Quick overview of Croatian real estate

Rental income and capital gains of Croatian real estate

Taxpayer

Basis of tax

Tax levied

Tax rates (2022)

Resident company

 

 

Non-Resident company

 

 

Resident individual

 

 

Non-resident individual

 

 

Rental income

Capital gains

 

n/a

n/a

 

Rental income

Capital gains

 

Rental income

Capital gains

Corporate income tax

Corporate income tax

 

n/a

n/a

 

Individual income tax

Real estate income tax

 

Individual income tax

Real estate income tax

 

10 / 18%

10 / 18%

 

n/a

n/a

 

10%/flat rate tax

20% (+surtax)

 

10%/flat rate tax

20%

 

Rental income

Companies

Introduction

Rental income is taxed as business income.

Liability to tax

Rental income earned by companies is subject to corporate income tax as business income.

Basis to tax

Business income is subject to Croatian corporate income tax at the rate of 10% for revenue up to HRK 7.500.000,00 during the fiscal year or 18% for revenue equal to or greater than HRK 7.500.000,01 during the fiscal year.

Individuals

Introduction

Rental income is taxed as a taxpayer’s individual income.

Liability to tax

Tax liability is different whether the rent is done for residential purposes or for touristic purposes.

Basis to tax

The taxable base for rental income generated by residential purposes (housing) is calculated on the basis of rental fee which is decreased for 30% (lump-sum deduction). The remaining 70% is the tax base for tax rate of 10%.

The taxable base for rental income done for touristic purposes is calculated as flat rate tax. This flat rate tax is calculated per sleeping unit and it is different for each city. The range of tax per sleeping unit is from 150,00 kn to 1.500,00 kn.

Capital gains

Companies

Introduction

Real estate capital gains are taxed as business income.

Liability to tax

Real estate capital gains earned by companies are subject to corporate income tax as business income.

Basis to tax

Business income including all capital gains is subject to Croatian corporate income tax at a rate of 10% for revenue up to HRK 7.500.000,00 during the fiscal year or 18% for revenue equal to or greater than HRK 7.500.000,01 during the fiscal year.

Individuals

Introduction

Real estate capital gains, i.e., income from selling real estate by individuals is taxed with a special tax rate when the individual disposes of the property within 2 years from the date of its acquisition or if more than 3 properties of the same kind are disposed in period of 5 years.

Liability to tax

Real estate capital gains realised by individuals are subject to the capital gain income. The tax rate is 20%.

Basis of tax

Tax base is the difference between the selling price determined according to the market value of the real estate and the purchase price, increased by the rise of the producer prices of industrial products. The costs of the disposal can be deducted as expenses.

Croatian VAT & transfer taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2022)

Resident company

 

 

 

 

 

 

 

 

 

 

Non-Resident company

 

 

 

 

 

 

 

 

 

 

 

Resident individual

 

 

 

 

Non-resident individual

 

 

Rental income from:

  1. residential rent
  2. non-residential rent

Transfer of:

  1. building and land in use

less than 2 years

  b)    building and land in use

more than 2 years

  1. building land
  2. agricultural land

 

Rental income from:

  •  

Transfer of:

  1. building and land in use

less than 2 years

  1. building and land in use

more than 2 years

  1. building land
  2. agricultural land

 

 

Rental income

a) residential rent

b) non-residential rent

Transfer of real estate (all types)

 

Rental income

a) residential rent

b) non-residential rent

Transfer of real estate (all types)

 

Value-Added Tax

Value-Added Tax

 

Value-Added Tax

 

Value-Added Tax           

Transfer Tax

Value-Added Tax           

Value-Added Tax           

Transfer Tax

 

 

 

Value-Added Tax

 

Value-Added Tax

Transfer Tax

Value-Added Tax

Value-Added Tax

Transfer Tax

 

 

Value-Added Tax              

Value-Added Tax              

Transfer Tax

 

 

Value-Added Tax

Value-Added Tax

Transfer Tax

 

 

0%

25%/13%

 

25%

 

0%

3%

25%

0%

3%

 

 

 

25%

 

0%

3%

25%

0%

3%

 

 

0%

0%/13%

3%

 

 

0%

13%

3%

Value-Added Tax

Value-added tax (VAT) is a tax based on the increase of the value of a product or service at each stage of the supply chain.

