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0. What does an Agency need to do for you?
1. What is the land registry?
2. What is a land?
3. What is the cadastre?
4. What is a real estate?
5. Ownership rights
6. Who can purchase real estate in the Republic of Croatia?
7. Who can sell real estate in the Republic of Croatia?
8. What are the obligations of the buyer and seller in real estate brokerage?
9. Relationship of the buyer or seller and the agent (agency)
10. What is the amount the buyer must pay to the seller as an advance payment?
11. Where is the purchasing contract verified and by whom?
12. Who must pay the real estate circulation tax and in what amount?
13. Must the real estate circulation tax be paid for the exchange of real estate?
14. What is the deadline for submitting the tax return and paying the real estate circulation tax?
15. Can the buyer request the ownership rights be registered prior to the payment of the real estate circulation tax?
16. Upon real estate purchase, when must the added value tax be paid and by whom?
17. Are the contracting parties liable for other taxes, other than the real estate circulation tax?
18. What is the agency commission?
19. What does a foreign physical person or a foreign legal entity require to gain real estate ownership rights in the Republic of Croatia?
20. How to avoid problems in real estate sale or purchase?
21. Qualifying for real estate circulation tax exemption - for citizens buying their first real estate in order to fulfil their own housing needs.
0. What does an Agency need to do for you?
In accordance with the business regulations for real estate brokers, the primary activities to be performed by agents are the following:
- Connect the person requesting the mediation services with another person in order to finalise a certain transaction pursuant to the Mediation Contract
- Estimate the real estate market value, i.e. provide an opinion on the market value of the mediated real estate
- Forewarn the Principal of the real estate's shortcomings
- Perform a check of ownership documents required for the valid conclusion of a certain transaction
- Inform both parties of all legislative, tax and other obligations related to the transaction
- Perform all necessary actions for the presentation of a mediated real estate on the real estate market, and perform other actions agreed upon in the Mediation Contract
- Enable real estate viewing to the interested parties
- Mediate the negotiations on the stipulation of the Purchasing Contract or another Contract
- Safeguard personal and other data considered a business secret
- Inform the Principal of all circumstances relevant for a certain transaction
- Perform all other actions and activities stipulated by the agent in the Mediation Contract
* 12 April 2003 (Croatian Chamber of Economy Real Estate Brokerage Association)
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1. What is the land registry?
The land registry is a public document registry operated by the Municipal court (in Croatian: Gruntovnica). Everybody is allowed access to the land registry documents, from which they can obtain an excerpt, a print-out or a transcript (in the presence of the chief land registrar). The land registry and all excerpts are valid public documents.
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2. What is a land?
A land is an area of the Earth's surface marked in the cadastre by a special number and the title of the Cadastral Municipality in which it is located (cadastral plot).
Everything permanently connected to the land, on the surface or beneath it, is a constituent part of the land and is subject to its legal destiny (unless otherwise provided by law).
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3. What is the cadastre?
The cadastre is a registry of information on lands and real estate operated by the STATE GEODETIC DIRECTORATE. The cadastre supports the land ownership registration system, other proprietary rights related to real estate, and the land registry.
If a party wishes to request access to the land registry data, they must first obtain cadastral plot information in the cadastre,
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4. What is a real estate?
According to the real estate unity principle, a real estate is a plot of the Earth's surface containing everything permanently connected to it, on the surface or beneath it, which means that by purchasing an apartment, you also purchase an ideal share of the building and the land the building is constructed on. Therefore, if you purchase a cadastral plot, you become the owner of everything constructed upon it, regardless whether the constructed facilities have been reported, drawn in and entered into the cadastral plans and land registries.
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5. Ownership rights:
Ownership rights are not automatically gained upon the purchase of real estate and the signing of the Purchasing Contract.
To gain the right, it must be registered into the land registry...
Therefore, a land registry REGISTRATION PROPOSAL must be submitted upon every real estate purchase. When the registration is realised, the owner receives the TITLE DEED. (Art. 119 of the Ownership Act)
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6. Who can purchase real estate in the Republic of Croatia?
