How high are realtors’ and lawyers’ fees in Croatia? What about other property purchase costs?
|Real Estate Transfer Tax||5%||buyer|
|Legal Fees||1.25% (+ 25% VAT)||buyer|
|Registration and other Fees||0.01% - 0.05%||buyer|
|Agent Fee||3% - 6% (+ 25% VAT)
3% - 6% (+ 25% VAT)
|Costs paid by buyer||10.33% - 14.11%|
|Costs paid by seller||3.75% - 7.50%|
|ROUNDTRIP TRANSACTION COSTS||14.08% - 21.61%|
| See Footnotes
Source: Global Property Guide
Real estate acquisition by foreign nationals is tedious and restrictive. The numerous restrictions on foreign ownership cannot be easily be circumvented. The following are the restrictions:
Note that foreigners can only rent out through a company, which involves paying 25% VAT, which can be accounted as a business cost. However, VAT is waived on renting of housing premises. With accession to the EU forecast to occur in 2009-2010, a relaxation on the restrictions of foreign ownership is expected in two years’ time.
The following is the acquisition process.
At pre-contract stage, the down payment is not returned if the buyer fails to fulfill the terms of the contract. In cases where the seller fails to fulfill his part of the contract, he is expected to compensate the buyer by paying double the sum of the deposit.
There is an issue concerning clean titles. A third of the population fled the country during the war. A big possibility exists that the ‘owner’ may not be the legal owner (especially if the rightful owner happens to be a Serb). The government does not allow purchase of properties with unclear ownership. It is advisable to establish the rightful ownership of the property, before getting to the pre-agreement stage.
Hence, title registration is a slow business in Croatia. It takes an average of 956 days to complete the five procedures necessary for property registration.
VAT is imposed on new dwellings, and is paid by the seller, who usually passes it on the buyer through an increased purchase price.
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
Real Estate Transfer Tax:
Real estate transfer tax of 5% of the market value is imposed on the transfer of real estate ownership. This tax is payable by both domestic and foreign legal entities and individuals, unless an international treaty provides otherwise. Buyers may not be obliged to pay this tax if certain conditions prescribed by the Real Estate Tax Act are met. The transfer tax does not apply to the acquisition of new buildings, that is, first sale. Instead, the sale is subject to 25% VAT of the value of construction, i.e., the net construction value.
The Value Added Tax (VAT) is levied at a flat rate of 25% as of 01 March 2012.
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