract with a licensed real estate agent is required to pay a 3% provision of the total selling price for the specific property listed.

12. What amount of downpayment is required of the buyer?

By agreement with the seller the down payment is usually 10% of the price for the real estate in question, and in congruence to the legal maximum.
The agency fee is also to be paid during the realization of the down payment.

13. Where and by whom is the sales contract certified?

The seller is required to certify his signature on the sales contract by a licensed notary office in the Republic of Croatia, and when abroad the seller is able to certify the sales contract in a licensed notary office or Croatian Embassy, but the seller is still required to apostate the sales contract in front of an authorized court.

14. What is a tabulated declaration?

A declaration stating that the seller of the real estate received the full amount as requested in the sales contract and allows the transfer of ownership in the land-registry for the property declared in the sales contract between the two parties.

15. Who must pay the real property transfer tax and how much?

In Croatia, the real property transfer tax amounts to 5% for all kinds of real estate and all types of transactions. The tax itself is determined based on the price mentioned in the sales contract, and the estimate of the authorized tax administration. According to the law, the tax is to be paid by the buyer, or someone else in the buyer's name, if this is what they agree upon.
The deadline for reporting the tax to the tax administration is 30 days after the date when the sales contract was signed. Inside 15 days after receiving the tax administration's decision, the buyer is obliged to pay the tax, or otherwise he shall be subject to interest.

16. Is it neccessary to pay real estate tax if a propriety owner is exchanging real estate with another owner?

Yes, but when property is only exchanged then the owners have the right to seek exemption from paying real estate tax on newly acquired property and be able to receive a legal title.

17. How is leased real estate taxed?

If you lease the apartment (or apartments) to other people for the purpose of RESIDENCE, then YOU DO NOT PARTICIPATE IN THE VALUE ADDED TAX SYSTEM regardless of how much you make per year, because this kind of service is not subject to taxes (according to Article 11 of the Value added tax act).
However, if you lease the rooms to a company for their activities (i.e. not for residence), then you enter the system if you make more than 80,000 Kn a year, and you are also obliged to keep ledger records. This may not be quite as bad as it sounds, because you might as well add some other expenses to these records, which might be approved of in the taxation process, and you could allow yourself tax prepayment. When an individual leases a real estate to someone, the tax base consists of the monthly rent minus lump expenses (30%). If such a tax base amounts to less than 2,400 Kn per month, it is taxed according to the 20% income tax plus surtax. If it amounts to more, the rate is 35% plus surtax. If a legal entity leases the real estate to another legal entity or an individual, the 22% value added tax must be paid. When rooms and auxilliary rooms are leased, all taxes are calculated the same way, but the tax base is lower, since it is made by deducting 50% lump expenses.

18. Achieving tax exemption rights regarding the real property transfer tax for citizens who buy their first real estate to resolve their residential needs.

The real property transfer tax doesn't need to be paid by citizens who are buying their first ever real estate (an apartment or a house), which shall be used to resolve their personal residential needs, under the following conditions:
1. that they have Croatian citizenship,
2. that they report their residence as the place and address where the real estate they are buying is located,
3. that the size of the real estate, depending on the number of core family members does not exceed the following surface area:
• up to 50m2 of residential space for 1 person
• up to 65m2 of residential space for 2 persons
• up to 80m2 of residential space for 3 persons
• up to 90m2 of residential space for 4 persons
• up to 100m2 of residential space for 5 persons
• up to 110m2 of residential space for 6 persons
• up to 12om2 of residential space for 7 or more people; if the surface area of the real estate the citizen is buying exceeds the aforementioned figures, then the real property transfer tax is to be paid only for the surplus of residential space
4. that the citizen and the core members of his family do not own another real estate which is sufficient for their residential needs.
5. that the citizen and the core members of his family do not own another apartment or house for vacation purposes, which is of significant value.
The spouse, as well as children who are registered at the same address as the citizen itself, are considered to be core members of the family. The tax has to be paid if the apartment or house changes owners inside five years of the date of its acquisition, or if the Tax administration subsequently finds that the conditions for tax exemptions weren't met.

19. Are buyers and property owners responsible for paying additional taxes apart from property tax?

Property owners are required to pay tax on personal income if they sell real estate that was acquired within three years of a new sales contract for the same property. The difference on the purchased and selling price is only taxed, but it is also possible to free the buyer of these obligations in some circumstances.

20. Which specific Croatian laws are related to the purchase of real estate?

The laws which are listed below were published in the Croatian law manual called “Narodne Novine”, and relate to various situations which a client may need to know about when purchasing real estate in the Republic of Croatia.

1. Marriage and Family Law (NN, 51/89, revised statute, 59/90)
2. Status of a notary public Law (NN, 78/93, 29/94)
3. Inheritance Law (NN 52/71, 47/78)
4. Rental of property Law (NN 91/96)
5. Liability Law (NN 53/91, 73/91, 3/94, 7/96, 91/96)
6. Proprietary Law (NN, 91/96)
7. Land-registry Law (NN, 91/96)
8. Property transfer mediation act (NN, 107/07)