There are no obstacles or sanctions for the purchase of real estate in the Republic of Croatia but, in addition to the Purchasing Contract, it is necessary to submit a proof or Croatian citizenship for the registration into the land registry.
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7. Who can sell real estate in the Republic of Croatia?
Every owner who has registered his ownership into the land registry, in order to legally transfer it onto the buyer. However, non-registered owners can also sell their real estate, in which case the buyer acquires non-registered ownership and must prove the legal succession to legally register into the land registry under his own name.
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8. What are the obligations of the buyer and seller in real estate brokerage?
The buyer must pay the seller the entire sum of the stipulated purchasing price, and the seller must transfer the possession of the real estate to the buyer and allow the transfer of ownership rights to the buyer.
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9. Relationship of the buyer or seller and the agent (agency)
It is regulated in accordance with the mediation contract signed by the contractual parties who thereby accept the provisions thereof.
The contract obliges the agency to find a real estate or a buyer, and the latter is obliged to pay for the stipulated mediation service (commission) upon the possible finalisation of a preliminary contract or a real estate purchasing contract.
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10. What is the amount the buyer must pay to the seller as an advance payment?
Pursuant to mutual agreement, usually 10% of the total stipulated purchasing price, in accordance with the maximum legal limit.
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11. Where is the purchasing contract verified and by whom?
Only the seller's signature on the purchasing contract is to be verified. In the Republic of Croatia it must be verified by a Notary Public, and abroad in a Croatian diplomatic mission or by a Notary Public, in which case the verification must be legalised by an Apostille at the relevant court.
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12. Who must pay the real estate circulation tax and in what amount?
The buyer, in the amount of 5% of the real estate market value. A buyer fulfilling his housing needs in the manner described by and in accordance with the provisions of the Act on Amendments to the Real Estate Circulation Tax Act is fully exempt from paying the real estate circulation tax. The buyer can receive all the information related to the aforementioned exemption from his agent, depending on the particulars of the case.
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13. Must the real estate circulation tax be paid for the exchange of real estate?
Yes, all who acquire real estate must pay real estate circulation tax in the amount of 5% of the acquired real estate market value. However, the acquirer can request tax exemption from the Tax Administration if the exchange was implemented to acquire ownership rights on an appropriate real estate.
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14. What is the deadline for submitting the tax return and paying the real estate circulation tax?
The buyer must report his tax liability incurrence to the Tax Administration within 30 days, and must pay the tax within 15 days of the tax assessment receipt.
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15. Can the buyer request the ownership rights be registered prior to the payment of the real estate circulation tax?
Yes, the obligation of obtaining the "green seal" of the competent Tax Administration has been abolished.
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16. Upon real estate purchase, when must the added value tax be paid and by whom?
The buyer assumes the added value tax payment obligation for newly constructed real estate. The tax must be calculated into the total stipulated purchasing price, thus relieving the buyer from the payment obligation for the real estate circulation tax in order to avoid double taxation. Unfortunately, in accordance with special Tax Administration regulations and contrary to the real estate unity principle, the buyer must pay the circulation tax for the land below and surrounding the building containing the apartment, the tax being payable at the same rate.
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17. Are the contracting parties liable for other taxes, other than the real estate circulation tax?
The seller is liable for income tax if he sells the real estate within three years from purchase, and the tax shall apply to the difference between the real estate purchase and sale price. However, he can also be exempt from this tax obligation.
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18. What is the agency commission?
The contracting party requesting real estate agency mediation must to that effect pay the agency a commission amounting to 3% of the stipulated purchasing price.
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19. What does a foreign physical person or a foreign legal entity require to gain real estate ownership rights in the Republic of Croatia?
Foreign physical persons and legal entities can, under the assumption of reciprocity, acquire real estate ownership on the territory of the Republic of Croatia on the basis of inheritance.
In such cases, the Minister of Justice of the Republic of Croatia must issue an approval. The approval is an administrative act (without ministerial approval, the legal matter is null and void).
If the request for ministerial approval for the assumption of ownership rights is rejected, the party may only re-submit the request pertaining to the same real estate after 5 years.
