Croatia - a tax haven

Real estate and property taxation in Croatia

Krešimir Lipovšćak
Real estate and property taxation in Croatia
We are continuing our series of blogs on the topic Croatia – a tax haven. This time topic is taxation of property. It is no secret that interest (and prices) for real estate (property) investment in Croatia has increased. Therefore, in the sections below we describe the basics of taxation of property (real estate) in Croatia.

(No) property tax
Croatia has no property tax, that is, the property owners do not pay any tax (except for holiday homes owners but the amounts are relatively symbolic).

Sale of property
Gains on sale of property (real estate) by individuals are in principle taxed at the rate of 20% on the gain (plus city surtax calculated on this tax payable). Gain could be decreased by certain allowable expenditure and inflation. After holding (owing) real estate for more than two years, sale of such real estate by an individual is tax exempt. There is additional tax rule when multiple sales of the real estate represent taxable activity.

Renting property
Renting property for non-tourist purposes if income is below EUR 40 thousand p.a. is subject to low effective tax rates (from 7% to 8,2%).
Renting of property by the Croatian tax residents and the EU nationals is subject to favourable lump sum taxation from HRK 150 (cca EUR 20) to HRK 1500 (cca EUR 200) annually per “rented” bed. Exact amount of the lump sum tax (in the above range) is determined by the local municipality.

All in all, the rules of property taxation are relatively simple, and rate of effective taxation is low which makes Croatian tax residency attractive. In our next blog we will discuss the eternal dilemma about application of real estate transfer tax and VAT and exemptions from payment of real estate transfer tax and exemptions of payment of VAT when selling/buying property in Croatia.