After covering diverse European jurisdictions, we now move back to the Mediterranean Sea and The Adriatic and explore the charms of this most interesting jurisdiction of Croatia. To a good number of people Croatia is known for its War of Independence in the Balkans in the 1990s and more recently for its brave performance in the World FIFA Football Cup in 2018 held in Russia, and where they made it to the finals becoming second runners only to be beaten 4-2 by France.
Croatia is an enchanting country, formerly part of Yugoslavia, and now an Independent Republic since 1991 and a full member of the European Union. It is most certainly a well consolidated jurisdiction with a high standard of living, a member of the United Nations, The Council of Europe and NATO as well as an important member of The World Trade Organization. In addition, Croatia is also a founding member of The Union of The Mediterranean.
Croatia is ranked amongst the 20 most popular destinations in the world.
Croatia has a very healthy economy based primarily in services, industry and agriculture. In addition, tourism accounts for an important part of its economic income. As a matter of interest Croatia is ranked amongst the 20 most popular destinations in the world.
The property market in Croatia is now healthy and it has been growing in a positive trend over the past years. Some true facts show an overall growth of property values of 7.64% in the year of 2017 and 4.7% in the year of 2018.
It is an interesting fact that in Zagreb alone the property market average price index soared to a very decent figure of 8.47% in 2018. At this time the average price per square metre being a mere €1712.
In order to improve an already moving-up market, The Government of Croatia lowered the Real Estate transfer tax from a reasonable figure of 5% to a lower figure of 4% in 2017. One never ceases to say the same over and over again: Lower taxes equals better and more investments.
Rental yields in Croatia are moderate to high. In the Capital, Zagreb, rental yields are very attractive. At this point in time one can expect and obtain yields of between 5.5% and 6%. Similar rates can be obtained in the cities of the Adriatic and higher rates if short term rentals are done.
In Croatia you have to understand that should you decide to make a property investment you must be aware that your transaction as a foreign buyer and investor depends on a reciprocity agreement between Croatia and your own jurisdiction. Basically, all EU countries have this agreement with Croatia, but there are exceptions, such as Italy.
Pristine gin-clear waters where stunning cities can be found.
PURCHASE TAXES AND EXPENSES IN CROATIA
In general terms, taxes plus buying expenses for property in Croatia amount to 15%. This figure is close to what you would pay in other European jurisdictions such as Spain. This figure includes everything: agency fee, lawyers’ fee, stamp duty, etcetera.
Rental income tax at the time of publication of this article stands at 12%.
And what happens when we sell the property investment? Are there important capital gains tax to account for? Capital gains tax in Croatia stands at a flat rate of 24%. However, if you keep the property for three years or longer there is absolutely none to account for.
In addition, there is no inheritance tax, provided the property is inherited by the spouse or descendants.
Should you decide to become a resident in Croatia, the rates of personal income tax work at a progressive rate from 24% to 36%. They are moderate for European standards.
For those interested in the corporate route for their acquisition, at the time of publication of this article, the corporate tax rate in Croatia stands at 18% but it could be 12% if it is a small investment. This tax criteria should be discussed with a local tax expert.
What are the main reasons to decide on Croatia as a Jurisdiction to invest in or even consider residency there?
1. Croatia is a fully democratic jurisdiction with a stable and growing economy and very safe to live in.
2. It has a small population of just over 4 million (less than Madrid alone) in a country with 56.594 square kilometers and 128 square kilometers of pristine gin-clear waters where stunning cities can be found like Dubrovnik or Split.
3. Croatia has over 1000 Islands so it is fierce competition to the Greek Islands with the added bonus of being grossly underdeveloped and very wild and beautiful. It is a sailor’s paradise no doubt. Pollution is non-existent.
4. Croatia is one of the richest countries in Europe in biodiversity. It actually includes four types of bio-geographical regions in its country: Mediterranean, Alpine, Pannonian and Continental. To cater for most tastes and preferences.
5. The country has a mild continental climate which is considerably milder in the Adriatic.
6. Croatia has unpolluted marine areas with no less than 120 blue flagged beaches.
7. The country is ranked as the 18th most popular tourist destination in the world.
All these reasons plus the fact that it is right now a safe jurisdiction offering good rental yields, fair taxes and competitive purchase prices make Croatia a good option to invest in within Europe.