Real estate ownership acquisition for foreign persons in accordance with the Stabilization and Accession Agreement, after 1 February 2009.
The equalisation of citizens and legal entities from the European Union Member States and Croatian citizens signifies the removal of special assumptions from the Ownership Act currently in force. The assumption of reciprocity and the approval of the Minister of Justice no longer apply to foreign citizens and legal entities in the acquisition of real estate ownership rights in the Republic of Croatia.
With the coming into force of the new and amended Ownership Act, the aforementioned persons are allowed gain real estate ownership rights in the Republic of Croatia under the same terms prescribed for Croatian nationals (except for special regulations real estate), therefore, only under the general, and no longer under special conditions of real estate ownership acquisition.
After 1 February 2009, the citizens of the EU Member States will submit their proposals for the registration of real estate ownership rights to the competent Land Registry Court in accordance with the provisions of land registry law.
The Ownership Act amendments have not influenced the change of Ownership Act provisions and special regulations on the basis of which foreign nationals cannot acquire ownership of certain real estate under no legal grounds. Such real estate are:
- Real estate on excluded properties (maritime demesne)
- Agricultural land, unless otherwise provided by international law
- Protected areas of nature (reserves, national parks, natural monuments...)
- Forests and forest land, unless otherwise provided by international agreement
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20. How to avoid problems in real estate sale or purchase?
If you are a seller and possess clear and complete ownership records, you will not encounter substantial problems in the sale of your real estate. If confided into the hands of experts, the task may prove even easier. A professional agency will perform the sale with the least possible worry on your part. Yes, you will need to pay for the service, but then again - is anything free nowadays? The same applies to the purchase. If you are buying on your own, be careful of what you are buying and from whom. If you are not adept at real estate brokering, it is best you do it through an authorised agency or an attorney. Do not finalise any deal without having previously verified the documentation of the real estate you wish to purchase. If the real estate is offered by an agency as mediator, it holds the responsibility for the entire transaction. If you are purchasing a real estate you found by yourself, it is best to have the documentation checked by an agent or an attorney. Such service will cost you less than the commission (dependant on the service requested), and it will add to your safety. Our agency checks the ownership and legal status of the real estate for each sale and prior to the finalisation of the preliminary agreement or the contract, and on the client's request it can obtain a new land registry excerpt as proof the real estate is not encumbered with liens.
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21. Qualifying for real estate circulation tax exemption - for citizens buying their first real estate in order to fulfil their own housing needs.
A citizen buying his first real estate in order to fulfil his own housing needs can be exempt from paying real estate circulation tax. Pursuant to Article 11, items 9, 11 and 13 of the Real Estate Circulation Tax Act (The Official Gazette of the Republic of Croatia No. 153/02), in addition to the real estate tax submission, the request and the purchasing contract, the citizen needs to file the following:
- The taxpayer's certificate of citizenship.
- A certificate issued by the police authority stating the permanent residence of the citizen and the members of his immediate family to be at the purchased real-estate, including the information on their last (previous) permanent residence registration.
- A certificate issued by the town's Office of Cadastral and Geodetic Affairs stating the citizen and the members of his immediate family do not own other real estate (in the municipality where the taxpayer and his immediate family last (previously) permanently resided).
- A statement issued under moral and legal liability, certified by a Notary Public, stating that the citizen and the members of his immediate family do not own or co-own an apartment, a house or other real estate of significant value. In the event they own such real estate, the certified statement must contain information on real estate ownership, the property's location and surface.
- When purchasing construction land, the tax payer must issue a statement declaring that he will build a house on the purchased plot within 5 years from the purchase, and when purchasing an unfinished (roche-bau) facility, that he will register residence at the real estate location as soon as the conditions for the usage of the purchased real estate are met.
- The facsimile of the marriage certificate or the birth certificates are required for the members of the immediate family (members of the immediate family are a spouse and the children registered at the same address as the citizen).
- The taxpayers who are single need to state in their tax return form that they have no immediate family.
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F.A.Q.