Companies

When determining the tax status for the transfer of real estate, it is important to consider following:

  • whether it is building that has been used for less than two years or building that has been used for more than two years
  • Whether it is a building land (construction-able property with no buildings) or agricultural land

Building that has been used for less than two years – new building

All tax obligors are obligated to pay VAT at a rate of 25% when transferring construction land and buildings, or parts of buildings.

Building that has been used for more than two years – old building

Transfer of such buildings are free of VAT, but the buyer is paying real estate transfer tax of 3%.

Building land

All subjects are obligated to pay VAT at a rate of 25% when transferring land classified as building land.

Building land is land on which new construction is permitted.

Agriculture land

Transfer of such land is free of VAT, but the buyer is paying real estate transfer tax of 3%.

Option for taxation

Option that seller – tax obligor and buyer – tax obligor have when the subject of transaction is a building free of VAT or land which is free of VAT.

Instead of paying 3% of real estate transfer tax, the sale is taxable with VAT but with the reverse charge principal. This means that there is no real estate transfer tax for the buyer but the buyer has to calculate VAT as obligation and prepayment at the same time.

Basis of tax

The taxable base is the market value/contract value of the property at the moment when the tax liability is incurred.

VAT from rent

Rental income for business (non-residential) purposes is subject to 25% VAT and 13% if providing accommodation service with real estate. Rental income for residential purposes is exempt from VAT.

Individuals

Introduction

When buying new property or building land from a company VAT is part of the purchase price. No real estate transferred tax is paid.

When buying new property or building land from the individual VAT is not part of the purchase price. Real estate transferred tax is paid in amount of 3%.

When buying existing property or agricultural land from the company or from the individual, VAT is not part of the purchase price. Real estate transfer tax is paid at a rate of 3%.

Liability to tax

The VAT tax rate is 25% when applicable or 3% of real estate transfer tax when applicable.

Basis of tax

The taxable base is the market/contract value of a real estate at the moment when the tax liability is incurred.

VAT from rent

When residents rent real estate located in Croatia, they are considered VAT obligors if the rent exceeds 300.000 kn of revenues (ca. 40.000 €), in which case, they are obliged to pay VAT at the rate of 25% or 13% according to the provided business service (rent or accommodation). Rental income for residential purposes is exempt from VAT. 

When non-residents rent real estate located in Croatia, they are considered VAT obligors by default, in which case, they are obliged to pay VAT at the rate of 25% or 13% according to the provided business service (rent or accommodation). Rental income for residential purposes is exempt from VAT. 

Real Estate Transfer Tax​

Real estate transfer tax is paid for acquiring real estate when value-added tax (VAT) is not paid for such an acquisition.

Companies

Introduction

When Real estate is purchased, inherited or acquired in any other way, real estate transfer tax is due if the value added tax (VAT) is not applicable.

Liability to tax

The basis for the real estate transfer tax is the market value of the real estate at the moment when the tax liability is incurred. The tax rate equals 3% of the real estate market value at the moment of its acquisition.

Individuals

The same rules as for companies apply.

Croatian local taxes

Introduction

Every municipality in Croatia can proscribe additional taxes connected to the real estate. The following are:

Vehicles for Croatian real estate

Commonly used vehicles for Croatian real estate

Limited

The so-called ‘d.o.o.’ (in Croatian: Društvo s ograničenom odgovornošću) is the Croatian version of a limited liability company and is the most frequently used vehicle for the ownership of Croatian real estate. The amount of the contribution determines the share of the shareholder. The shareholders of the d.o.o. are not personally liable for the business debt.

Individuals who hold shares in a Croatian company derive capital income that is subject to 10% tax. Profits made by the d.o.o. itself are subject to the corporate income tax at a flat tax rate of 10% (revenue < HRK 7.500.000) or 18% (revenue > HRK 7.500.000).

Renting and organising tourist accommodation with flat-rate taxation

This is the most common way of renting and organising tourist accommodation in Croatia for individuals who have less than 300.000,00 kn of revenues.

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